-----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, JnqvL6h75UKaaRWrR7SLdS8mP1TpHveLgnl1k21qWVRwlArWDZnduYBBC29hqg1z ycLzL0weX2tdT6/W4uMPbg== 0000950159-01-000163.txt : 20010316 0000950159-01-000163.hdr.sgml : 20010316 ACCESSION NUMBER: 0000950159-01-000163 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRAXAIR INC CENTRAL INDEX KEY: 0000884905 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 061249050 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11037 FILM NUMBER: 1569557 BUSINESS ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06810-5113 BUSINESS PHONE: 2038372000 MAIL ADDRESS: STREET 1: 39 OLD RIDGEBURY ROAD CITY: DANBURY STATE: CT ZIP: 06810-5113 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE INDUSTRIAL GASES INC DATE OF NAME CHANGE: 19600201 10-K 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - -------------------------------------------------------------------------------- [] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 Commission file number 1-11037 Praxair, Inc. 2000 Form 10-K Praxair, Inc. Tel. (203) 837-2000 39 Old Ridgebury Road State of incorporation: Delaware Danbury, Connecticut 06810-5113 IRS identification number: 06-124 9050 Securities registered pursuant to Section 12(b) of the Act: - -------------------------------------------------------------------------------- Title of each class: Registered on : - -------------------------------------------------------------------------------- Common Stock ($.01 par value) New York Stock Exchange Common Stock Purchase Rights New York Stock Exchange - -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Security Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [*] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ] At January 31, 2001, 160,063,371 shares of common stock of Praxair, Inc. were outstanding. The aggregate market value of common stock held by non-affiliates at January 31, 2001 was approximately $7,074 million. Documents incorporated by reference: Portions of the 2000 Annual Report to Shareholders of the Registrant are incorporated in Parts I, II and IV of this report. Also, portions of the Proxy Statement of Praxair, Inc., dated March 1, 2001, are incorporated in Part III of this report. The Index to Exhibits is located on page 11 of this report. Forward-looking statements The forward-looking statements contained in this annual report concerning, development and commercial acceptance of new products, services , financial outlook, earnings growth, and other financial goals involve risks and uncertainties, and are subject to change based on various factors. These include the impact of changes in worldwide and national economies, the cost and availability of electric power and other energy and the ability to achieve price increases to offset such cost increases, development of operational efficiencies, changes in foreign currencies, changes in interest rates, the continued timely development and acceptance of new products and services, the impact of competitive products and pricing, and the impact of tax and other legislation and regulation in the jurisdictions which the company operates.
INDEX Part I PAGE Item 1: Business ..................................................................................... 2 Item 2: Properties.................................................................................... 6 Item 3: Legal Proceedings............................................................................. 6 Item 4: Submission of Matters to a Vote of Security Holders........................................... 6 Part II Item 5: Market for Registrant's Common Equity and Related Shareholder Matters........................ 7 Item 6: Selected Financial Data....................................................................... 7 Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations......... 7 Item 7a: Quantitative and Qualitative Disclosures About Market Risk.................................... 7 Item 8: Financial Statements and Supplementary Data................................................... 7 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......... 7 Part III Item 10: Directors and Executive Officers of the Registrant........................................... 8 Item 11: Executive Compensation....................................................................... 8 Item 12: Security Ownership of Certain Beneficial Owners and Management............................... 8 Item 13: Certain Relationships and Related Transactions............................................... 8 Part IV Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................. 9 Signatures .............................................................................................10 Index to Exhibits.......................................................................................11
PART I Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Item 1. Business General Praxair, Inc. (Praxair or Company) was founded in 1907 and became an independent publicly traded company in 1992. Praxair was the first company in the United States to produce oxygen from air using a cryogenic process. Praxair has been, and continues to be, a major technological innovator in the industrial gases industry and has done much to create value for its customers by developing new applications for industrial gases and to open new markets by lowering the cost of supply. Praxair is the largest industrial gases company in North and South America and the third largest worldwide. The Company is also the world's largest supplier of carbon dioxide. Praxair's primary products for its industrial gases business are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). The Company's surface technology segment, operated through Praxair Surface Technologies, Inc., supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders. The Company also designs, engineers and builds equipment that produces industrial gases (for internal use and external sale) through its global supply systems included in its All Other segment. Sales for Praxair were $5,043 million, $4,639 million, and $4,833 million for 2000, 1999 and 1998, respectively, with industrial gases accounting for 88% of sales in 2000, 89% of sales in 1999 and 90% of sales in 1998, and surface technologies and global supply systems accounting for the balance. Refer to Note 3 of the section captioned "Notes to Consolidated Financial Statements" in Praxair's 2000 Annual Report to Shareholders for information related to Praxair's segment information. Gases produced by the Company find wide use in the metal fabrication, chemicals & refining, primary metals, food & beverage, healthcare, semiconductor materials, aerospace, glass, pulp & paper, environmental remediation, and other industries. By using the gases that Praxair produces and, in many cases, the proprietary processes that it invents, customer value is created through improved product quality, increased productivity, conservation of energy, and the attainment of environmental improvement objectives. The Company has been and continues to be a major technological innovator in the industrial gases industry and, working with customers, has done much to increase the use of its industrial gases to support the manufacture of other products and for many other uses. Historically, consumption of industrial gases has increased at approximately 1.5 to 2.0 times local industrial production growth in countries in which the Company does business. Industrial Gases Products and Manufacturing Processes Atmospheric gases are the highest volume products produced by Praxair. Using air as its raw material, Praxair primarily produces oxygen, nitrogen and argon through several air separation processes. Cryogenic air separation, which is the primary process, compresses and cools air until it liquefies. As a pioneer in the industrial gases industry, Praxair has been a leader in developing a wide range of proprietary and patented applications and supply systems technology, including small cryogenic nitrogen plants. In recent years, Praxair has developed and commercialized air separation technologies for the production of industrial gases and is a recognized leader in this rapidly growing market segment. These technologies open important new markets and optimize production capacity for the Company by lowering the cost of supply of industrial gases. These technologies include proprietary vacuum pressure swing adsorption ("VPSA") and membrane separation to produce gaseous oxygen and nitrogen, respectively. 2 PART I (Cont.) Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Process gases, including carbon dioxide, hydrogen, carbon monoxide, helium and acetylene, are produced by different methods than air separation. Most carbon dioxide is purchased from by-product sources, including chemical plants, refineries and industrial processes, or from carbon dioxide wells, and is processed in Praxair's own plants to produce commercial carbon dioxide. Hydrogen and carbon monoxide are produced by purifying hydrocarbon sources or by purifying by-product sources obtained from the chemical and petrochemical industries. Most of the helium sold by Praxair is derived from certain helium-rich natural gas streams in the United States, with additional supplies being acquired from outside the United States. Acetylene is typically produced from calcium carbide and water. Industrial Gases Distribution There are three basic distribution methods for industrial gases: (i) on-site or tonnage; (ii) merchant liquid; and (iii) packaged or cylinder gases. These distribution methods are often integrated, with products from all three supply modes coming from the same plant. The method of supply is generally determined by the lowest cost means of meeting the customer's needs, depending upon factors such as volume requirements, purity, pattern of usage, and the form in which the product is used (as a gas or as a cryogenic liquid). On-site. Customers that require the largest volumes of product (typically oxygen, nitrogen and hydrogen) and that have a relatively constant demand pattern are supplied by cryogenic and process gas on-site plants. Praxair constructs plants on or adjacent to these customers' sites and supplies the product directly to customers. Because these are usually dedicated plants, the product supply contracts generally are total requirement contracts, typically having 10-20 year terms and containing minimum purchase requirements and price escalation provisions. Many of the cryogenic on-site plants also produce liquid products for the merchant market. New advanced air separation processes allow on-site delivery to customers with smaller volume requirements. Customers using these systems usually enter into requirement contracts with terms typically ranging from 5-15 years. Merchant. The merchant business is generally associated with distributable liquid oxygen, nitrogen, argon, carbon dioxide, hydrogen and helium. Atmospheric gases for the merchant business are produced by cryogenic processes, whereas carbon dioxide, hydrogen and helium are produced by other processes as discussed earlier. The deliveries generally are made from Praxair's plants by tanker trucks to storage containers owned or leased and maintained by Praxair or the customer at the customer's site. Although merchant oxygen and nitrogen generally have a relatively small distribution radius from the plants at which they are produced, merchant argon, hydrogen and helium can be shipped much longer distances. The agreements used in the merchant business are usually three to five year requirement contracts except for carbon dioxide, which typically has one-year requirement contracts in the United States. Packaged Gases. Customers requiring small volumes are supplied products in metal containers called cylinders, usually at medium to high pressure. These so-called packaged gases include the atmospheric gases, carbon dioxide, hydrogen, helium and acetylene. Praxair also produces and distributes in cylinders a wide range of specialty gases and mixtures. Cylinders may be delivered to the customer's site or picked up by the customer at a packaging facility or retail store. Packaged gases are generally sold by purchase orders. A substantial amount of the cylinder gases sold in the United States is distributed by independent distributors that buy merchant gases in liquid form and repackage the products in their facilities. These businesses also distribute welding equipment purchased from manufacturers of such products. Praxair has acquired independent industrial gas and welding products distributors at various locations in the United States. Between distributors in which it owns an equity interest and independent distributors that resell its gases, Praxair is represented in 42 states, the District of Columbia and Puerto Rico. 3 PART I (Cont.) Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Surface Technologies Praxair's surface technologies business supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders to the aircraft, electronics, printing, textile, plastics, primary metals, petrochemical, and other industries. It also provides aircraft engine and airframe component overhaul services. Additionally, Praxair Surface Technologies manufactures a complete line of electric arc, plasma, and high velocity oxygen fuel spray equipment as well as arc and flame wire equipment; including its patented Super D-Gun. This equipment is used for the application of thermal barrier wear resistant coatings. The coatings extend wear life at high temperatures and under corrosive conditions and are applied at Praxair's facilities using a variety of thermal spray coatings processes. The coated parts are finished to the customer's precise specifications before shipment. Resulting from a recent acquisition, Praxair Surface Technologies also manufactures precious metal and ceramic sputtering targets used principally in the production of semiconductors. Inventories - Praxair carries inventories of merchant and cylinder gases, hardgoods and coatings materials to supply products to its customers on a reasonable delivery schedule. On-site plants and pipeline complexes have limited inventory. Inventories, inventory obsolescence and backlogs are not material to Praxair's business. Customers - Praxair is not dependent, to a significant extent, upon a single customer or a few customers. International - Praxair is a global enterprise with 46% of its 2000 sales outside of the United States. It conducts industrial gases business through subsidiary and affiliated companies in Argentina, Australia, Belgium, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, France, Germany, India, Israel, Italy, Japan, South Korea, Mexico, the Netherlands, the People's Republic of China, Paraguay, Peru, Poland, Portugal, Spain, Taiwan, Thailand, Turkey, Uruguay and Venezuela. S.I.A.D. (Societa Italiana Acetilene & Derivati S.p.A.), an Italian company carried at equity, also has established positions in Austria, Bulgaria, Croatia, the Czech Republic, Hungary, Romania and Slovenia. Praxair's surface technologies business has operations in Brazil, France, Germany, Italy, Japan, Singapore, South Korea, Taiwan, Spain, Switzerland and the United Kingdom. Praxair's international business is subject to risks customarily encountered in foreign operations, including fluctuations in foreign currency exchange rates and controls, import and export controls, and other economic, political and regulatory policies of local governments. Also, see Note 1 of the section captioned "Notes to Consolidated Financial Statements", and the section captioned "Management's Discussion and Analysis - Market Risk and Sensitivity Analysis" in Praxair's 2000 Annual Report to Shareholders. Seasonality - Praxair's business is generally not subject to seasonal fluctuations to any significant extent. Research and Development - Praxair's research and development is directed toward developing new and improved methods for the production and distribution of industrial gases and the development of new markets and applications for these gases. This results in the frequent introduction of new industrial gas applications. It has also led to the development of new advanced air separation process technologies. Research and development for industrial gases is principally conducted at Tonawanda and Tarrytown, New York; Burr Ridge, Illinois; Rio de Janeiro, Brazil; Mississauga, Canada and Norwood, Massachusetts. Praxair conducts research and development for its surface technologies to improve the quality and durability of coatings and the use of specialty powders for new applications and industries. Surface technologies research is conducted at Indianapolis, Indiana. Patents and Trademarks - Praxair owns or licenses a large number of United States and foreign patents that relate to a wide variety of products and processes. Praxair's patents expire at various times over the next 20 years. While these patents and licenses are considered important, Praxair does not consider its business as a whole to be materially dependent upon any one particular patent or patent license. Praxair also owns a large number of trademarks. 4 PART I (Cont.) Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Raw Materials and Energy - Energy is the single largest cost in the production and distribution of industrial gases. Most of Praxair's energy requirements are in the form of electricity. Other important elements are natural gas, waste hydrogen (for hydrogen) and diesel fuel (for distribution). A shortage or interruption of energy, or increases in energy prices that cannot be passed through to customers, are risks to Praxair's business and financial performance. Because many of Praxair's contracts with customers are long term, with pass-through provisions, Praxair has not, historically, experienced significant difficulties related to recovery of energy costs. Supply of energy also has not been a significant issue. However, during 2000 and continuing into 2001, there has been unprecedented volatility in the cost and supply of electricity and in natural gas prices in the United States, particularly in California. To date, Praxair has been able to substantially mitigate the financial impact of these costs by passing them on to customers. In anticipation of continued volatility, the company has taken aggressive pricing actions, is strengthening its energy-management program for purchased power, and is implementing new customer contract terms and conditions. However, the outcome of the U.S. energy situation and its impact on the U.S. economy is unpredictable at this time and may pose unforeseen future risk. For carbon dioxide, carbon monoxide, helium, hydrogen, specialty gases and surface technologies, raw materials are largely purchased from outside sources. Praxair has contracts or commitments for, or readily available sources of, most of these raw materials; however, their long term availability and prices are subject to market conditions. Competition - Praxair operates within a highly competitive environment. Some of its competitors are larger in size and capital base than Praxair. Competition is based on price, product quality, delivery, reliability, technology and service to customers. Major competitors in the industrial gases industry both in the United States and worldwide include The BOC Group p.l.c., L'Air Liquide S.A., Air Products and Chemicals, Inc., The Messer Group and Linde AG. At a worldwide level, there are no congruent competitors for the surface technologies business. However, principal domestic competitors are Sermatech International, Inc., a subsidiary of Teleflex, Inc., Chemtronics, Inc., a subsidiary of GKN p.l.c. and Johnson Matthey Electronics, a subsidiary of Honeywell. International competitors in surface technologies vary from country to country. Employees and Labor Relations - As of December 31, 2000, Praxair had 23,430 employees worldwide. Of this number, 9,479 are employed in the United States. Praxair has collective bargaining agreements with unions at numerous locations throughout the world which expire at various dates. Praxair considers relations with its employees to be good. Environment - Information required by this item is incorporated herein by reference to the section captioned "Management's Discussion and Analysis - Costs Relating to the Protection of the Environment" in Praxair's 2000 Annual Report to Shareholders. 5 PART I (Cont.) Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Item 2. Properties Praxair's worldwide headquarters is located in leased office space in Danbury, Connecticut. Other principal administrative offices are owned in Tonawanda, New York and Rio de Janeiro, Brazil. Praxair designs, engineers, manufactures and operates facilities that produce and distribute industrial gases. These industrial gas production facilities and certain components are designed and/or manufactured at its facilities in Tonawanda, New York; Norwood, Massachusetts; Burr Ridge, Illinois and Rio de Janeiro, Brazil. Praxair's Italian equity affiliate, Societa Italiana Acetilene & Derivati S.p.A. (S.I.A.D.) also has such capacity. Praxair owns 316 cryogenic air separation plants (195 in the United States); 90 by-product carbon dioxide plants (23 in the United States); 348 non-cryogenic plants, and 37 hydrogen plants. No single production facility is material except for the following complexes: Number of Supply System Connected Plants Products Produced - ------------- ---------------- ---------------------------------- Northern Indiana 14 Air Separation/Hydrogen/Carbon Dioxide Houston 8 Air Separation Gulf Coast * 11 Hydrogen/ Carbon Monoxide Detroit 7 Air Separation/Hydrogen Louisiana* 4 Hydrogen/Carbon Monoxide Southern Brazil * 2 Air Separation Northern Spain 5 Air Separation/Hydrogen/Carbon Dioxide * partially owned and partially leased. The surface technologies business operates 47 plants located near customers in Brazil, France, Germany, Italy, Japan, Singapore, South Korea, Taiwan, Spain, Switzerland, the United Kingdom and the United States. Generally, these facilities are fully utilized and sufficient to meet customer needs. Item 3. Legal Proceedings Information required by this item is incorporated herein by reference to the section captioned "Notes to Consolidated Financial Statements - Note 13 Commitments and Contingencies" in Praxair's 2000 Annual Report to Shareholders. Item 4. Submission of Matters to a Vote of Security Holders Praxair did not submit any matters to a shareholder vote during the fourth quarter of 2000. 6 PART II Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Item 5. Market for Registrant's Common Equity and Related Shareholder Matters Market, trading, shareholder and dividend information for Praxair's common stock is incorporated herein by reference to the section captioned "Information for Investors" in Praxair's 2000 Annual Report to Shareholders. Praxair's annual dividend on its common stock for 2000 was $0.62 per share. On January 30, 2001, Praxair's Board of Directors declared a dividend of $0.17 per share for the first quarter of 2001, or $0.68 per share annualized, which may be changed as Praxair's earnings and business prospects warrant. The declaration of dividends is a business decision made by the Board of Directors based on Praxair's earnings and financial condition and other factors the Board of Directors considers relevant. Item 6. Selected Financial Data Selected financial data for the five years ended December 31, 2000 is incorporated herein by reference to the section captioned "Five-Year Financial Summary" in Praxair's 2000 Annual Report to Shareholders. This summary should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information required by this item is incorporated herein by reference to the section captioned "Management's Discussion and Analysis" in Praxair's 2000 Annual Report to Shareholders. Item 7a. Quantitative and Qualitative Disclosures About Market Risk Information required by this item is incorporated herein by reference to the section captioned "Management's Discussion and Analysis" in Praxair's 2000 Annual Report to Shareholders. Item 8. Financial Statements and Supplementary Data Information required by this item is incorporated herein by reference to the sections captioned "Consolidated Statement of Income," "Consolidated Balance Sheet," "Consolidated Statement of Cash Flows," "Consolidated Statement of Shareholders' Equity" and "Notes to Consolidated Financial Statements" in Praxair's 2000 Annual Report to Shareholders. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants reportable under this item. 7 PART III Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Item 10. Directors and Executive Officers of the Registrant Information required by this item is incorporated herein by reference to the section captioned "Directors and Executive Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" in Praxair's Proxy Statement for the Annual Meeting of Shareholders to be held on April 24, 2001. Item 11. Executive Compensation Information required by this item is incorporated herein by reference to the section captioned "Executive Compensation" in Praxair's Proxy Statement for the Annual Meeting of Shareholders to be held on April 24, 2001. Item 12. Security Ownership of Certain Beneficial Owners and Management Information required by this item is incorporated herein by reference to the section captioned "Share Ownership" in Praxair's Proxy Statement for the Annual Meeting of Shareholders to be held April 24, 2001. Item 13. Certain Relationships and Related Transactions There have been no transactions or relationships since the beginning of 2000 which are reportable under this item. 8 PART IV Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Financial Statements and Schedules Page No. in Praxair's 2000 Annual Report (AR)* Financial Statements Consolidated Statement of Income for the Years Ended December 31, 2000, 1999 and 1998 ............................AR-18 Consolidated Balance Sheet at December 31, 2000 and 1999 ......AR-19 Consolidated Statement of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 .............................AR-20 Consolidated Statement of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998 .................AR-21 Notes to Consolidated Financial Statements ....................AR-31 Report of Independent Accountants .............................AR-48 * Incorporated by reference to the indicated pages of the 2000 Annual Report to Shareholders. With the exception of this information and the information incorporated in Items 5, 6, 7, 7A, 8 and 9, the 2000 Annual Report to Shareholders is not to be deemed filed as part of this Annual Report on Form 10-K. Financial Statement Schedules All financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (b) Reports on Form 8-K On October 19, 2000, Praxair, Inc. filed a Current Report on Form 8-K, Item 9, reporting its approach to the new SEC Fair Disclosure Rules and the impact on its investor communication program. (c) Exhibits Exhibits filed as a part of this Annual Report on Form 10-K are listed in the Index to Exhibits located on page 11 of this Report. 9 SIGNATURES Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Pursuant to the requirements of Section 13 or 15(d) 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. PRAXAIR, INC. (Registrant) Date: March 15, 2001 /s/ George P. Ristevski ------------------------ George P. Ristevski Vice President and Controller (On behalf of the Registrant and as Chief Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 21, 2001. /s/ James S. Sawyer /s/ Dennis H. Reilley - ------------------- --------------------- James S. Sawyer Dennis H. Reilley Vice President and Chairman, President and Chief Chief Financial Officer Executive Officer and Director
/s/ Alejandro Achaval /s/ C. Fred Fetterolf /s/ Dale F. Frey - --------------------- --------------------- ---------------- Alejandro Achaval C. Fred Fetterolf Dale F. Frey Director Director Director /s/ Claire W. Gargalli /s/ Ronald L. Kuehn, Jr. /s/ Raymond W. LeBoeuf - ---------------------- ------------------------- ---------------------- Claire W. Gargalli Ronald L. Kuehn, Jr. Raymond W. LeBoeuf Director Director Director /s/ Benjamin F. Payton /s/ G. Jackson Ratcliffe, Jr /s/ H. Mitchell Watson, Jr. - ---------------------- ----------------------------- --------------------------- Benjamin F. Payton G. Jackson Ratcliffe, Jr. H. Mitchell Watson, Jr Director Director Director
10 INDEX TO EXHIBITS Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Exhibit No. Description 2.01 Agreement and Plan of Merger dated as of December 22, 1995 among Praxair, Inc., PX Acquisition Corp. and CBI Industries, Inc. (Filed as Exhibit 2 to the Company's Current Report on Form 8-K dated December 22, 1995, Filing No. 1-11037, and incorporated herein by reference). 3.01 Restated Certificate of Incorporation (Filed as Exhibit 3.01 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 3.02 Amended By Laws of Praxair, Inc. (Filed as Exhibit 3.02 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 3.03 Certificate of Designations for the 7.48% Cumulative Preferred Stock, Series A. (Filed on February 7, 1997 as Exhibit 3.3 to Amendment #1 to the Company's Registration Statement on Form S-3, Registration No. 333-18141). 3.04 Certificate of Designations for the 6.75% Cumulative Preferred Stock, Series B. (Filed on February 7, 1997 as Exhibit 3.4 to Amendment #1 to the Company's Registration Statement on Form S-3, Registration No. 333-18141). 4.01 Common Stock Certificate (Filed as Exhibit 4.01 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 4.02 Rights Agreement between the registrant and The Bank of New York as Rights Agent. (Filed as Exhibit 4.02 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 4.03 Indenture, dated as of July 15, 1992, between Praxair, Inc. and State Street Bank and Trust Company, successor trustee to Fleet Bank of Connecticut and the ultimate successor trustee to Bank of America Illinois (formerly Continental Bank, National Association) (Filed as Exhibit 4 to the Company's Form 10-Q for the quarter ended June 30, 1992, Filing No. 1-11307, and incorporated herein by reference). 4.04 Copies of the agreements relating to long-term debt which are not required to be filed as exhibits to this Annual Report on Form 10-K will be furnished to the Securities and Exchange Commission upon request. 4.05 Series A Preferred Stock Certificate. (Filed on February 7, 1997 as Exhibit 4.3 to Amendment #1 to the Company's Registration Statement on Form S-3, Registration No. 333-18141). 4.06 Series B Preferred Stock Certificate. (Filed on February 7, 1997 as Exhibit 4.4 to Amendment #1 to the Company's Registration Statement on Form S-3, Registration No. 333-18141). *10.01 1992 Long-Term Incentive Plan (Filed as Exhibit 10.01 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). *10.01a First Amendment to the 1992 Long-Term Incentive Plan (Filed as Exhibit 10.01a to the Company's 1993 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 11 INDEX TO EXHIBITS (Cont.) Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Exhibit No. Description *10.01b Second Amendment to the 1992 Long-Term Incentive Plan (Filed as Exhibit 10.01b to the Company's 1995 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). *10.01c Third Amendment to the 1992 Long-Term Incentive Plan (Filed as Exhibit 10.01c to the Company's 1995 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). *10.01d Fourth Amendment to the 1992 Long-Term Incentive Plan (Filed as Exhibit 10.01d to the Company's 1996 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). *10.02 Form of Severance Compensation Agreement (Filed as Exhibit 10.02 to the Company's 1997 Annual Report on Form 10K, Filing No. 1-11037, and incorporated herein by reference). *10.03 1992 Variable Compensation Plan (Filed as Exhibit 10.03 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). *10.03a First Amendment to the 1992 Variable Compensation Plan (Filed as Exhibit 10.03a to the Company's 1993 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). *10.04 Amended and Restated 1995 Stock Option Plan for Non-Employee Directors (Filed as Exhibit 10.04 to the Company's 1998 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). *10.05 Special Severance Protection Program (Filed as Exhibit 10.05 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). *10.06 Restated Praxair, Inc. Directors' Fees Deferral Plan (Filed as Exhibit 10.06 to the Company's 1996 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). *10.07 Amended and Restated 1993 Praxair Compensation Deferral Program (Filed as Exhibit 10.07 to the Company's 1996 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 10.08 Transfer Agreement dated January 1, 1989, between Union Carbide Corporation and the registrant. (Filed as Exhibit 10.06 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.08a Amendment No. 1 dated as of December 31, 1989, to the Transfer Agreement (Filed as Exhibit 10.07 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.08b Amendment No. 2 dated as of July 2, 1990, to the Transfer Agreement (Filed as Exhibit 10.08 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 12 INDEX TO EXHIBITS (Cont.) Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Exhibit No. Description 10.08c Amendment No. 3 dated as of January 2, 1991, to the Transfer Agreement (Filed as Exhibit 10.09 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.9 Transfer Agreement dated January 1, 1989, between Union Carbide Corporation and Union Carbide Coatings Service Corporation (Filed as Exhibit 10.14 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.09a Amendment No. 1 dated as of December 31, 1989, to the Transfer Agreement (Filed as Exhibit 10.15 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.09b Amendment No. 2 dated as of July 2, 1990, to the Transfer Agreement (Filed as Exhibit 10.16 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.10 Additional Provisions Agreement dated as of June 4, 1992, (Filed as Exhibit 10.21 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.11 Amended and Restated Realignment Indemnification Agreement dated as of June 4, 1992 (Filed as Exhibit 10.23 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.12 Environmental Management, Services and Liabilities Allocation Agreement dated as of January 1, 1990 (Filed as Exhibit 10.13 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.12a Amendment No. 1 to the Environmental Management, Services and Liabilities Allocation Agreement dated as of June 4, 1992 (Filed as Exhibit 10.22 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.13 Danbury Lease-Related Services Agreement dated as of June 4, 1992 (Filed as Exhibit 10.24 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.13a First Amendment to Danbury Lease-Related Services Agreement (Filed as Exhibit 10.13a to the Company's 1994 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 10.14 Danbury Lease Agreements, as amended (Filed as Exhibit 10.26 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.14a Second Amendment to Linde Data Center Lease (Danbury) (Filed as Exhibit 10.14a to the Company's 1993 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 10.14b Fourth Amendment to Carbide Center Lease (Filed as Exhibit 10.14b to the Company's 1993 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 10.14c Third Amendment to Linde Data Center Lease (Filed as Exhibit 10.14c to the Company's 1994 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 13 INDEX TO EXHIBITS (Cont.) Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- Exhibit No. Description 10.14d Fifth Amendment to Carbide Center Lease (Filed as Exhibit 10.14d to the Company's 1994 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 10.15 Employee Benefits Agreement dated as of June 4, 1992 (Filed as Exhibit 10.25 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.15a First Amendatory Agreement to the Employee Benefits Agreement (Filed as Exhibit 10.15a to the Company's 1994 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 10.16 Tax Disaffiliation Agreement dated as of June 4, 1992 (Filed as Exhibit 10.20 to the Company's Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference). 10.17 Credit Agreement dated as of December 7, 1995, among Praxair, Inc., The Banks Party Thereto, Morgan Guaranty Trust Company of New York as Documentation Agent and The Chase Manhattan Bank (formerly known as Chemical Bank), as Administrative Agent (Filed as Exhibit 10.17 to the Company's 1995 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 10.17a Amendment No. 1 to Credit Agreement, dated as of December 22, 1997 (Filed as Exhibit 10.17a to the Company's 1997 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference). 10.17b Credit Agreement(s) dated as of July 12, 2000 among Praxair, Inc., The Banks Party Thereto, Morgan Guaranty Trust Company of New York, Bank of America, N. A. and Credit Suisse First Boston as Co-Syndication Agents and The Chase Manhattan Bank as Administrative Agent. *10.18 1996 Praxair, Inc. Senior Executive Performance Award Plan (Filed as Exhibit 10.19 to the Company's Report on Form 10-Q for the Quarter ended March 31, 1996, Filing No. 1-11037, and incorporated herein by reference). 12.01 Computation of Ratio of Earnings to Fixed Charges. 13.01 Praxair's 2000 Annual Report to Shareholders (such report, except for those portions which are expressly referred to in this Form 10-K, is furnished for the information of the Commission and is not deemed "filed" as part of this Form 10-K). 21.01 Subsidiaries of Praxair, Inc. 23.01 Consent of Independent Accountants. Copies of exhibits incorporated by reference can be obtained from the SEC and are located in SEC File No. 1-11037. * Indicates a management contract or compensatory plan or arrangement. EX-10.17B 2 0002.txt CONFORMED COPY $500,000,000 364-DAY CREDIT AGREEMENT dated as of July 12, 2000 among Praxair, Inc., The Banks Party Hereto Morgan Guaranty Trust Company of New York Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents and The Chase Manhattan Bank, as Administrative Agent ------------------------------------------- J.P. Morgan Securities Inc., Lead Arranger and Book Manager -------------- Banc of America Securities LLC Chase Securities Inc. Credit Suisse First Boston, Co-Arrangers and Co-Book Managers i
TABLE OF CONTENTS ---------------------- PAGE ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions......................................................................1 SECTION 1.02. Accounting Terms and Determinations.............................................14 SECTION 1.03. Types of Borrowings.............................................................14 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend.............................................................15 SECTION 2.02. Notice of Committed Borrowings..................................................16 SECTION 2.03. Money Market Borrowings.........................................................16 SECTION 2.04. Notice to Banks; Funding of Loans...............................................21 SECTION 2.05. Notes...........................................................................22 SECTION 2.06. Maturity of Loans...............................................................23 SECTION 2.07. Interest Rates..................................................................23 SECTION 2.08. Facility Fee....................................................................26 SECTION 2.09. Optional Termination or Reduction of Commitments................................27 SECTION 2.10. Optional Prepayments............................................................27 SECTION 2.11. General Provisions as to Payments...............................................28 SECTION 2.12. Funding Losses..................................................................29 SECTION 2.13. Computation of Interest and Fees................................................29 SECTION 2.14. Method of Electing Interest Rates...............................................29 SECTION 2.15. Withholding Tax Exemption.......................................................31 SECTION 2.16. Regulation D Compensation.......................................................32 SECTION 2.17. Replacement of this Agreement...................................................33 SECTION 2.18. Optional Increase in Commitments................................................33 ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness...................................................................34 SECTION 3.02. Borrowings......................................................................36 i PAGE ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power...................................................37 SECTION 4.02. Corporate and Governmental Authorization; No Contravention.........................................................................37 SECTION 4.03. Binding Effect..................................................................37 SECTION 4.04. Financial Information...........................................................38 SECTION 4.05. Litigation......................................................................38 SECTION 4.06. Compliance with ERISA...........................................................38 SECTION 4.07. Environmental Matters...........................................................39 SECTION 4.08. Subsidiaries....................................................................39 SECTION 4.09. Not an Investment Company.......................................................39 SECTION 4.10. Disclosure......................................................................39 ARTICLE 5 COVENANTS SECTION 5.01. Information.....................................................................40 SECTION 5.02. Maintenance of Property; Insurance..............................................43 SECTION 5.03. Negative Pledge.................................................................43 SECTION 5.04. Consolidations, Mergers and Sales of Assets.....................................44 SECTION 5.05. Minimum Consolidated Book Net Worth.............................................45 SECTION 5.06. Leverage Ratio..................................................................45 SECTION 5.07. Use of Proceeds.................................................................45 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default...............................................................46 SECTION 6.02. Notice of Default...............................................................49 ARTICLE 7 AGENTS SECTION 7.01. Appointment and Authorization...................................................49 SECTION 7.02. Agents and Affiliates...........................................................49 SECTION 7.03. Action by Administrative Agent..................................................49 SECTION 7.04. Consultation with Experts.......................................................50 SECTION 7.05. Liability of Administrative Agent...............................................50 SECTION 7.06. Indemnification.................................................................50 ii PAGE SECTION 7.07. Credit Decision.................................................................50 SECTION 7.08. Successor Administrative Agent..................................................51 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................51 SECTION 8.02. Illegality......................................................................52 SECTION 8.03. Increased Cost and Reduced Return...............................................53 SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans.......................55 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices.........................................................................56 SECTION 9.02. No Waivers......................................................................56 SECTION 9.03. Expenses; Documentary Taxes; Indemnification....................................56 SECTION 9.04. Sharing of Set-offs.............................................................57 SECTION 9.05. Amendments and Waivers..........................................................58 SECTION 9.06. Successors and Assigns..........................................................59 SECTION 9.07. Designated Lenders..............................................................61 SECTION 9.08. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial............................................................................62 SECTION 9.09. Counterparts; Integration.......................................................62 SECTION 9.10. Confidentiality.................................................................63 SECTION 9.11. Severability....................................................................64 SECTION 9.12. Termination of Existing Credit Agreement........................................64 SECTION 9.13. Collateral......................................................................64
iii Exhibits Exhibit A -- Note Exhibit B -- Form of Money Market Quote Request Exhibit C -- Form of Invitation for Money Market Quotes Exhibit D -- Form of Money Market Quote Exhibit E -- Form of Opinion of Cahill Gordon & Reindel, Special Counsel for the Borrower Exhibit F -- Opinion of Davis Polk & Wardwell, Special Counsel for the Agents Exhibit G -- Assignment and Assumption Agreement Exhibit H -- Designation Agreement Exhibit I -- Extension Agreement iv CREDIT AGREEMENT AGREEMENT dated as of July 12, 2000 among PRAXAIR, INC., the BANKS party hereto, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BANK OF AMERICA, N.A. and CREDIT SUISSE FIRST BOSTON, as Co-Syndication Agents, and THE CHASE MANHATTAN BANK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Administrative Agent" means The Chase Manhattan Bank, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (which shall promptly following receipt thereof give a copy to the Borrower) duly completed by such Bank. "Agents" means the Administrative Agent and the Co-Syndication Agents. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and 1 (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank listed on the signature pages hereof, each Person which becomes a Bank pursuant to Section 2.18 and each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Bank Parties" has the meaning set forth in Section 9.10. "Base Rate" means, for any day, a rate per annum equal to the higher of the Reference Rate for such day or the sum of 1/2 of 1% plus the Effective Federal Funds Rate for such day. "Base Rate Loan" means a Committed Loan that bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the last sentence of Section 2.14(a) or Article 8. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means Praxair, Inc., a Delaware corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means a Committed Loan that bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election. "CD Margin" has the meaning set forth in Section 2.07(b). "CD Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of an Adjusted CD Rate. 2 "CD Reference Banks" means Bank of America, N.A., The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York and each other Bank as may be appointed pursuant to Section 9.06(g). "Commitment" means (i) with respect to each Bank listed on the Commitment Schedule, the amount set forth opposite such Bank's name on the Commitment Schedule and (ii) with respect to any Assignee or other Person which becomes a Bank pursuant to Section 2.18 or 9.06(c), the amount of the transferor Bank's Commitment assigned to it pursuant to Section 9.06(c), in each case as such amount may be changed from time to time pursuant to Section 2.09 or 9.06(c); provided that, if the context so requires, the term "Commitment" means the obligation of a Bank to extend credit up to such amount to the Borrower hereunder. "Commitment Schedule" means the Schedule attached hereto identified as such. "Committed Loan" means a Revolving Credit Loan or a Term Loan; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Book Net Worth" means at any date the consolidated shareholders' equity of the Borrower and its Consolidated Subsidiaries, calculated without giving effect to (i) changes in the cumulative foreign currency translation adjustment after March 31, 2000, (ii) any mark-to-market of a derivative or hedging instrument or any other adjustment related to any derivative or hedging instrument that might be required under FAS 133 after March 31, 2000, and (iii) after-tax restructuring charges taken after March 31, 2000 up to a maximum cumulative amount of $75,000,000. "Consolidated Net Income" for any period means the consolidated net income of the Borrower and its Consolidated Subsidiaries for such period, excluding any extraordinary items of gain or loss. "Consolidated Subsidiary" with respect to any Person means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date. 3 "Consolidated Total Debt" means at any date all consolidated Debt of the Borrower and its Consolidated Subsidiaries determined as of such date. "Continuing Director" means at any date a member of the Borrower's board of directors who was either (i) a member of such board twelve months prior to such date or (ii) nominated for election to such board by at least two-thirds of the Continuing Directors then in office. "Co-Syndication Agent" means each of Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., in its capacity as co-syndication agent for the credit facility provided hereunder. "Debt" of any Person means at any date, without duplication, to the extent required in accordance with generally accepted accounting principles to be included in the financial statements of such Person or the footnotes thereto, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures or notes, (iii) all obligations of such Person for installment purchase transactions involving the purchase of property or services over $5,000,000 for any particular transaction, except trade accounts payable and expense accruals arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all contingent or non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid or to be paid under a letter of credit, and (vi) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Designated Lender" means, with respect to any Designating Bank, an Eligible Designee designated by it pursuant to Section 9.07(a) as a Designated Lender for purposes of this Agreement. 4 "Designating Bank" means, with respect to each Designated Lender, the Bank that designated such Designated Lender pursuant to Section 9.07(a). "Dollars" and the sign "$" mean lawful money of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "Domestic Consolidated Subsidiary" with respect to any Person means a Consolidated Subsidiary of such Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia. "Domestic Lending Office" means, as to each Bank, its office identified in its Administrative Questionnaire as its Domestic Lending Office or such other office of such Bank as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Effective Federal Funds Rate" means the weighted average of the rates on overnight federal funds transactions between members of the Federal Reserve System arranged by federal funds brokers as published daily (or, if such day is not a Domestic Business Day, for the immediately preceding Domestic Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities (or any successor quotations). "Eligible Designee" means a special purpose corporation that (i) is organized under the laws of the United States or any state thereof, (ii) is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and (iii) issues (or the parent of which issues) commercial 5 paper rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's. "Environmental Laws" means all applicable federal, state, local and foreign laws, ordinances, codes, regulations, orders and requirements relating to the protection of, or discharge of materials into, the environment, including, without limitation, the Resource Conservation and Recovery Act of 1976, as amended; the Comprehensive Environmental Response, Compensation and Liability Act; the Toxic Substance Control Act; the Clean Water Act; the Clean Air Act; and the Safe Drinking Water Act. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Eurocurrency Reserve Ratio" has the meaning set forth in Section 2.16. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office or branch located at its address identified in its Administrative Questionnaire as its Euro-Dollar Lending Office or such other office or branch of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means a Committed Loan that bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election. "Euro-Dollar Margin" has the meaning set forth in Section 2.07(c). "Euro-Dollar Reference Banks" means the principal London offices of Bank of America, N.A., The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York and the principal London office of each other Bank as may be appointed pursuant to Section 9.06(g). 6 "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreement" means the Credit Agreement dated as of December 7, 1995, among the Borrower, the banks parties thereto, Morgan Guaranty Trust Company of New York, as documentation agent, and The Chase Manhattan Bank (successor to Chemical Bank), as administrative agent and auction agent, as amended to the Effective Date. "Final Maturity Date" means the first anniversary of the Termination Date, or if such date is not a Euro-Dollar Business Day, the next preceding Euro- Dollar Business Day. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Reference Rate pursuant to Section 8.01) or any combination of the foregoing. "Group of Loans" means, at any time, a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time, (ii) all Euro-Dollar Loans having the same Interest Period at such time or (iii) all CD Loans having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt 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 Debt (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); or (ii) entered into for the purpose of ensuring in any legally enforceable manner the obligee of such Debt of the payment thereof or to protect such obligee in any legally enforceable manner against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include 7 (a) endorsements for collection or deposit in the ordinary course of business; (b) obligations that are not required in accordance with generally accepted accounting principles to be included in the financial statements of such Person or the footnotes thereto; (c) "unconditional purchase obligations" (including take-or-pay contracts) as defined in and as required to be disclosed pursuant to Statement of Financial Accounting Standards No. 47 and the related interpretations, as the same may be amended from time to time, but only to the extent the aggregate present value amount of all such obligations of the Borrower and its Consolidated Subsidiaries (other than amounts reflected on the balance sheet of the Borrower and its Consolidated Subsidiaries) is equal to or less than 5% of the net sales of the Borrower and its Consolidated Subsidiaries as set forth in their Consolidated Statement of Income, determined as of the end of the preceding quarter for the twelve months then ending; and (d) any obligations required to be disclosed pursuant to the Statement of Financial Accounting Standards No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, issued March 1990, the Statement of Financial Accounting Standards No. 107, Disclosure about Fair Value of Financial Instruments, issued December 1991, and the Statement of Financial Accounting Standards No. 119, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments, issued October 1994, and their related interpretations, as the same may be amended from time to time (except to the extent any such obligation is required to be reflected on the balance sheet of the Borrower and its Consolidated Subsidiaries). The term "Guarantee" used as a verb has a corresponding meaning. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter and, if deposits of a corresponding maturity are available to all Banks in the London interbank market, nine or twelve months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls 8 in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar 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 Euro-Dollar Business Day of a calendar month; (2) with respect to each CD Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable notice; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; (3) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending such whole number of months thereafter (but not more than 12 months) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar 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 Euro-Dollar Business Day of a calendar month; and (4) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than seven nor more than 180 days) as the Borrower may elect in accordance with Section 2.03; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and provided further that: 9 (x) no Interest Period which begins before the Termination Date may end after the Termination Date; and (y) no Interest Period applicable to any Term Loan may end after the Final Maturity Date. Notwithstanding the foregoing, all Interest Periods at any one time outstanding hereunder shall end on not more than 25 different dates, and the duration of any Interest Period which would otherwise exceed such limitation shall be adjusted so as to coincide with the remaining term of such other then current Interest Period as the Borrower may specify in the related Notice of Borrowing or Notice of Interest Rate Election. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Invitation for Money Market Quotes" means an invitation by the Administrative Agent on behalf of the Borrower to each Bank to submit Money Market Quotes offering to make Money Market Loans in accordance with Section 2.03, substantially in the form of Exhibit C hereto. "Leverage Ratio" means the ratio of (x) Consolidated Total Debt to (y) Consolidated Book Net Worth. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market LIBOR Margins pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing, in each case made or to be made under this Agreement. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Federal Reserve Board, as the same may be amended, supplemented or modified from time to time. 10 "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $25,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d)(ii)(D). "Money Market Absolute Rate Loan" means a loan made or to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office or branch of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan made or to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Reference Rate pursuant to Section 8.01). "Money Market LIBOR Margin" has the meaning set forth in Section 2.03(d)(ii)(C). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA 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 ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. 11 "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.14(a). "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time 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 Internal Revenue Code and either: (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group; or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the Pricing Schedule attached hereto. "Quarterly Payment Dates" means each March 31, June 30, September 30 and December 31. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Reference Rate" means the rate of interest publicly announced by The Chase Manhattan Bank in New York City from time to time as its "prime rate". 12 "Regulation D" and "Regulation U" means Regulation D and Regulation U, respectively, of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least 51% of the aggregate amount of the Commitments, or, if the Commitments have been terminated, holding Notes evidencing at least 51% of the aggregate unpaid principal amount of the outstanding Loans. "Restricted Subsidiary" means (i) any Domestic Consolidated Subsidiary of the Borrower, and (ii) Praxair Canada Inc. "Revolving Credit Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(a). "SEC" means the Securities and Exchange Commission. "Subsidiary" with respect to any Person means any corporation or other entity of which such Person directly or indirectly owns a majority of the securities or other ownership interests having ordinary voting power to elect the board of directors or other persons performing similar functions. Unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Termination Date" means July 11, 2001 or such later date to which the "Termination Date" under this Agreement shall have been extended pursuant to Section 2.01(c), or, if any such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Term Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(b). "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (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 a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. 13 "Wholly-Owned Consolidated Subsidiary" with respect to any Person means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by such Person. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article 5 to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Banks wish to amend Article 5 for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). 14 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. (a) Revolving Credit Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time before the Termination Date in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b) and, if less than $5,000,000, must be a Base Rate Borrowing) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, to the extent permitted by Section 2.10, prepay Loans and reborrow at any time before the Termination Date under this Section. The Commitments shall terminate at the close of business on the Termination Date. (b) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, and subject to the prior satisfaction of the conditions set forth in Section 3.02, to make a loan to the Borrower on the Termination Date in an aggregate principal amount up to but not exceeding the aggregate principal amount of Revolving Credit Loans it has outstanding on the Termination Date. (c) Extension of the Termination Date. The Termination Date may be extended in the manner set forth in this subsection 2.01(c) on not more than two occasions, in each case for a period of 364 days from the Termination Date then in effect. If the Borrower wishes to request an extension of the Termination Date, it shall give written notice to that effect to the Administrative Agent not less than 45 nor more than 60 days prior to the Termination Date then in effect, whereupon the Administrative Agent shall immediately notify each of the Banks of such request. Each Bank will use its best efforts to respond to such request, whether affirmatively or negatively, as it may elect in its discretion, within 30 days of such notice to the Administrative Agent. If less than all Banks respond affirmatively to such request within 30 days, then so long as Banks having more than 50% of the Commitments shall have responded affirmatively, the Banks that do not elect to extend the Termination Date shall if so requested by the Borrower assign their Commitments in their entirety to one or more Assignees pursuant to Section 9.06(c) which Assignees will agree to extend the Termination Date. Subject to receipt by the Administrative Agent no earlier than 30 days prior to the Termination Date then in effect of counterparts of an Extension Agreement in substantially the form of Exhibit I hereto duly completed and signed by each of 15 the Banks responding affirmatively to the Borrower's request for extension and each Assignee contemplated by the preceding sentence, the Termination Date shall be extended for the period specified above as to such parties, and the Commitment of any Bank which shall not have responded affirmatively, to the extent such Commitment shall not have been assigned as contemplated by the preceding sentence, shall terminate on the unextended Termination Date (and no such Bank shall be obligated to make a Term Loan on such unextended Termination Date). SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 12:00 Noon (New York City time) on: (x) the date of each Base Rate Borrowing, (y) the Domestic Business Day next preceding the date of each CD Borrowing, and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate, a CD Rate or a Euro-Dollar Rate, and (d) in the case of a Fixed Rate Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks to make offers to make Money Market Loans to the Borrower prior to the Termination Date. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than: (x) 11:00 A.M. (New York City time) on the fourth Euro-Dollar Business 16 Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) 9:00 A.M. (New York City time) on the Domestic Business Day which is the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market LIBOR Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes, substantially in the form of Exhibit C hereto, with respect to such Money Market Quote Request. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than 11:00 A.M. (New York City time) on: (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or 17 (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed, with corresponding changes to the times and dates set forth in clauses (x) and (y) below, and the Administrative Agent shall have notified the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Administrative Agent in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent notifies the Borrower of the terms of the offer or offers contained therein not later than: (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount: (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, 18 (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market LIBOR Margin") offered for each such Money Market Loan, expressed as a percentage (rounded to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (rounded to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language, except as permitted by subsection (d)(ii)(B)(z); (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Administrative Agent shall promptly notify the Borrower of the terms: (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is 19 submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the Borrower shall specify: (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 12:00 Noon (New York City time) on: (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and the Administrative Agent shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $1,000,000 and the principal 20 amount of each Money Market Loan with respect to such Money Market Borrowing must be in an amount of $5,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement, and (v) failure by the Borrower to notify the Administrative Agent by the time specified above shall be deemed a rejection of all offers. (g) Allocation by Borrower. If offers are made by two or more Banks with the same Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Banks as nearly as possible in proportion to the aggregate principal amounts of such offers (or as nearly in proportion as shall be practicable after giving effect to the requirement that Money Market Loans for each relevant maturity date shall each be in a principal amount of $5,000,000 or a multiple of $1,000,000 in excess thereof). SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall make the amount of its share of such Borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in or pursuant to Section 9.01 in funds immediately available to the Administrative Agent. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent shall make such aggregate funds available to the Borrower by depositing the proceeds thereof, in like funds as received by the Administrative Agent, in the account of the Borrower 21 with the Administrative Agent as promptly as practicable, but in no event later than 2:00 P.M. (New York City time) on the date of such Borrowing. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date (or, in the case of a Base Rate Borrowing, prior to 12:30 P.M. on the date) of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent does, in such circumstances, make available to the Borrower such amount, such Bank shall within three Domestic Business Days following such Borrowing make such share available to the Administrative Agent, together with interest thereon for each day from and including the date of such Borrowing that such share was not made available, at the Effective Federal Funds Rate. If such amount is so made available, such payment to the Administrative Agent shall constitute such Bank's share of such Borrowing for all purposes of this Agreement. If such amount is not so made available to the Administrative Agent, then the Administrative Agent shall on the third Domestic Business Day following such Borrowing notify the Borrower of such failure and on the fourth Domestic Business Day following the date of such Borrowing, the Borrower shall pay to the Administrative Agent such share, together with interest thereon for each day that the Borrower had the use of such share, at the Effective Federal Funds Rate. Nothing contained in this subsection (c) shall relieve any Bank which has failed to make available its share of any Borrowing hereunder from its obligation to do so in accordance with the terms hereof. (d) The failure of any Bank to make available to the Administrative Agent its share of any Borrowing on the date of such Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make available to the Administrative Agent its share of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make available the share of any Borrowing to be made available by such other Bank on such date of Borrowing. SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Administrative Agent (to be given not later than two Domestic Business Days prior to the first 22 Borrowing), request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal 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 type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Administrative Agent shall mail such Note to such Bank. Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto and may, at its option prior to any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. (a) Each Revolving Credit Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the Termination Date. (b) Each Term Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the Final Maturity Date. (c) Each Money Market Loan included in any Money Market Borrowing shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made to but excluding the date it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date, on the Termination Date and on the Final Maturity Date, and, with respect to the principal amount of any Base Rate Loan that is prepaid or converted to a CD Loan or Euro-Dollar Loan, on the date of such prepayment or conversion. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day from and including the date 23 payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (b) Subject to Section 8.01, each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the applicable CD Margin for such day plus the applicable Adjusted CD Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof and, with respect to the principal amount of any CD Loan that is prepaid or converted to a Base Rate Loan or Euro-Dollar Loan, on the date of such prepayment or conversion. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------------] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate * The amount in brackets being rounded upwards, if necessary, to the next higher 1/100 of 1%. The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank 24 to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding $5,000,000,000 in respect of new non-personal time deposits in Dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. ss. 327.4(a) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Subject to Section 8.01, each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the applicable Euro-Dollar Margin for such day plus the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof and, with respect to the principal amount of any Euro-Dollar Loan that is prepaid or converted to a Base Rate Loan or CD Loan, on the date of such prepayment or conversion. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in Dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period and for value on the first day of such Interest 25 Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market LIBOR Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Interest on each Money Market Loan shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give to the Borrower and the Banks making such Loans prompt notice by telex or facsimile transmission of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated by this Section. If any Reference Bank 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 Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. Facility Fee. The Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a 26 facility fee at the Facility Fee Rate (determined for each day in accordance with the Pricing Schedule). Such facility fee shall accrue: (i) from and including the date on which the condition referred to in Section 3.01(a) has been satisfied to but excluding the date on which the Commitments are terminated in their entirety, on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the date on which the Commitments are terminated in their entirety to but excluding the date the Loans shall be repaid in their entirety (if later), on the daily aggregate outstanding principal amount of the Loans. Such facility fee shall be payable quarterly on each Quarterly Payment Date (in arrears), commencing on September 30, 2000, and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments, provided that the Commitments may not be reduced below the aggregate outstanding principal amount of the Loans. Promptly after receiving a notice pursuant to this subsection, the Administrative Agent shall notify each Bank of the contents thereof. SECTION 2.10. Optional Prepayments. (a) Subject in the case of Fixed Rate Loans to Section 2.12, the Borrower may (i) upon at least one Domestic Business Day's notice to the Administrative Agent, prepay any Group of Domestic Loans (or any Money Market Borrowing bearing interest at the Reference Rate pursuant to Section 8.01) or (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent, prepay any Group of Euro- Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with interest accrued thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay 27 ratably the Loans of the several Banks included in such Group of Loans (or such Money Market Borrowing). (b) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. (c) Except as expressly provided in Section 2.10(a), the Borrower may not prepay the Money Market Loans at any time. SECTION 2.11. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 11:00 A.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01 and without reduction by reason of any set-off or counterclaim. The Administrative Agent will promptly distribute to each Bank its share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is 28 distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Effective Federal Funds Rate. SECTION 2.12. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a different type of Loan (whether such payment or conversion is pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(d), or if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loan after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.14(c), the Borrower shall reimburse each Bank through the Administrative Agent within 30 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after such payment or conversion or failure to borrow, prepay, convert or continue; provided that such Bank shall have delivered to the Borrower a certificate containing a computation in reasonable detail of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.13. Computation of Interest and Fees. Interest based on the Reference Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.14. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject to Section 2.14(d) and the provisions of Article 8), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans as of any Domestic Business Day, or convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day or continue such Loans as CD Loans, as of the end of any 29 Interest Period applicable thereto, for an additional Interest Period, subject to Section 2.12 if any such conversion is effective on any day other than the last day of an Interest Period applicable to such Loans; and (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans as of any Domestic Business Day, or convert such Loans to CD Loans as of any Domestic Business Day or may elect to continue such Loans as Euro-Dollar Loans, as of the end of any Interest Period applicable thereto, for an additional Interest Period, subject to Section 2.12 if any such conversion is effective on any day other than the last day of an Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be converted from Domestic Loans of one type to Domestic Loans of the other type or are CD Loans to be continued as CD Loans for an additional Interest Period, in which case such notice shall be delivered to the Administrative Agent not later than 10:30 A.M. (New York City time) on the second Domestic Business Day before such conversion or continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each at least $5,000,000 (unless such portion is comprised of Base Rate Loans). If no such notice is timely received before the end of an Interest Period for any Group of CD Loans or Euro-Dollar Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans at the end of such Interest Period. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of Section 2.14(a); (iii) if the Loans comprising such Group are to be converted, the new Type of Loans and, if the Loans resulting from such conversion are to 30 be CD Loans or Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to Section 2.14(a), the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. (d) The Borrower shall not be entitled to elect to convert any Committed Loans to, or continue any Committed Loans for an additional Interest Period as, CD Loans or Euro-Dollar Loans if (i) the aggregate principal amount of any Group of CD Loans or Euro-Dollar Loans created or continued as a result of such election would be less than $5,000,000 or (ii) a Default shall have occurred and be continuing when the Borrower delivers notice of such election to the Administrative Agent. (e) If any Committed Loan is converted to a different type of Loan, the Borrower shall pay, on the date of such conversion, the interest accrued to such date on the principal amount being converted. SECTION 2.15. Withholding Tax Exemption. At least five Domestic Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Bank, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Borrower and the Administrative Agent (i) two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI (or, in either case, a successor form), certifying in either case that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes and (ii) if such Bank is subject to backup withholding on the payment of interest, notification to such effect. Each Bank which so delivers a Form W-8BEN or W-8ECI (or, in either case, a successor form) further undertakes to deliver to the Borrower and the Administrative Agent two additional copies of such form on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably 31 requested by the Borrower or the Administrative Agent, in each case certifying that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank promptly advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. SECTION 2.16. Regulation D Compensation. (a) So long as Regulation D shall require reserves to be maintained against "Eurocurrency liabilities" (or against any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents), each Bank subject to and actually incurring such reserve requirement may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum (the "Regulation D Rate") determined pursuant to the following formula: [ LIBOR ] RDR = [---------] - LIBOR [ 1 - ERR ] RDR = Regulation D Rate LIBOR = The applicable London Interbank Offered Rate ERR = Eurocurrency Reserve Ratio "Eurocurrency Reserve Ratio" means the applicable reserve ratio prescribed by Regulation D (as such Regulation shall have been amended to the first day of the related Interest Period) for such reserve requirements (expressed as a decimal). Notwithstanding anything contained herein to the contrary, the Regulation D Rate shall be adjusted automatically on and as of the effective date of any change in such reserve ratio. (b) Any Bank wishing to require payment of such additional interest: (i) shall so notify the Borrower, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable on any date interest is payable with respect to each Euro-Dollar Loan commencing after the giving of such notice and 32 (ii) shall notify the Borrower from time to time of the amount due it under this Section; provided that the Borrower shall not be required to make any payment of an amount due hereunder earlier than the fifth Euro-Dollar Business Day after receipt of the notice referred to in clause (ii) of this Section. SECTION 2.17. Replacement of this Agreement. If the Borrower wishes at any time to replace this Agreement with another credit facility, the Borrower may give prior notice of the termination of the Commitments hereunder as required by Section 2.09 and prior notice of the prepayment of any Loans outstanding hereunder as required by Section 2.10, in each case on a conditional basis (i.e., conditioned upon such other credit facility becoming available to the Borrower), provided that the Borrower gives definitive notice of such termination of the Commitments and prepayment of outstanding Loans (if any) to the Administrative Agent before 10:00 A.M. (New York City time) on the date of such termination and prepayment (if any) and complies with the applicable requirements of Sections 2.09 and 2.10 in all other respects. SECTION 2.18. Optional Increase in Commitments. (a) At any time prior to the Termination Date, if no Default shall have occurred and be continuing, the Borrower may, upon notice to the Administrative Agent (which shall promptly provide a copy of such notice to the Banks), propose to increase the aggregate amount of the Commitments by an amount not greater than $125,000,000 (the amount of any such increase, the "Increased Commitments"). Each Bank party to this Agreement at such time shall have the right (but no obligation), for a period of 30 days following receipt of such notice to elect by notice to the Borrower and the Administrative Agent to increase its Commitment by a principal amount which bears the same ratio to the Increased Commitments as its then Commitment bears to the aggregate Commitments then existing. Any Bank not responding within 30 days of receipt of such notice shall be deemed to have declined to increase its Commitment. (b) If any Bank party to this Agreement shall not elect to increase its Commitment pursuant to subsection (a) of this Section, the Borrower may, within 21 days of the Banks' response, designate one or more of the existing Banks or other financial institutions acceptable to the Administrative Agent and the Borrower (which consent of the Administrative Agent shall not be unreasonably withheld) which at the time agree to (i) in the case of any such Person that is an existing Bank, increase its Commitment and (ii) in the case of any other such Person (an "Additional Bank"), become a party to this Agreement. The sum of the increases in the Commitments of the existing Banks pursuant to this 33 subsection (b) plus the Commitments of the Additional Banks shall not in the aggregate exceed the unsubscribed amount of the Increased Commitments. (c) An increase in the aggregate amount of the Commitments pursuant to this Section 2.18 shall become effective upon the receipt by the Administrative Agent of (i) an agreement in form and substance satisfactory to the Administrative Agent signed by the Borrower, by each Additional Bank and by each other Bank whose Commitment is to be increased, setting forth the new Commitments of such Banks and setting forth the agreement of each Additional Bank to become a party to this Agreement and to be bound by all the terms and provisions hereof and (ii) such evidence of appropriate corporate authorization on the part of the Borrower with respect to the Increased Commitments and such opinions of counsel for the Borrower with respect to the Increased Commitments as the Administrative Agent may reasonably request. (d) Upon any increase in the aggregate amount of the Commitments pursuant to this Section 2.18, within five Domestic Business Days, in the case of any Group of Base Rate Loans then outstanding, and at the end of the then current Interest Period with respect thereto, in the case of any Group of CD Loans or Euro-Dollar Loans then outstanding, the Borrower shall prepay such Group in its entirety and, to the extent the Borrower elects to do so and subject to the conditions specified in Article 3, the Borrower shall reborrow Committed Loans from the Banks in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Committed Loans are held by the Banks in such proportion. ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to the Agents of telegraphic, telex, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent for the account of each Bank of one executed Note dated on or before the Effective Date complying with the provisions of Section 2.05; 34 (c) receipt by the Administrative Agent of an opinion of Cahill Gordon & Reindel, special counsel for the Borrower, covering the matters described in Exhibit E; (d) receipt by the Administrative Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agents, substantially in the form of Exhibit F hereto; (e) receipt by the Administrative Agent of a certificate signed by the Chairman, the President, any Vice President, the Treasurer (or such Treasurer's designee) or any Assistant Treasurer of the Borrower, dated the Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02; (f) receipt by the Administrative Agent of a copy of the Borrower's certificate of incorporation, certified by the Secretary of State of Delaware; (g) receipt by the Administrative Agent of a certificate on behalf of the Borrower signed by the Secretary or an Assistant Secretary of the Borrower or such other authorized officer of the Borrower satisfactory to the Administrative Agent certifying (i) that the Borrower's certificate of incorporation has not been amended since the date of the certificate referred to in clause (f) above, (ii) that no proceeding for the dissolution or liquidation of the Borrower exists, (iii) that the copy of the By-laws of the Borrower attached to the certificate is true, correct and complete, (iv) that the copies of the resolutions of the Borrower's Board of Directors attached to the certificate are true and correct and in full force and effect, and (v) as to the incumbency of each officer of the Borrower who signed this Agreement and the Notes on behalf of the Borrower; (h) receipt by the Administrative Agent of evidence satisfactory to it of (i) the repayment in full, not later than the Effective Date, of all loans (if any) under the Existing Credit Agreement, together with interest accrued thereon to the Effective Date, and 35 (ii) the receipt by The Chase Manhattan Bank, as administrative agent under the Existing Credit Agreement, of all accrued and unpaid fees and all other amounts then due and payable by the Borrower under the Existing Credit Agreement; (i) the fact that all fees payable on or before the Effective Date by the Borrower for the account of the Banks and their affiliates in connection with this Agreement have been paid in full on or before such date in the amounts previously agreed upon in writing; and (j) receipt by the Administrative Agent of all other documents that the Agents may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement, the Notes and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Administrative Agent; provided that (i) the obligations of the Borrower set forth in Section 2.08 and clauses (a) and (b) of Section 5.01, and the obligations of the Bank Parties set forth in Section 9.10, shall become effective on the date on which the condition referred to in Section 3.01(a) has been satisfied, and (ii) the other provisions of this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than July 19, 2000. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (b) immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) immediately after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(c) as to any material adverse change which has theretofore been 36 disclosed in writing by the Borrower to the Banks) shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section, and each Notice of Borrowing shall be deemed to be a confirmation by the Borrower to such effect. ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (other than routine informational filings) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any material agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Restricted Subsidiaries or result in or permit the termination or modification of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Restricted Subsidiaries or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Restricted Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower. SECTION 4.04. Financial Information. 37 (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1999 and the related statements of income and cash flows for the fiscal year then ended, reported on by PricewaterhouseCoopers LLP, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of March 31, 2000 and the related unaudited consolidated statements of income and cash flows for the three months then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the consolidated financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such three month period (subject to normal year-end adjustments). (c) Since March 31, 2000 there has been no change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, which could materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or any Note or which in any manner draws into question the validity or enforceability of this Agreement or any Note. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Restricted Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or any Note or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. Compliance with ERISA. After it has become a member of the ERISA Group, each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. After it has become a member of the ERISA Group, no member of the ERISA Group has: 38 (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, 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 Internal Revenue 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 and aggregate withdrawal liabilities not in excess of $5,000,000 at any one time outstanding. SECTION 4.07. Environmental Matters. In the ordinary course of its business, the Borrower conducts reviews of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Restricted Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs. On the basis of this review, the Borrower has reasonably concluded that Environmental Laws are unlikely to have an effect on the business, financial condition or results of operations of the Borrower and its Consolidated Subsidiaries taken as a whole during the term of the Agreement, which could materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or any Note. SECTION 4.08. Subsidiaries. Each corporate Restricted Subsidiary of the Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.09. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. Disclosure. None of the material furnished to the Agents and the Banks by or on behalf of the Borrower in connection herewith contains, or contained at the time so furnished, any untrue statement of a material fact or omits, or omitted at the time so furnished, to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 39 ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to the Administrative Agent (and, in the case of a certificate delivered pursuant to clause (e) below, to each Bank): (a) as promptly as practicable and in any event within 113 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in accordance with generally accepted accounting principles by PricewaterhouseCoopers LLP or other independent public accountants of nationally recognized standing; (b) as promptly as practicable and in any event within 53 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and comparative financial information as of the end of the previous fiscal year, the related consolidated statement of income for such quarter and the related consolidated statements of income and cash flows for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the principal financial officer or the principal accounting officer of the Borrower or a person designated in writing by either of the foregoing persons. If such financial statements are filed with the SEC, then they shall be reported on in conformity with the financial reporting requirements of the SEC; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the principal financial officer, principal accounting officer, treasurer or comptroller of the Borrower, or a person designated in writing by either of the foregoing persons 40 (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with any applicable requirements of Sections 5.05 and 5.06; (ii) stating whether the Borrower was in compliance with the requirements of Sections 5.02 and 5.03; and (iii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements whether anything has come to their attention to cause them to believe that the Borrower was not in compliance with Sections 5.05 and 5.06, insofar as they relate to accounting matters, on the date of such statements; (e) within five days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the principal financial officer or the principal accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the public shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the SEC; (h) if and when any member of the ERISA Group (after it has become a member of the ERISA 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; 41 (ii) receives notice of complete or partial withdrawal liability in excess of $5,000,000, 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, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, 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 Internal Revenue 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 in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the principal financial officer, principal accounting officer, treasurer or comptroller of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; (i) promptly after the Borrower is notified by any rating agency referred to in the Pricing Schedule of any actual change in any rating referred to in the Pricing Schedule, written notice of such change; and (j) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. The Administrative Agent will deliver a copy of each document it receives pursuant to this Section 5.01 to each Bank within four Domestic Business Days after receipt thereof. 42 Information required to be delivered pursuant to clauses 5.01(a), 5.01(b), 5.01(f) or 5.01(g) above shall be deemed to have been delivered on the date on which the Borrower provides notice to the Banks that such information has been posted on the Borrower's website on the Internet at www.praxair.com, at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that such notice may be included in a certificate delivered pursuant to clause 5.01(c). SECTION 5.02. Maintenance of Property; Insurance. (a) The Borrower will keep, and will cause each of its Subsidiaries to keep, all property useful and necessary in its respective business in good working order and condition, ordinary wear and tear excepted. (b) The Borrower will maintain, and will cause each of its Subsidiaries to maintain, insurance policies on its assets at coverage levels that are at least as high as the coverage levels that are usually insured against in the same general area by companies of established repute engaged in the same or a similar business as the Borrower or such Subsidiary, as the case may be; and, upon request of the Administrative Agent, will promptly furnish to the Administrative Agent for distribution to the Banks information presented in reasonable detail as to the insurance so carried. SECTION 5.03. Negative Pledge. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, create, assume or suffer to exist any Lien securing Debt on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $75,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Restricted Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (d) any Lien on any improvements constructed on any property of the Borrower or any such Restricted Subsidiary and any theretofore unimproved real property on which such improvements are located securing Debt incurred for the purpose of financing all or any part of the cost of constructing such improvements, provided that such Lien attaches to such improvements within 90 43 days after the later of (1) completion of construction of such improvements and (2) commencement of full operation of such improvements; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Restricted Subsidiary and not created in contemplation of such acquisition; (f) Liens on property of the Borrower or a Restricted Subsidiary in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or any other government or department, agency, instrumentality or political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any Debt incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Liens; (g) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; and (h) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed $400,000,000. SECTION 5.04. Consolidations, Mergers and Sales of Assets. The Borrower will not merge or consolidate with or into any other Person or sell, lease, transfer or otherwise dispose of all or substantially all of its assets, property or business in any single transaction or series of related transactions, unless (i) in the case of any such merger or consolidation, the Borrower shall be the continuing corporation, or, in the case of any such sale, lease, transfer or other disposition, the transferee or transferees shall be one or more Wholly-Owned Consolidated Subsidiaries of the Borrower organized and existing under the laws of the United States of America or any State thereof which shall expressly assume, in the case of any such Wholly-Owned Consolidated Subsidiary, the due and punctual performance and observance of all of the covenants and agreements of the Borrower contained in this Agreement and the Notes, and (ii) immediately after giving effect to such merger or consolidation, or such sale, lease, transfer or other disposition, no Default shall have occurred and be continuing. 44 SECTION 5.05. Minimum Consolidated Book Net Worth. Consolidated Book Net Worth will not at any time be less than the sum of (a) $1,700,000,000, (b) 50% of Consolidated Net Income (calculated before giving effect to any charges referred to in the definition of Consolidated Book Net Worth) for each fiscal quarter beginning after March 31, 2000 for which such Consolidated Net Income (as so calculated) is positive, and (c) 50% of the proceeds from the sale on or subsequent to March 31, 2000 of capital stock of the Borrower or any of its Subsidiaries; provided that the proceeds from capital stock issued pursuant to any employee benefit plan, stock option plan or dividend reinvestment plan shall not be included in any determination under this Section 5.05. SECTION 5.06. Leverage Ratio. The Leverage Ratio will not exceed at any time 1.9:1. SECTION 5.07. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, in violation of any applicable law or regulation, and no use of such proceeds for general corporate purposes will include any use thereof, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events (each, an "Event of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan; (b) the Borrower shall fail to pay within five Domestic Business Days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; (c) the Borrower shall fail to observe or perform any covenant contained in Sections 5.03 through 5.07, inclusive; 45 (d) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a), (b) or (c) above) for 20 days after written notice thereof has been given to the Borrower; (e) any representation, warranty, certification or statement made (or deemed made) by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any materially adverse respect when made (or deemed made); (f) the Borrower or any Subsidiary of the Borrower shall fail to make any payment in respect of any Debt having an aggregate principal amount outstanding at such time equal to or exceeding $100,000,000 (other than the Notes) when due or within any applicable grace period; (g) any event or condition shall occur which results in the acceleration of the maturity of any Debt having an aggregate principal amount outstanding at such time equal to or exceeding $100,000,000 of the Borrower or any Subsidiary of the Borrower or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof or terminate its commitment in respect thereof; (h) the Borrower or any Subsidiary of the Borrower shall: (i) commence a voluntary case or other proceeding seeking (1) liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or (2) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property; (ii) consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it; (iii) make a general assignment for the benefit of creditors; (iv) except for trade payables, fail generally to pay its debts as they become due; or (v) take any corporate action to authorize any of the foregoing; 46 provided that no event otherwise constituting an Event of Default under this clause (h) shall be an Event of Default if the total assets of all entities with respect to which events have occurred and are continuing (calculated in each case at the time such event occurred) which would otherwise have constituted Events of Default under this clause (h) or clause (i) below do not exceed $150,000,000 on a cumulative basis; (i) (i) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary of the Borrower seeking (1) liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or (2) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or (ii) an order for relief shall be entered against the Borrower or any Subsidiary of the Borrower under the federal bankruptcy laws as now or hereafter in effect; provided that no event otherwise constituting an Event of Default under this clause (i) shall be an Event of Default if the total assets of all entities with respect to which events have occurred and are continuing (calculated in each case at the time such event occurred) which would otherwise have constituted Events of Default under this clause (i) or clause (h) above do not exceed $150,000,000 on a cumulative basis; (j) (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay under Title IV of ERISA; (ii) notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; (iii) 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 Material Plan; (iv) a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or 47 (v) 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 one or more members of the ERISA Group to incur a current payment obligation in excess of $25,000,000; (k) a judgment or order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Subsidiary and shall remain unsatisfied for a period of ten consecutive days during which ten-day period execution shall not be effectively stayed; or (l) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 30% or more of the outstanding shares of common stock of the Borrower; or Continuing Directors shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such event, the Administrative Agent shall: (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower, terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Borrower, declare the Notes (together with accrued interest thereon) to be, and the Notes (together with accrued interest thereon) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (h) or (i) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice under Section 6.01(d) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. 48 ARTICLE 7 AGENTS SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agents and Affiliates. The Chase Manhattan Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and The Chase Manhattan Bank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. SECTION 7.03. Action by Administrative Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.04. Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Administrative Agent. Neither the Administrative Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks (or such different number of Banks as any provision hereof expressly requires for such consent or request) or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in 49 reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. The Co-Syndication Agents have no responsibilities, and shall have no liability, under this Agreement or the Notes in their capacities as Co-Syndication Agents. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon any Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Administrative Agent. (a) The Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor to such Administrative Agent which shall be a Bank. If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a Bank. Upon the acceptance of its 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 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 hereunder as an Administrative Agent, the provisions of this Article shall inure to 50 its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. (b) If at any time the Administrative Agent shall have assigned its rights and obligations in respect of all of its Commitment hereunder, the Administrative Agent shall resign as the Administrative Agent in accordance with the procedures set forth in subsection (a) of this Section 7.08. ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Loan (other than a Money Market Absolute Rate Loan): (a) the Reference Banks notify (stating the reason therefor) the Administrative Agent that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments notify (stating the reason therefor) the Administrative Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, or to continue or convert outstanding Loans as or into CD Loans or Euro- Dollar Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to 51 but excluding the last day of the Interest Period applicable thereto at the Reference Rate for such day. SECTION 8.02. Illegality. (a) If, after the date of this Agreement, the adoption of, or any change in, any applicable law, rule or regulation, 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 Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall promptly so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. (b) Before giving any such notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day or (ii) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day. Interest and principal on any such Base Rate Loan shall be payable on the same dates as, and on a pro rata basis with, the interest and principal payable on the related Euro- Dollar Loans of the other Banks. SECTION 8.03. Increased Cost and Reduced Return. (a) If, after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of, or any change in, any applicable law, rule or regulation, 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 Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Loans, its Note 52 to the extent evidencing Fixed Rate Loans or its obligation to make Fixed Rate Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Loans or any other amounts due under this Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note to the extent evidencing Fixed Rate Loans or its obligation to make Fixed Rate Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall notify (stating the reason therefor) the Borrower that, after the date hereof, the adoption of, or any change in, any applicable law, rule or regulation regarding capital adequacy, 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 any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (including any determination by any such authority, central bank or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less), has the effect of reducing the rate of return on capital of such Bank as a consequence of such Bank's obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change, request or directive (taking into 53 consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder, accompanied by a computation thereof in reasonable detail, shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. (d) If any Bank has demanded compensation under this Section, the Borrower: (i) shall have the right, with the assistance of the Administrative Agent and upon notification to such Bank, to require such Bank to transfer, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto, its Note and Commitment to a substitute bank or banks satisfactory to the Borrower and the Administrative Agent (which may be one or more of the Banks) or (ii) may elect to terminate this Agreement as to such Bank, and in connection therewith to prepay any Base Rate Loan made pursuant to Section 8.04, provided that the Borrower (1) notifies the Administrative Agent (which will forthwith notify such Bank) of such election at least three Euro-Dollar Business Days before any date fixed for such a prepayment, and (2) either (x) repays all of such Bank's outstanding Loans at the end of the respective Interest Periods applicable thereto or as otherwise required by Section 8.02 or (y) subject to Section 2.12, prepays all of such Bank's outstanding Loans (other than Money Market Loans). Upon receipt by the Administrative Agent of such notice, the Commitment of such Bank shall terminate. SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans. Subject to Sections 2.10 and 2.12, if (i) the obligation of any Bank to make, or to continue to convert outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded 54 compensation under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (as continued or as converted to) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. All notices, requests, instructions and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address, facsimile number or telex number (if any) set forth on the signature pages hereof, (y) in the case of any Bank, at its address, facsimile number or telex number (if any) set forth in its Administrative Questionnaire or (z) in the case of any party hereto, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 8 shall not be effective until received. 55 SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agents, including reasonable fees and disbursements of one special counsel (Davis Polk & Wardwell) for the Agents, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agents or any Bank, including reasonable fees and disbursements of counsel (including the cost of staff counsel when used in lieu of separate special counsel), in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. The Borrower shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement or the Notes. (b) The Borrower shall indemnify each Bank and its directors, officers and employees for, and hold each Bank and its directors, officers and employees harmless from and against (i) any and all damages, losses and other liabilities of any kind, including, without limitation, judgments and costs of settlement, and (ii) any and all out-of-pocket costs and expenses of any kind, including, without limitation, reasonable fees and disbursements of counsel, including the cost of staff counsel where used in lieu of separate special counsel, and any other costs of defense, including, without limitation, costs of discovery and investigation, for such Bank and its officers and directors (all of which shall be paid or reimbursed by the Borrower monthly), suffered or incurred in connection with any investigative, administrative or judicial proceeding (whether or not such Bank shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that such Bank and its directors, officers and employees shall have no right to be indemnified or held harmless hereunder for its own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. The Borrower shall indemnify and hold harmless each Agent, in its capacity as an Agent hereunder, to the same extent that the Borrower indemnifies and holds harmless each Bank pursuant to this Section. SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise (other than pursuant to Section 8.03(d)(ii)), receive payment of a proportion of the aggregate amount of 56 principal and interest then due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest then due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that if at any time thereafter, the Bank that originally received such payment is required to repay (whether to the Borrower or to any other Person) all or any portion of such payment, each other Bank shall promptly (and in any event within five Domestic Business Days of its receipt of notification from such Bank requiring such repayment) repay to such Bank the portion of such payment previously received by it under this Section 9.04, together with such amount (if any) as is equal to the appropriate portion of any interest (in respect of the period during which such other Bank held such amount) such Bank shall have been obligated to pay when repaying such amount as aforesaid, in exchange for such participation in the Note of such other Bank as was previously purchased by such Bank. Nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of any Agent are affected thereby, by such Agent). Notwithstanding the foregoing, no such amendment or waiver shall, (a) unless signed by all the Banks, (i) increase the Commitment of any Bank or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, 57 (v) amend or waive the provisions of this Section 9.05; or (b) unless signed by a Designated Lender or its Designating Bank, (i) subject such Designated Lender to any additional obligation, (ii) affect its rights hereunder (unless the rights of all the Banks hereunder are similarly affected) or (iii) change this clause 9.05(b). The exercise by the Borrower of its right to decrease the Commitments pursuant to Section 2.09 or to decrease the Commitment of a Bank pursuant to Section 8.03(d) shall not be deemed to require the consent of any party to this Agreement. The exercise by the Borrower of its option to increase the aggregate amount of the Commitments pursuant to Section 2.18 shall not require the consent of any Person except for the consent of such Persons required by Section 2.18. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agents, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agents shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement and such Bank's Note. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder and under the Notes including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i) (only to the extent such modification, amendment or waiver would decrease the Commitment of such Bank), (ii) or (iii) of Section 9.05 or to any modification, amendment or waiver that would have the effect of increasing the amount of a Participant's participation in such Bank's Commitment, in any such case without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to subsection (f) below. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement 58 only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with the subscribed consent of the Borrower, not to be unreasonably withheld, in consultation with the Administrative Agent and with the subscribed acknowledgment of the Administrative Agent; provided that if an Assignee is (i) any Person which controls, is controlled by, or is under common control with, or is otherwise substantially affiliated with such transferor Bank or (ii) another Bank, no such consent shall be required; and provided further that any assignment shall not be less than $5,000,000, or, if less, shall constitute an assignment of all of such Bank's rights and obligations under this Agreement and the Notes. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee and the transferor Bank and the original Note is canceled, and the Administrative Agent shall notify the other Agents of such assignment. In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee of $3,500 for processing such assignment. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.15. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) The Administrative Agent and the Borrower may, for all purposes of this Agreement, treat any Bank as the holder of any Note drawn to its order (and 59 owner of the Loans evidenced thereby) until written notice of assignment or other transfer shall have been received by them. (f) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (g) If any Reference Bank assigns its Note to an unaffiliated institution, the Administrative Agent shall, with the consent of the Borrower and the Required Banks, appoint another Bank to act as a Reference Bank hereunder. SECTION 9.07. Designated Lenders. (a) Subject to the provisions of this subsection (a), any Bank may at any time designate an Eligible Designee to provide all or a portion of the Loans to be made by such Bank pursuant to this Agreement; provided that such designation shall not be effective unless the Borrower and the Administrative Agent consent thereto in writing (which consents shall not be unreasonably withheld). When a Bank and its Eligible Designee shall have signed an agreement substantially in the form of Exhibit H hereto (a "Designation Agreement") and the Borrower and the Administrative Agent shall have signed their respective consents thereto, such Eligible Designee shall become a Designated Lender for purposes of this Agreement. The Designating Bank shall thereafter have the right to permit such Designated Lender to provide all or a portion of the Loans to be made by such Designating Bank pursuant to Section 2.01 or 2.03, and the making of such Loans or portion thereof shall satisfy the obligation of the Designating Bank to the same extent, and as if, such Loans or portion thereof were made by the Designating Bank. As to any Loans or portion thereof made by it, each Designated Lender shall have all the rights that a Bank making such Loans or portion thereof would have had under this Agreement and otherwise; provided that (x) its voting rights under this Agreement shall be exercised solely by its Designating Bank and (y) its Designating Bank shall remain solely responsible to the other parties hereto for the performance of such Designated Lender's obligations under this Agreement, including its obligations in respect of the Loans or portion thereof made by it. No additional Note shall be required to evidence the Loans or portion thereof made by a Designated Lender; and the Designating Bank shall be deemed to hold its Note as agent for its Designated Lender to the extent of the Loans or portion thereof funded by such Designated Lender. Each Designating Bank shall act as administrative agent for its Designated Lender and give and receive notices and other communications on its behalf. Any payments for the account of any Designated Lender shall be paid to its Designating Bank as administrative agent 60 for such Designated Lender and neither the Borrower nor the Administrative Agent shall be responsible for any Designating Bank's application of such payments. In addition, any Designated Lender may, with notice to (but without the prior written consent of) the Borrower and the Administrative Agent, (i) assign all or portions of its interest in any Loans to its Designating Bank or to any financial institutions consented to in writing by the Borrower and the Administrative Agent that provide liquidity and/or credit facilities to or for the account of such Designated Lender to support the funding of Loans or portions thereof made by it and (ii) disclose on a confidential basis any non-public information relating to its Loans or portions thereof to any rating agency, commercial paper dealer or provider of any guarantee, surety, credit or liquidity enhancement to such Designated Lender. (b) Each party to this Agreement agrees that it will not institute against, or join any other person in instituting against, any Designated Lender any bankruptcy, insolvency, reorganization or other similar proceeding under any federal or state bankruptcy or similar law, for one year and a day after all outstanding senior indebtedness of such Designated Lender is paid in full. The Designating Bank for each Designated Lender agrees to indemnify, save, and hold harmless each other party hereto for any loss, cost, damage and expense arising out of its inability to institute any such proceeding against such Designated Lender. This subsection (b) shall survive the termination of this Agreement. SECTION 9.08. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE BORROWER 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 BORROWER 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 BORROWER, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY. 61 SECTION 9.09. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and the writings referred to in Section 3.01(i) constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.10. Confidentiality. In addition to any confidentiality requirements under applicable law, each of the Agents and Banks (each a "Bank Party" and, collectively, the "Bank Parties") agrees that through and including the later of (x) the Termination Date and (y) a date three years from the relevant Bank Party's receipt of the relevant information, it will take normal and reasonable precautions so that (i) all information provided to it by the Borrower, any Person on behalf of the Borrower, or by any other Bank Party on behalf of the Borrower, in connection with this Agreement or the transactions contemplated hereby will be held and treated by such Bank Party and its respective directors, affiliates, officers, agents and employees in confidence and (ii) neither it nor any of its respective directors, affiliates, officers, agents or employees shall, without the prior written consent of the Borrower, use any such information for any purpose or in any manner other than pursuant to the terms of and for the purposes contemplated by this Agreement. Notwithstanding the immediately preceding sentence, any Bank Party may disclose any such information or portions thereof (a) that is or becomes publicly available other than through a breach by such Bank Party of its obligations hereunder; (b) that is also provided to such Bank Party by a Person other than the Borrower not in violation, to the actual knowledge of such Bank Party, of any duty of confidentiality; (c) at the request of any bank regulatory authority or examiner; (d) pursuant to subpoena or other court process; (e) when required by applicable law; 62 (f) at the written request or the express direction of any other authorized government agency; (g) to its independent auditors, counsel and other professional advisors in connection with their provision of professional services to such Bank Party; (h) to any (i) Participant or (ii) prospective Participant or prospective Bank, if such Participant, prospective Participant or prospective Bank (which prospective Bank is promptly identified to the Borrower), prior to any such disclosure, agrees in writing to keep such information confidential to the same extent required of the Bank Parties hereunder; or (i) to any affiliate of such Bank Party, solely to enable such affiliate to assess the creditworthiness of the Borrower in connection with any transaction between such affiliate and the Borrower or any of its Subsidiaries; provided that any Bank Party's failure to comply with the provisions of this Section 9.10 shall not affect the obligations of the Borrower hereunder. SECTION 9.11. Severability. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. SECTION 9.12. Termination of Existing Credit Agreement. The Borrower and each of the Banks that is also a party to the Existing Credit Agreement agree that the "Commitments" as defined in the Existing Credit Agreement shall terminate in their entirety on the Effective Date. Each such Bank waives (a) any requirement of notice of such termination pursuant to Section 2.09 of the Existing Credit Agreement and (b) any claim to any commitment fees or other fees under the Existing Credit Agreement for any day on or after the Effective Date. The Borrower agrees that (i) no loans will be outstanding under the Existing Credit Agreement on or at any time after the Effective Date and (ii) all accrued and unpaid commitment fees, facility fees and other amounts due and payable under the Existing Credit Agreement on or before the Effective Date will be paid on or before the Effective Date. SECTION 9.13. Collateral. Each of the Banks represents to the Agents and each of the other Banks that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. 63 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. PRAXAIR, INC. By: /s/ James S. Sawyer ------------------------------------------------ Title: Vice President, Treasurer and Interim Chief Financial Officer 39 Old Ridgebury Road Danbury, CT 06810-5113 Telecopy number: (203) 837-2480 Attention: Treasurer's Group THE CHASE MANHATTAN BANK, as Administrative Agent By: /s/ Stacey L. Haimes ------------------------------------------------ Title: Vice President 270 Park Avenue New York, NY 10017 Attention: Stacey Haimes Telecopy number: (212) 270-7939 Commitments $29,166,666.68 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Dennis Wilczek ------------------------------------------------ Title: Associate 64 $29,166,666.67 BANK OF AMERICA, N.A. By: /s/ Wendy J. Gorman ------------------------------------------------ Title: Vice President $29,166,666.67 CREDIT SUISSE FIRST BOSTON By: /s/ William S. Lutkins ------------------------------------------------ Title: Vice President By: /s/ Vitaly G. Butenko ------------------------------------------------ Title: Assistant Vice President $29,166,666.67 THE CHASE MANHATTAN BANK By: /s/ Stacey L. Haimes ------------------------------------------------ Title: Vice President $20,000,000 ABN-AMRO BANK NV By: /s/ David Mandell ------------------------------------------------ Title: Senior Vice President By: /s/ Patricia Christy ------------------------------------------------ Title: Assistant Vice President 65 $20,000,000 BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Pamela Donnelly ------------------------------------------------ Title: Vice President $20,000,000 BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH By: /s/ Steven Atwell ------------------------------------------------ Title: Director By: /s/ Alexander M. Blodi ------------------------------------------------ Title: Director $20,000,000 CITIBANK, N.A. By: /s/ James N. Simpson ------------------------------------------------ Title: Managing Director $20,000,000 COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ Robert J. Donohue ------------------------------------------------ Title: Senior Vice President By: /s/ Peter T. Doyle ------------------------------------------------ Title: Assistant Vice President 66 $20,000,000 CREDIT AGRICOLE INDOSUEZ By: /s/ Sarah McClintock ------------------------------------------------ Title: Vice President By: /s/ John McCloskey ------------------------------------------------ Title: First Vice President $20,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: /s/ Jean M. Hannigan ------------------------------------------------ Title: Vice President By: /s/ Annette Walter ------------------------------------------------ Title: Associate $20,000,000 FLEET NATIONAL BANK By: /s/ Irene Bertozzi Bartenstein ------------------------------------------------ Title: Vice President $20,000,000 ROYAL BANK OF CANADA By: /s/ Gordon C. MacArthur ------------------------------------------------ Title: Senior Manager 67 $20,000,000 THE SANWA BANK, LIMITED By: /s/ Masahito Okubo ------------------------------------------------ Title: Vice President $20,000,000 THE INDUSTRIAL BANK OF JAPAN, LTD. By: /s/ John Dippo ------------------------------------------------ Title: Senior Vice President $20,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE By:/s/ Cynthia M. Niesen ------------------------------------------------ Title: Managing Director By:/s/ Walter T. Duffy III ------------------------------------------------ Title: Associate Director $13,333,333.33 BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH By: /s/ Frank Maffei ------------------------------------------------ Title: Authorized Signature By: /s/ Joseph Carlani ------------------------------------------------ Title: Vice President 68 $13,333,333.33 BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH By: /s/ Frederic W. Hall ------------------------------------------------ Title: Vice President By: /s/ Leonardo Valentini ------------------------------------------------ Title: First Vice President $13,333,333.33 CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Stephen M. Poppel ------------------------------------------------ Title: First Vice President $13,333,333.33 MELLON BANK N.A. By: /s/ Charles E. Frankenberry ------------------------------------------------ Title: Lending Officer $13,333,333.33 THE BANK OF NEW YORK By: /s/ Eliza S. Adams ------------------------------------------------ Title: Vice President 69 $13,333,333.33 THE SUMITOMO BANK, LIMITED By: /s/ Edward D. Henderson, Jr. ------------------------------------------------ Title: Senior Vice President $13,333,333.33 TORONTO DOMINION (TEXAS), INC. By: /s/ Sheila M. Conley ------------------------------------------------ Title: Vice President $10,000,000 BANCA DI ROMA, NEW YORK BRANCH By: /s/ Alessandro Paoli ------------------------------------------------ Title: Assistant Treasurer By: /s/ Steven Paley ------------------------------------------------ Title: First Vice President $10,000,000 BANCO BILBAO VIZCAYA ARGENTARIA S.A. By: /s/ John Martini ------------------------------------------------ Title: Vice President Corporate Banking By: /s/ Alberto Conde ------------------------------------------------ Title: Vice President Corporate Banking 70 $10,000,000 BANCO SANTANDER CENTRALE HISPANO, S.A. NEW YORK BRANCH By: /s/ Javier Guibert ------------------------------------------------ Title: Vice President By: /s/ Rebecca Rains ------------------------------------------------ Title: Assistant Vice President $10,000,000 BNP PARIBAS By: /s/ Sophie Revillard Kaufman ------------------------------------------------ Title: Vice President By: /s/ Richard Pace ------------------------------------------------ Title: Vice President Corporate Banking Division $10,000,000 STANDARD CHARTERED BANK By: /s/ Peter G. R. Dodds ------------------------------------------------ Title: Senior Credit Officer Coin 98/62 By: /s/ Shafiq Ur Rahman ------------------------------------------------ Title: Senior Vice President - ------------------ TOTAL COMMITMENTS: $500,000,000 ============== 71 PRICING SCHEDULE The "CD Margin", "Euro-Dollar Margin", and "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row and column corresponding to the Status and Utilization that exist on such day; provided that for any day on or after the Termination Date, the CD Margin and the Euro-Dollar Margin are the percentage specified in (i) plus 0.125%.
Level I Level II Level III Level IV Level V Level VI Euro-Dollar Margin if Utilization is equal to or less than 33% .14% .27% .40% .50% .825% 1.25% Euro-Dollar Margin If Utilization exceeds 33% .19% .37% .525% .625% .95% 1.25% CD Margin If Utilization is equal to or less than 33% .265% .395% .52% .625% .95% 1.375% CD Margin If Utilization exceeds 33% .315% .495% .645% .745% 1.05% 1.375% Facility Fee Rate .06% .08% .10% .125% .175% .25%
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, (i) the Borrower's long- term debt is rated at least A by S&P and at least A3 by Moody's or (ii) the Borrower's long-term debt is rated at least A- by S&P and at least A2 by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower's long-term debt is rated (x) at least A- by S&P and at least Baa1 by Moody's or (y) at least BBB+ by S&P and at least A3 by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower's long-term debt is rated (x) at least BBB+ by S&P and at least Baa2 by Moody's or (y) at least BBB by S&P and at least Baa1 by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or higher by Moody's and (ii) none of Level I Status, Level II Status and Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower's long-term debt is rated BBB- or higher by S&P and Baa3 or higher by Moody's 1 and (ii) none of Level I Status, Level II Status, Level III and Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. "Moody's" means Moody's Investors Service, Inc. "S&P" means Standard & Poor's Ratings Group. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, or Level V or Level VI Status exists at any date. "Utilization" means at any date the percentage equivalent of a fraction (i) the numerator of which is the aggregate outstanding principal amount of the Loans at such date, after giving effect to any borrowing or payment on such date and (ii) the denominator of which is the aggregate amount of the Commitments at such date, after giving effect to any reduction of the Commitments on such date. If for any reason any Loans remain outstanding following termination of the Commitments in their entirety, Utilization shall be deemed to exceed 33%. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. 2 EXHIBIT A NOTE New York, New York ________ __, 200__ For value received, PRAXAIR, INC., a Delaware corporation (the "Borrower"), promises to pay to the order of ______________ (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Chase Manhattan Bank, 270 Park Avenue, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the 364-Day Credit Agreement dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. 1 PRAXAIR, INC. By________________________ Name: Title: 2 Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL Amount of Amount of Type of Principal Notation Made Date Loan Loan Repaid By - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 3 EXHIBIT B FORM OF MONEY MARKET QUOTE REQUEST [Date] To: The Chase Manhattan Bank (the "Administrative Agent") From: Praxair, Inc. (the "Borrower") Re: 364-Day Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount1 Interest Period2 $ Such Money Market Quotes should offer a Money Market [LIBOR Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. PRAXAIR, INC By________________________ Name: Title: - -------- 1 Amount must be $25,000,000 or a larger multiple of $1,000,000. 2 Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. 1 EXHIBIT C FORM OF INVITATION FOR MONEY MARKET QUOTES [Date] To: [Name of Bank] Re: Invitation for Money Market Quotes to Praxair, Inc. (the "Borrower") Pursuant to Section 2.03 of the 364-Day Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [LIBOR Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than 11:00 A.M. (New York City time) on [date]. Terms used herein have the meanings assigned to them in the Credit Agreement. The Chase Manhattan Bank, as Administrative Agent By________________________ Authorized Officer 1 EXHIBIT D FORM OF MONEY MARKET QUOTE [Date] The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue NY, NY 10017 Attention: Re: Money Market Quote to Praxair, Inc. (the "Borrower") In response to your invitation on behalf of the Borrower dated __________ we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: ________________________________ 3. Date of Borrowing: ____________________1 ________________ 1 As specified in the related Invitation. 1 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market Amount 1 Period 2 [LIBOR Margin] 3 [Absolute Rate] 4 - ------------------------------------------------------------------------------ $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]1 We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the 364-Day Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Terms used herein have the meanings assigned to them in the Credit Agreement. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer - ------------- 1 Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. 2 Not more than 12 months or not less than 7 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. . 3 Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". 4 Specify rate of interest per annum (rounded to the nearest 1/10,000th of 1%). 2 EXHIBIT E FORM OF OPINION OF CAHILL GORDON & REINDEL, SPECIAL COUNSEL FOR THE BORROWER [Effective Date] To the Banks and the Agents Referred to Below c/o The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue NY, NY 10017 Re: Praxair, Inc. Ladies and Gentlemen: We have acted as special counsel to Praxair, Inc., a Delaware corporation (the "Borrower"), in connection with the 364-Day Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Bank of America, N.A., Credit Suisse First Boston and Morgan Guaranty Trust Company of New York, as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. In such capacity, we have examined the Credit Agreement and such corporate records, instruments and other documents, and such questions of law, as we have deemed necessary or appropriate to enable us to render the opinions expressed herein. As to various questions of fact material to our opinion, we have relied upon and assumed the accuracy of (i) the representations and warranties contained in the Credit Agreement, (ii) certificates or other documents furnished by the Borrower and the officers of the Borrower and (iii) certificates from various state authorities and public officials. 1 In connection with this opinion, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the appropriate authentic original documents of all documents submitted to us as certified, conformed or photostatic or facsimile copies. We have further assumed the due authorization, execution and delivery of the Credit Agreement by, or on behalf of, all parties thereto, other than the Borrower. Based on the foregoing and subject to the qualifications set forth below, we are of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business as a foreign corporation under the laws of the States of Connecticut and New York. 2. The Borrower has the corporate power and corporate authority to execute, deliver and perform its obligations under the Credit Agreement and the Notes. 3. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes have been duly authorized by all requisite corporate action on the part of the Borrower. 4. The Credit Agreement and the Notes have been duly executed and delivered by the Borrower and are valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, fraudulent conveyance and transfer, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (regardless of whether considered in a proceeding in equity or at law). 5. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes do not contravene any United States Federal or New York State law or the General Corporation Law of the State of Delaware. 6. No consent or approval of, or action by or filing with, any court or administrative or governmental body is required under the General Corporation Law of the State of Delaware or the laws of the State of New York or the United States of America for the Borrower to execute and deliver the Credit Agreement and the Notes and to perform its obligations thereunder. 7. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes will not (i) violate the certificate of incorporation 2 or by laws of the Borrower or (ii) result in a breach of, or constitute a default under, or require any consent under, any indenture or other agreement or instrument known to us evidencing or governing indebtedness for borrowed money of the Borrower. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction. In particular, we are expressing no opinion as to the effect, if any, of any law of any jurisdiction (except the State of New York) in which any Bank is located that may limit the rate of interest that may be charged or collected by such bank. In addition, with respect to the enforceability against and the performance by the Borrower of the Credit Agreement and the Notes, we express no opinion as to any contractual provisions purporting to provide indemnification insofar as such indemnification might be deemed inconsistent with public policy. This opinion is furnished at the request of the Borrower pursuant to Section 3.01(c) of the Credit Agreement by us as special counsel for the Borrower to you as Banks and Agents and is solely for your benefit in connection with the above transaction and may not be relied upon by you for any other purpose or relied upon by any other person, firm or corporation for any purpose without our prior written consent. The opinions we express herein are as of the date hereof, and we do not assume or undertake any responsibility or obligation to supplement such opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in the law which may occur after the date hereof. Very truly yours, 3 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENTS [Effective Date] To the Banks and the Agents Referred to Below c/o The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue NY, NY 10017 Dear Sirs: We have participated in the preparation of the 364-Day Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc. (the "Borrower"), the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent, for the purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 1 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, 2 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, ____ among [ASSIGNOR] (the "Assignor"), [and] [ASSIGNEE] (the "Assignee"), [and PRAXAIR, INC. (the "Borrower")]. W I T N E S S E T H: WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the 364-Day Credit Agreement dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co- Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent (as amended, the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Committed Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: 1 SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assumption. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, [and] the Assignee[, the Borrower and the Administrative Agent] and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $_________.1 It is understood that facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof with respect to the Assigned Amount are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower. This Agreement is conditioned upon the consent of the Borrower pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver Notes payable to the order of the Assignee (and, if necessary, to the Assignor) to evidence the assignment and assumption provided for herein.] - -------- 1 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 2 SECTION 5. Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, the Sole Lead Arranger, any Co-Arranger, any Co-Syndication Agent, any Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By______________________________ Name: Title: [ASSIGNEE] By______________________________ Name: Title: [PRAXAIR, INC.] By______________________________ Name: Title: Acknowledged this ____ day of ________ by The Chase Manhattan Bank, as Administrative Agent By___________________________ Name: 4 EXHIBIT H DESIGNATION AGREEMENT dated as of ________________, _____ Reference is made to the 364-Day Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meaning. _________________ (the "Designator") and ________________ (the "Designee") agree as follows: 1. The Designator designates the Designee as its Designated Lender under the Credit Agreement and the Designee accepts such designation. 2. The Designator makes no representations or warranties and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it is an Eligible Designee; (ii) appoints and authorizes the Designator as its administrative agent and attorney-in-fact and grants the Designator an irrevocable power of attorney to receive payments made for the benefit of the Designee under the Credit Agreement and to deliver and receive all communications and notices under the Credit Agreement, if any, that the Designee is obligated to deliver or has the right to receive thereunder; (iii) acknowledges that the Designator retains the sole right and responsibility to vote under the Credit Agreement, including, without limitation, the right to approve any amendment or waiver of any provision of the Credit Agreement; and (iv) agrees that the Designee shall be bound by all such votes, approvals, amendments and waivers and all other agreements of the Designator pursuant to or in connection with the Credit Agreement, all subject to Section 9.05(b) of the Credit Agreement. 4. The Designee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements referred to in Article 4 or delivered pursuant to Article 5 thereof and such other documents 1 and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement and (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Designator or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action it may be permitted to take under the Credit Agreement. 5. Following the execution of this Designation Agreement by the Designator and the Designee and the consent hereto by the Borrower, it will be delivered to the Administrative Agent for its consent. This Designation Agreement shall become effective when the Administrative Agent consents hereto or on any later date specified on the signature page hereof. 6. Upon the effectiveness hereof, the Designee shall have the right to make Loans or portions thereof as a Bank pursuant to Section 2.01 or 2.03 of the Credit Agreement and the rights of a Bank related thereto. The making of any such Loans or portions thereof by the Designee shall satisfy the obligations of the Designator under the Credit Agreement to the same extent, and as if, such Loans or portions thereof were made by the Designator. 7. This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Designation Agreement to be executed by their respective officers hereunto duly authorized, as of the date first above written. Effective Date:______ , ____ [NAME OF DESIGNATOR] By: ------------------------------------------ Name: Title: [NAME OF DESIGNEE] By: ------------------------------------------ Name: Title: 2 The undersigned consent to the foregoing designation. PRAXAIR, INC. By: ------------------------------------------ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent By: ------------------------------------------ Name: Title: 3 EXHIBIT I EXTENSION AGREEMENT Praxair, Inc. 39 Old Ridgebury Road Danbury, Connecticut 06810-5113 Gentlemen: Effective as of [effective date], the undersigned hereby agree to extend the Termination Date as now in effect under the 364-Day Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent, to [date]. Terms defined in the Credit Agreement are used herein as therein defined. 1 This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. THE CHASE MANHATTAN BANK, as Administrative Agent By: ------------------------------------------ Name: Title: [NAME OF BANK] By: ------------------------------------------ Name: Title: Agreed and accepted: PRAXAIR, INC. By: ----------------------------------------- Name: 2 CONFORMED COPY $1,000,000,000 FIVE-YEAR CREDIT AGREEMENT dated as of July 12, 2000 among Praxair, Inc., The Banks Party Hereto Morgan Guaranty Trust Company of New York Bank of America, N.A. and Credit Suisse First Boston, as Co-Syndication Agents and The Chase Manhattan Bank, as Administrative Agent ------------------------------------------- J.P. Morgan Securities Inc., Lead Arranger and Book Manager -------------- Banc of America Securities LLC Chase Securities Inc. Credit Suisse First Boston, Co-Arrangers and Co-Book Managers i
TABLE OF CONTENTS ---------------------- PAGE ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions......................................................................1 SECTION 1.02. Accounting Terms and Determinations.............................................13 SECTION 1.03. Types of Borrowings.............................................................14 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend.............................................................14 SECTION 2.02. Notice of Committed Borrowings..................................................14 SECTION 2.03. Money Market Borrowings.........................................................15 SECTION 2.04. Notice to Banks; Funding of Loans...............................................20 SECTION 2.05. Notes...........................................................................21 SECTION 2.06. Maturity of Loans...............................................................22 SECTION 2.07. Interest Rates..................................................................22 SECTION 2.08. Facility Fee....................................................................25 SECTION 2.09. Optional Termination or Reduction of Commitments................................26 SECTION 2.10. Optional Prepayments............................................................26 SECTION 2.11. General Provisions as to Payments...............................................26 SECTION 2.12. Funding Losses..................................................................27 SECTION 2.13. Computation of Interest and Fees................................................28 SECTION 2.14. Method of Electing Interest Rates...............................................28 SECTION 2.15. Withholding Tax Exemption.......................................................30 SECTION 2.16. Regulation D Compensation.......................................................30 SECTION 2.17. Replacement of this Agreement...................................................31 SECTION 2.18. Optional Increase in Commitments................................................32 ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness...................................................................33 SECTION 3.02. Borrowings......................................................................35 i PAGE ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power...................................................36 SECTION 4.02. Corporate and Governmental Authorization; No Contravention.........................................................................36 SECTION 4.03. Binding Effect..................................................................36 SECTION 4.04. Financial Information...........................................................36 SECTION 4.05. Litigation......................................................................37 SECTION 4.06. Compliance with ERISA...........................................................37 SECTION 4.07. Environmental Matters...........................................................38 SECTION 4.08. Subsidiaries....................................................................38 SECTION 4.09. Not an Investment Company.......................................................38 SECTION 4.10. Disclosure......................................................................38 ARTICLE 5 COVENANTS SECTION 5.01. Information.....................................................................39 SECTION 5.02. Maintenance of Property; Insurance..............................................42 SECTION 5.03. Negative Pledge.................................................................42 SECTION 5.04. Consolidations, Mergers and Sales of Assets.....................................43 SECTION 5.05. Minimum Consolidated Book Net Worth.............................................43 SECTION 5.06. Leverage Ratio..................................................................44 SECTION 5.07. Use of Proceeds.................................................................44 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default...............................................................44 SECTION 6.02. Notice of Default...............................................................47 ARTICLE 7 AGENTS SECTION 7.01. Appointment and Authorization...................................................48 SECTION 7.02. Agents and Affiliates...........................................................48 SECTION 7.03. Action by Administrative Agent..................................................48 SECTION 7.04. Consultation with Experts.......................................................48 SECTION 7.05. Liability of Administrative Agent...............................................48 SECTION 7.06. Indemnification.................................................................49 ii PAGE SECTION 7.07. Credit Decision.................................................................49 SECTION 7.08. Successor Administrative Agent..................................................49 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................50 SECTION 8.02. Illegality......................................................................51 SECTION 8.03. Increased Cost and Reduced Return...............................................51 SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans.......................54 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices.........................................................................54 SECTION 9.02. No Waivers......................................................................55 SECTION 9.03. Expenses; Documentary Taxes; Indemnification....................................55 SECTION 9.04. Sharing of Set-offs.............................................................56 SECTION 9.05. Amendments and Waivers..........................................................56 SECTION 9.06. Successors and Assigns..........................................................57 SECTION 9.07. Designated Lenders..............................................................59 SECTION 9.08. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial............................................................................60 SECTION 9.09. Counterparts; Integration.......................................................61 SECTION 9.10. Confidentiality.................................................................61 SECTION 9.11. Severability....................................................................62 SECTION 9.12. Termination of Existing Credit Agreement........................................62 SECTION 9.13. Collateral......................................................................63
iii Exhibits Exhibit A -- Note Exhibit B -- Form of Money Market Quote Request Exhibit C -- Form of Invitation for Money Market Quotes Exhibit D -- Form of Money Market Quote Exhibit E -- Form of Opinion of Cahill Gordon & Reindel, Special Counsel for the Borrower Exhibit F -- Opinion of Davis Polk & Wardwell, Special Counsel for the Agents Exhibit G -- Assignment and Assumption Agreement Exhibit H -- Designation Agreement iv CREDIT AGREEMENT AGREEMENT dated as of July 12, 2000 among PRAXAIR, INC., the BANKS party hereto, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BANK OF AMERICA, N.A. and CREDIT SUISSE FIRST BOSTON, as Co-Syndication Agents, and THE CHASE MANHATTAN BANK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Administrative Agent" means The Chase Manhattan Bank, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (which shall promptly following receipt thereof give a copy to the Borrower) duly completed by such Bank. "Agents" means the Administrative Agent and the Co-Syndication Agents. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and 1 (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank listed on the signature pages hereof, each Person which becomes a Bank pursuant to Section 2.18 and each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Bank Parties" has the meaning set forth in Section 9.10. "Base Rate" means, for any day, a rate per annum equal to the higher of the Reference Rate for such day or the sum of 1/2 of 1% plus the Effective Federal Funds Rate for such day. "Base Rate Loan" means a Committed Loan that bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the last sentence of Section 2.14(a) or Article 8. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means Praxair, Inc., a Delaware corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means a Committed Loan that bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election. "CD Margin" has the meaning set forth in Section 2.07(b). "CD Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of an Adjusted CD Rate. 2 "CD Reference Banks" means Bank of America, N.A., The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York and each other Bank as may be appointed pursuant to Section 9.06(g). "Commitment" means (i) with respect to each Bank listed on the Commitment Schedule, the amount set forth opposite such Bank's name on the Commitment Schedule and (ii) with respect to any Assignee or other Person which becomes a Bank pursuant to Section 2.18 or 9.06(c), the amount of the transferor Bank's Commitment assigned to it pursuant to Section 9.06(c), in each case as such amount may be changed from time to time pursuant to Section 2.09 or 9.06(c); provided that, if the context so requires, the term "Commitment" means the obligation of a Bank to extend credit up to such amount to the Borrower hereunder. "Commitment Schedule" means the Schedule attached hereto identified as such. "Committed Loan" means a loan made or to be made by a Bank pursuant to Section 2.01; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Book Net Worth" means at any date the consolidated shareholders' equity of the Borrower and its Consolidated Subsidiaries, calculated without giving effect to (i) changes in the cumulative foreign currency translation adjustment after March 31, 2000, (ii) any mark-to-market of a derivative or hedging instrument or any other adjustment related to any derivative or hedging instrument that might be required under FAS 133 after March 31, 2000, and (iii) after-tax restructuring charges taken after March 31, 2000 up to a maximum cumulative amount of $75,000,000. "Consolidated Net Income" for any period means the consolidated net income of the Borrower and its Consolidated Subsidiaries for such period, excluding any extraordinary items of gain or loss. "Consolidated Subsidiary" with respect to any Person means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date. 3 "Consolidated Total Debt" means at any date all consolidated Debt of the Borrower and its Consolidated Subsidiaries determined as of such date. "Continuing Director" means at any date a member of the Borrower's board of directors who was either (i) a member of such board twelve months prior to such date or (ii) nominated for election to such board by at least two-thirds of the Continuing Directors then in office. "Co-Syndication Agent" means each of Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., in its capacity as co-syndication agent for the credit facility provided hereunder. "Debt" of any Person means at any date, without duplication, to the extent required in accordance with generally accepted accounting principles to be included in the financial statements of such Person or the footnotes thereto, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures or notes, (iii) all obligations of such Person for installment purchase transactions involving the purchase of property or services over $5,000,000 for any particular transaction, except trade accounts payable and expense accruals arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all contingent or non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid or to be paid under a letter of credit, and (vi) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Designated Lender" means, with respect to any Designating Bank, an Eligible Designee designated by it pursuant to Section 9.07(a) as a Designated Lender for purposes of this Agreement. 4 "Designating Bank" means, with respect to each Designated Lender, the Bank that designated such Designated Lender pursuant to Section 9.07(a). "Dollars" and the sign "$" mean lawful money of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "Domestic Consolidated Subsidiary" with respect to any Person means a Consolidated Subsidiary of such Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia. "Domestic Lending Office" means, as to each Bank, its office identified in its Administrative Questionnaire as its Domestic Lending Office or such other office of such Bank as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Effective Federal Funds Rate" means the weighted average of the rates on overnight federal funds transactions between members of the Federal Reserve System arranged by federal funds brokers as published daily (or, if such day is not a Domestic Business Day, for the immediately preceding Domestic Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities (or any successor quotations). "Eligible Designee" means a special purpose corporation that (i) is organized under the laws of the United States or any state thereof, (ii) is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and (iii) issues (or the parent of which issues) commercial 5 paper rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's. "Environmental Laws" means all applicable federal, state, local and foreign laws, ordinances, codes, regulations, orders and requirements relating to the protection of, or discharge of materials into, the environment, including, without limitation, the Resource Conservation and Recovery Act of 1976, as amended; the Comprehensive Environmental Response, Compensation and Liability Act; the Toxic Substance Control Act; the Clean Water Act; the Clean Air Act; and the Safe Drinking Water Act. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Eurocurrency Reserve Ratio" has the meaning set forth in Section 2.16. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office or branch located at its address identified in its Administrative Questionnaire as its Euro-Dollar Lending Office or such other office or branch of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means a Committed Loan that bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election. "Euro-Dollar Margin" has the meaning set forth in Section 2.07(c). "Euro-Dollar Reference Banks" means the principal London offices of Bank of America, N.A., The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York and the principal London office of each other Bank as may be appointed pursuant to Section 9.06(g). 6 "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreement" means the Credit Agreement dated as of December 7, 1995, among the Borrower, the banks parties thereto, Morgan Guaranty Trust Company of New York, as documentation agent, and The Chase Manhattan Bank (successor to Chemical Bank), as administrative agent and auction agent, as amended to the Effective Date. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Reference Rate pursuant to Section 8.01) or any combination of the foregoing. "Group of Loans" means, at any time, a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time, (ii) all Euro-Dollar Loans having the same Interest Period at such time or (iii) all CD Loans having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt 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 Debt (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); or (ii) entered into for the purpose of ensuring in any legally enforceable manner the obligee of such Debt of the payment thereof or to protect such obligee in any legally enforceable manner against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include (a) endorsements for collection or deposit in the ordinary course of business; 7 (b) obligations that are not required in accordance with generally accepted accounting principles to be included in the financial statements of such Person or the footnotes thereto; (c) "unconditional purchase obligations" (including take-or-pay contracts) as defined in and as required to be disclosed pursuant to Statement of Financial Accounting Standards No. 47 and the related interpretations, as the same may be amended from time to time, but only to the extent the aggregate present value amount of all such obligations of the Borrower and its Consolidated Subsidiaries (other than amounts reflected on the balance sheet of the Borrower and its Consolidated Subsidiaries) is equal to or less than 5% of the net sales of the Borrower and its Consolidated Subsidiaries as set forth in their Consolidated Statement of Income, determined as of the end of the preceding quarter for the twelve months then ending; and (d) any obligations required to be disclosed pursuant to the Statement of Financial Accounting Standards No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, issued March 1990, the Statement of Financial Accounting Standards No. 107, Disclosure about Fair Value of Financial Instruments, issued December 1991, and the Statement of Financial Accounting Standards No. 119, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments, issued October 1994, and their related interpretations, as the same may be amended from time to time (except to the extent any such obligation is required to be reflected on the balance sheet of the Borrower and its Consolidated Subsidiaries). The term "Guarantee" used as a verb has a corresponding meaning. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter and, if deposits of a corresponding maturity are available to all Banks in the London interbank market, nine or twelve months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and 8 (b) any Interest Period which begins on the last Euro-Dollar 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 Euro-Dollar Business Day of a calendar month; (2) with respect to each CD Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable notice; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; (3) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending such whole number of months thereafter (but not more than 12 months) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar 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 Euro-Dollar Business Day of a calendar month; and (4) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than seven nor more than 180 days) as the Borrower may elect in accordance with Section 2.03; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and provided further that no Interest Period may end after the Termination Date. Notwithstanding the foregoing, all Interest Periods at any one time outstanding hereunder shall end on not more than 25 different dates, and the duration of any Interest Period which would otherwise exceed such limitation 9 shall be adjusted so as to coincide with the remaining term of such other then current Interest Period as the Borrower may specify in the related Notice of Borrowing or Notice of Interest Rate Election. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Invitation for Money Market Quotes" means an invitation by the Administrative Agent on behalf of the Borrower to each Bank to submit Money Market Quotes offering to make Money Market Loans in accordance with Section 2.03, substantially in the form of Exhibit C hereto. "Leverage Ratio" means the ratio of (x) Consolidated Total Debt to (y) Consolidated Book Net Worth. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market LIBOR Margins pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing, in each case made or to be made under this Agreement. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Federal Reserve Board, as the same may be amended, supplemented or modified from time to time. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $25,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d)(ii)(D). "Money Market Absolute Rate Loan" means a loan made or to be made by a Bank pursuant to an Absolute Rate Auction. 10 "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office or branch of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan made or to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Reference Rate pursuant to Section 8.01). "Money Market LIBOR Margin" has the meaning set forth in Section 2.03(d)(ii)(C). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA 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 ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.14(a). "Participant" has the meaning set forth in Section 9.06(b). 11 "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time 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 Internal Revenue Code and either: (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group; or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the Pricing Schedule attached hereto. "Quarterly Payment Dates" means each March 31, June 30, September 30 and December 31. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Reference Rate" means the rate of interest publicly announced by The Chase Manhattan Bank in New York City from time to time as its "prime rate". "Regulation D" and "Regulation U" means Regulation D and Regulation U, respectively, of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least 51% of the aggregate amount of the Commitments, or, if the Commitments have been terminated, holding Notes evidencing at least 51% of the aggregate unpaid principal amount of the outstanding Loans. "Restricted Subsidiary" means 12 (i) any Domestic Consolidated Subsidiary of the Borrower, and (ii) Praxair Canada Inc. "SEC" means the Securities and Exchange Commission. "Subsidiary" with respect to any Person means any corporation or other entity of which such Person directly or indirectly owns a majority of the securities or other ownership interests having ordinary voting power to elect the board of directors or other persons performing similar functions. Unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Termination Date" means July 12, 2005 or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (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 a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Wholly-Owned Consolidated Subsidiary" with respect to any Person means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by such Person. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article 5 to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Banks wish to amend Article 5 for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted 13 accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time before the Termination Date in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b) and, if less than $5,000,000, must be a Base Rate Borrowing) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, to the extent permitted by Section 2.10, prepay Loans and reborrow at any time before the Termination Date under this Section. The Commitments shall terminate on the Termination Date. SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 12:00 Noon (New York City time) on: (x) the date of each Base Rate Borrowing, (y) the Domestic Business Day next preceding the date of each CD Borrowing, and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: 14 (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate, a CD Rate or a Euro-Dollar Rate, and (d) in the case of a Fixed Rate Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks to make offers to make Money Market Loans to the Borrower prior to the Termination Date. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than: (x) 11:00 A.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) 9:00 A.M. (New York City time) on the Domestic Business Day which is the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $1,000,000, 15 (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market LIBOR Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes, substantially in the form of Exhibit C hereto, with respect to such Money Market Quote Request. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than 11:00 A.M. (New York City time) on: (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed, with corresponding changes to the times and dates set forth in clauses (x) and (y) below, and the Administrative Agent shall have notified the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Administrative Agent in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent notifies the Borrower of the terms of the offer or offers contained therein not later than: (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or 16 (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount: (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market LIBOR Margin") offered for each such Money Market Loan, expressed as a percentage (rounded to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (rounded to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. 17 A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language, except as permitted by subsection (d)(ii)(B)(z); (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Administrative Agent shall promptly notify the Borrower of the terms: (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the Borrower shall specify: (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, so offered and 18 (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 12:00 Noon (New York City time) on: (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and the Administrative Agent shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $1,000,000 and the principal amount of each Money Market Loan with respect to such Money Market Borrowing must be in an amount of $5,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement, and 19 (v) failure by the Borrower to notify the Administrative Agent by the time specified above shall be deemed a rejection of all offers. (g) Allocation by Borrower. If offers are made by two or more Banks with the same Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Banks as nearly as possible in proportion to the aggregate principal amounts of such offers (or as nearly in proportion as shall be practicable after giving effect to the requirement that Money Market Loans for each relevant maturity date shall each be in a principal amount of $5,000,000 or a multiple of $1,000,000 in excess thereof). SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall make the amount of its share of such Borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in or pursuant to Section 9.01 in funds immediately available to the Administrative Agent. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent shall make such aggregate funds available to the Borrower by depositing the proceeds thereof, in like funds as received by the Administrative Agent, in the account of the Borrower with the Administrative Agent as promptly as practicable, but in no event later than 2:00 P.M. (New York City time) on the date of such Borrowing. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date (or, in the case of a Base Rate Borrowing, prior to 12:30 P.M. on the date) of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent does, in such circumstances, make available to the Borrower such amount, such Bank shall within three 20 Domestic Business Days following such Borrowing make such share available to the Administrative Agent, together with interest thereon for each day from and including the date of such Borrowing that such share was not made available, at the Effective Federal Funds Rate. If such amount is so made available, such payment to the Administrative Agent shall constitute such Bank's share of such Borrowing for all purposes of this Agreement. If such amount is not so made available to the Administrative Agent, then the Administrative Agent shall on the third Domestic Business Day following such Borrowing notify the Borrower of such failure and on the fourth Domestic Business Day following the date of such Borrowing, the Borrower shall pay to the Administrative Agent such share, together with interest thereon for each day that the Borrower had the use of such share, at the Effective Federal Funds Rate. Nothing contained in this subsection (c) shall relieve any Bank which has failed to make available its share of any Borrowing hereunder from its obligation to do so in accordance with the terms hereof. (d) The failure of any Bank to make available to the Administrative Agent its share of any Borrowing on the date of such Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make available to the Administrative Agent its share of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make available the share of any Borrowing to be made available by such other Bank on such date of Borrowing. SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Administrative Agent (to be given not later than two Domestic Business Days prior to the first Borrowing), request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal 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 type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Administrative Agent shall mail such Note to such Bank. Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto and may, at its option prior to any transfer or enforcement of its Note, endorse on the schedule 21 forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. (a) Each Committed Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the Termination Date. (b) Each Money Market Loan included in any Money Market Borrowing shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made to but excluding the date it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date and on the Termination Date, and, with respect to the principal amount of any Base Rate Loan that is prepaid or converted to a CD Loan or Euro-Dollar Loan, on the date of such prepayment or conversion. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (b) Subject to Section 8.01, each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the applicable CD Margin for such day plus the applicable Adjusted CD Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof and, with respect to the principal amount of any CD Loan that is prepaid or converted to a Base Rate Loan or Euro-Dollar Loan, on the date of such prepayment or conversion. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. 22 The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------------] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate * The amount in brackets being rounded upwards, if necessary, to the next higher 1/100 of 1%. The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding $5,000,000,000 in respect of new non-personal time deposits in Dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. ss. 327.4(a) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) 23 insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Subject to Section 8.01, each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the applicable Euro-Dollar Margin for such day plus the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof and, with respect to the principal amount of any Euro-Dollar Loan that is prepaid or converted to a Base Rate Loan or CD Loan, on the date of such prepayment or conversion. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in Dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period and for value on the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market LIBOR Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Interest on each Money Market Loan shall be 24 payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give to the Borrower and the Banks making such Loans prompt notice by telex or facsimile transmission of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated by this Section. If any Reference Bank 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 Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. Facility Fee. The Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a facility fee at the Facility Fee Rate (determined for each day in accordance with the Pricing Schedule). Such facility fee shall accrue: (i) from and including the date on which the condition referred to in Section 3.01(a) has been satisfied to but excluding the date on which the Commitments are terminated in their entirety, on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the date on which the Commitments are terminated in their entirety to but excluding the date the Loans shall be repaid in their entirety (if later), on the daily aggregate outstanding principal amount of the Loans. Such facility fee shall be payable quarterly on each Quarterly Payment Date (in arrears), commencing on September 30, 2000, and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). 25 SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments, provided that the Commitments may not be reduced below the aggregate outstanding principal amount of the Loans. Promptly after receiving a notice pursuant to this subsection, the Administrative Agent shall notify each Bank of the contents thereof. SECTION 2.10. Optional Prepayments. (a) Subject in the case of Fixed Rate Loans to Section 2.12, the Borrower may (i) upon at least one Domestic Business Day's notice to the Administrative Agent, prepay any Group of Domestic Loans (or any Money Market Borrowing bearing interest at the Reference Rate pursuant to Section 8.01) or (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent, prepay any Group of Euro- Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with interest accrued thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group of Loans (or such Money Market Borrowing). (b) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. (c) Except as expressly provided in Section 2.10(a), the Borrower may not prepay the Money Market Loans at any time. SECTION 2.11. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 11:00 A.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01 and without reduction by reason of any set-off or counterclaim. The Administrative Agent will promptly distribute to each Bank its share of each such payment received by the Administrative Agent for the account of the Banks. Whenever 26 any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Effective Federal Funds Rate. SECTION 2.12. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a different type of Loan (whether such payment or conversion is pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(d), or if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loan after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.14(c), the Borrower shall reimburse each Bank through the Administrative Agent within 30 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after such payment or conversion or failure to borrow, prepay, convert or continue; provided that such Bank shall have delivered to the Borrower a certificate containing a computation in reasonable detail of the amount of such 27 loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.13. Computation of Interest and Fees. Interest based on the Reference Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.14. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject to Section 2.14(d) and the provisions of Article 8), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans as of any Domestic Business Day, or convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day or continue such Loans as CD Loans, as of the end of any Interest Period applicable thereto, for an additional Interest Period, subject to Section 2.12 if any such conversion is effective on any day other than the last day of an Interest Period applicable to such Loans; and (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans as of any Domestic Business Day, or convert such Loans to CD Loans as of any Domestic Business Day or may elect to continue such Loans as Euro-Dollar Loans, as of the end of any Interest Period applicable thereto, for an additional Interest Period, subject to Section 2.12 if any such conversion is effective on any day other than the last day of an Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be converted from Domestic Loans of one type to Domestic Loans of the other type or are CD Loans to be continued as CD Loans for an additional Interest 28 Period, in which case such notice shall be delivered to the Administrative Agent not later than 10:30 A.M. (New York City time) on the second Domestic Business Day before such conversion or continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each at least $5,000,000 (unless such portion is comprised of Base Rate Loans). If no such notice is timely received before the end of an Interest Period for any Group of CD Loans or Euro-Dollar Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans at the end of such Interest Period. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of Section 2.14(a); (iii) if the Loans comprising such Group are to be converted, the new Type of Loans and, if the Loans resulting from such conversion are to be CD Loans or Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to Section 2.14(a), the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. (d) The Borrower shall not be entitled to elect to convert any Committed Loans to, or continue any Committed Loans for an additional Interest Period as, CD Loans or Euro-Dollar Loans if (i) the aggregate principal amount of any Group of CD Loans or Euro-Dollar Loans created or continued as a result of such 29 election would be less than $5,000,000 or (ii) a Default shall have occurred and be continuing when the Borrower delivers notice of such election to the Administrative Agent. (e) If any Committed Loan is converted to a different type of Loan, the Borrower shall pay, on the date of such conversion, the interest accrued to such date on the principal amount being converted. SECTION 2.15. Withholding Tax Exemption. At least five Domestic Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Bank, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Borrower and the Administrative Agent (i) two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI (or, in either case, a successor form), certifying in either case that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes and (ii) if such Bank is subject to backup withholding on the payment of interest, notification to such effect. Each Bank which so delivers a Form W-8BEN or W-8ECI (or, in either case, a successor form) further undertakes to deliver to the Borrower and the Administrative Agent two additional copies of such form on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Administrative Agent, in each case certifying that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank promptly advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. SECTION 2.16. Regulation D Compensation. (a) So long as Regulation D shall require reserves to be maintained against "Eurocurrency liabilities" (or against any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents), each Bank subject to and actually incurring such reserve requirement may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, 30 additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum (the "Regulation D Rate") determined pursuant to the following formula: [ LIBOR ] RDR = [--------] - LIBOR [1 - ERR ] RDR = Regulation D Rate LIBOR = The applicable London Interbank Offered Rate ERR = Eurocurrency Reserve Ratio "Eurocurrency Reserve Ratio" means the applicable reserve ratio prescribed by Regulation D (as such Regulation shall have been amended to the first day of the related Interest Period) for such reserve requirements (expressed as a decimal). Notwithstanding anything contained herein to the contrary, the Regulation D Rate shall be adjusted automatically on and as of the effective date of any change in such reserve ratio. (b) Any Bank wishing to require payment of such additional interest: (i) shall so notify the Borrower, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable on any date interest is payable with respect to each Euro-Dollar Loan commencing after the giving of such notice and (ii) shall notify the Borrower from time to time of the amount due it under this Section; provided that the Borrower shall not be required to make any payment of an amount due hereunder earlier than the fifth Euro-Dollar Business Day after receipt of the notice referred to in clause (ii) of this Section. SECTION 2.17. Replacement of this Agreement. If the Borrower wishes at any time to replace this Agreement with another credit facility, the Borrower may give prior notice of the termination of the Commitments hereunder as required by Section 2.09 and prior notice of the prepayment of any Loans outstanding hereunder as required by Section 2.10, in each case on a conditional basis (i.e., conditioned upon such other credit facility becoming available to the Borrower), provided that the Borrower gives definitive notice of such termination of the Commitments and prepayment of outstanding Loans (if any) to the Administrative Agent before 10:00 A.M. (New York City time) on the date of such termination 31 and prepayment (if any) and complies with the applicable requirements of Sections 2.09 and 2.10 in all other respects. SECTION 2.18. Optional Increase in Commitments. (a) At any time prior to the Termination Date, if no Default shall have occurred and be continuing, the Borrower may, upon notice to the Administrative Agent (which shall promptly provide a copy of such notice to the Banks), propose to increase the aggregate amount of the Commitments by an amount not greater than $250,000,000 (the amount of any such increase, the "Increased Commitments"). Each Bank party to this Agreement at such time shall have the right (but no obligation), for a period of 30 days following receipt of such notice to elect by notice to the Borrower and the Administrative Agent to increase its Commitment by a principal amount which bears the same ratio to the Increased Commitments as its then Commitment bears to the aggregate Commitments then existing. Any Bank not responding within 30 days of receipt of such notice shall be deemed to have declined to increase its Commitment. (b) If any Bank party to this Agreement shall not elect to increase its Commitment pursuant to subsection (a) of this Section, the Borrower may, within 21 days of the Banks' response, designate one or more of the existing Banks or other financial institutions acceptable to the Administrative Agent and the Borrower (which consent of the Administrative Agent shall not be unreasonably withheld) which at the time agree to (i) in the case of any such Person that is an existing Bank, increase its Commitment and (ii) in the case of any other such Person (an "Additional Bank"), become a party to this Agreement. The sum of the increases in the Commitments of the existing Banks pursuant to this subsection (b) plus the Commitments of the Additional Banks shall not in the aggregate exceed the unsubscribed amount of the Increased Commitments. (c) An increase in the aggregate amount of the Commitments pursuant to this Section 2.18 shall become effective upon the receipt by the Administrative Agent of (i) an agreement in form and substance satisfactory to the Administrative Agent signed by the Borrower, by each Additional Bank and by each other Bank whose Commitment is to be increased, setting forth the new Commitments of such Banks and setting forth the agreement of each Additional Bank to become a party to this Agreement and to be bound by all the terms and provisions hereof and (ii) such evidence of appropriate corporate authorization on the part of the Borrower with respect to the Increased Commitments and such opinions of counsel for the Borrower with respect to the Increased Commitments as the Administrative Agent may reasonably request. (d) Upon any increase in the aggregate amount of the Commitments pursuant to this Section 2.18, within five Domestic Business Days, in the case of any Group of Base Rate Loans then outstanding, and at the end of the then current 32 Interest Period with respect thereto, in the case of any Group of CD Loans or Euro-Dollar Loans then outstanding, the Borrower shall prepay such Group in its entirety and, to the extent the Borrower elects to do so and subject to the conditions specified in Article 3, the Borrower shall reborrow Committed Loans from the Banks in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Committed Loans are held by the Banks in such proportion. ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to the Agents of telegraphic, telex, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent for the account of each Bank of one executed Note dated on or before the Effective Date complying with the provisions of Section 2.05; (c) receipt by the Administrative Agent of an opinion of Cahill Gordon & Reindel, special counsel for the Borrower, covering the matters described in Exhibit E; (d) receipt by the Administrative Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agents, substantially in the form of Exhibit F hereto; (e) receipt by the Administrative Agent of a certificate signed by the Chairman, the President, any Vice President, the Treasurer (or such Treasurer's designee) or any Assistant Treasurer of the Borrower, dated the Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02; (f) receipt by the Administrative Agent of a copy of the Borrower's certificate of incorporation, certified by the Secretary of State of Delaware; 33 (g) receipt by the Administrative Agent of a certificate on behalf of the Borrower signed by the Secretary or an Assistant Secretary of the Borrower or such other authorized officer of the Borrower satisfactory to the Administrative Agent certifying (i) that the Borrower's certificate of incorporation has not been amended since the date of the certificate referred to in clause (f) above, (ii) that no proceeding for the dissolution or liquidation of the Borrower exists, (iii) that the copy of the By-laws of the Borrower attached to the certificate is true, correct and complete, (iv) that the copies of the resolutions of the Borrower's Board of Directors attached to the certificate are true and correct and in full force and effect, and (v) as to the incumbency of each officer of the Borrower who signed this Agreement and the Notes on behalf of the Borrower; (h) receipt by the Administrative Agent of evidence satisfactory to it of (i) the repayment in full, not later than the Effective Date, of all loans (if any) under the Existing Credit Agreement, together with interest accrued thereon to the Effective Date, and (ii) the receipt by The Chase Manhattan Bank, as administrative agent under the Existing Credit Agreement, of all accrued and unpaid fees and all other amounts then due and payable by the Borrower under the Existing Credit Agreement; (i) the fact that all fees payable on or before the Effective Date by the Borrower for the account of the Banks and their affiliates in connection with this Agreement have been paid in full on or before such date in the amounts previously agreed upon in writing; and (j) receipt by the Administrative Agent of all other documents that the Agents may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement, the Notes and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Administrative Agent; 34 provided that (i) the obligations of the Borrower set forth in Section 2.08 and clauses (a) and (b) of Section 5.01, and the obligations of the Bank Parties set forth in Section 9.10, shall become effective on the date on which the condition referred to in Section 3.01(a) has been satisfied, and (ii) the other provisions of this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than July 19, 2000. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (b) immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) immediately after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(c) as to any material adverse change which has theretofore been disclosed in writing by the Borrower to the Banks) shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section, and each Notice of Borrowing shall be deemed to be a confirmation by the Borrower to such effect. ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the 35 laws of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (other than routine informational filings) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any material agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Restricted Subsidiaries or result in or permit the termination or modification of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Restricted Subsidiaries or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Restricted Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1999 and the related statements of income and cash flows for the fiscal year then ended, reported on by PricewaterhouseCoopers LLP, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of March 31, 2000 and the related unaudited consolidated statements of income and cash flows for the three months then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the consolidated financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of 36 operations and cash flows for such three month period (subject to normal year-end adjustments). (c) Since March 31, 2000 there has been no change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, which could materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or any Note or which in any manner draws into question the validity or enforceability of this Agreement or any Note. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Restricted Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or any Note or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. Compliance with ERISA. After it has become a member of the ERISA Group, each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. After it has become a member of the ERISA Group, no member of the ERISA Group has: (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, 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 Internal Revenue 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 and aggregate withdrawal liabilities not in excess of $5,000,000 at any one time outstanding. SECTION 4.07. Environmental Matters. In the ordinary course of its business, the Borrower conducts reviews of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Restricted Subsidiaries, in the course of which it identifies and evaluates associated 37 liabilities and costs. On the basis of this review, the Borrower has reasonably concluded that Environmental Laws are unlikely to have an effect on the business, financial condition or results of operations of the Borrower and its Consolidated Subsidiaries taken as a whole during the term of the Agreement, which could materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or any Note. SECTION 4.08. Subsidiaries. Each corporate Restricted Subsidiary of the Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.09. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. Disclosure. None of the material furnished to the Agents and the Banks by or on behalf of the Borrower in connection herewith contains, or contained at the time so furnished, any untrue statement of a material fact or omits, or omitted at the time so furnished, to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to the Administrative Agent (and, in the case of a certificate delivered pursuant to clause (e) below, to each Bank): (a) as promptly as practicable and in any event within 113 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in accordance with generally accepted accounting principles by PricewaterhouseCoopers LLP or other independent public accountants of nationally recognized standing; 38 (b) as promptly as practicable and in any event within 53 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and comparative financial information as of the end of the previous fiscal year, the related consolidated statement of income for such quarter and the related consolidated statements of income and cash flows for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the principal financial officer or the principal accounting officer of the Borrower or a person designated in writing by either of the foregoing persons. If such financial statements are filed with the SEC, then they shall be reported on in conformity with the financial reporting requirements of the SEC; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the principal financial officer, principal accounting officer, treasurer or comptroller of the Borrower, or a person designated in writing by either of the foregoing persons (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with any applicable requirements of Sections 5.05 and 5.06; (ii) stating whether the Borrower was in compliance with the requirements of Sections 5.02 and 5.03; and (iii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements whether anything has come to their attention to cause them to believe that the Borrower was not in compliance with Sections 5.05 and 5.06, insofar as they relate to accounting matters, on the date of such statements; (e) within five days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the principal financial officer or the principal accounting officer of the Borrower setting forth 39 the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the public shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the SEC; (h) if and when any member of the ERISA Group (after it has become a member of the ERISA 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 in excess of $5,000,000, 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, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, 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 Internal Revenue 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 40 (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the principal financial officer, principal accounting officer, treasurer or comptroller of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; (i) promptly after the Borrower is notified by any rating agency referred to in the Pricing Schedule of any actual change in any rating referred to in the Pricing Schedule, written notice of such change; and (j) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. The Administrative Agent will deliver a copy of each document it receives pursuant to this Section 5.01 to each Bank within four Domestic Business Days after receipt thereof. Information required to be delivered pursuant to clauses 5.01(a), 5.01(b), 5.01(f) or 5.01(g) above shall be deemed to have been delivered on the date on which the Borrower provides notice to the Banks that such information has been posted on the Borrower's website on the Internet at www.praxair.com, at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that such notice may be included in a certificate delivered pursuant to clause 5.01(c). SECTION 5.02. Maintenance of Property; Insurance. (a) The Borrower will keep, and will cause each of its Subsidiaries to keep, all property useful and necessary in its respective business in good working order and condition, ordinary wear and tear excepted. (b) The Borrower will maintain, and will cause each of its Subsidiaries to maintain, insurance policies on its assets at coverage levels that are at least as high as the coverage levels that are usually insured against in the same general area by companies of established repute engaged in the same or a similar business as the Borrower or such Subsidiary, as the case may be; and, upon request of the Administrative Agent, will promptly furnish to the Administrative Agent for distribution to the Banks information presented in reasonable detail as to the insurance so carried. 41 SECTION 5.03. Negative Pledge. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, create, assume or suffer to exist any Lien securing Debt on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $75,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Restricted Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (d) any Lien on any improvements constructed on any property of the Borrower or any such Restricted Subsidiary and any theretofore unimproved real property on which such improvements are located securing Debt incurred for the purpose of financing all or any part of the cost of constructing such improvements, provided that such Lien attaches to such improvements within 90 days after the later of (1) completion of construction of such improvements and (2) commencement of full operation of such improvements; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Restricted Subsidiary and not created in contemplation of such acquisition; (f) Liens on property of the Borrower or a Restricted Subsidiary in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or any other government or department, agency, instrumentality or political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any Debt incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Liens; (g) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; and 42 (h) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed $400,000,000. SECTION 5.04. Consolidations, Mergers and Sales of Assets. The Borrower will not merge or consolidate with or into any other Person or sell, lease, transfer or otherwise dispose of all or substantially all of its assets, property or business in any single transaction or series of related transactions, unless (i) in the case of any such merger or consolidation, the Borrower shall be the continuing corporation, or, in the case of any such sale, lease, transfer or other disposition, the transferee or transferees shall be one or more Wholly-Owned Consolidated Subsidiaries of the Borrower organized and existing under the laws of the United States of America or any State thereof which shall expressly assume, in the case of any such Wholly-Owned Consolidated Subsidiary, the due and punctual performance and observance of all of the covenants and agreements of the Borrower contained in this Agreement and the Notes, and (ii) immediately after giving effect to such merger or consolidation, or such sale, lease, transfer or other disposition, no Default shall have occurred and be continuing. SECTION 5.05. Minimum Consolidated Book Net Worth. Consolidated Book Net Worth will not at any time be less than the sum of (a) $1,700,000,000, (b) 50% of Consolidated Net Income (calculated before giving effect to any charges referred to in the definition of Consolidated Book Net Worth) for each fiscal quarter beginning after March 31, 2000 for which such Consolidated Net Income (as so calculated) is positive, and (c) 50% of the proceeds from the sale on or subsequent to March 31, 2000 of capital stock of the Borrower or any of its Subsidiaries; provided that the proceeds from capital stock issued pursuant to any employee benefit plan, stock option plan or dividend reinvestment plan shall not be included in any determination under this Section 5.05. SECTION 5.06. Leverage Ratio. The Leverage Ratio will not exceed at any time 1.9:1. SECTION 5.07. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. 43 None of such proceeds will be used, directly or indirectly, in violation of any applicable law or regulation, and no use of such proceeds for general corporate purposes will include any use thereof, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events (each, an "Event of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan; (b) the Borrower shall fail to pay within five Domestic Business Days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; (c) the Borrower shall fail to observe or perform any covenant contained in Sections 5.03 through 5.07, inclusive; (d) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a), (b) or (c) above) for 20 days after written notice thereof has been given to the Borrower; (e) any representation, warranty, certification or statement made (or deemed made) by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any materially adverse respect when made (or deemed made); (f) the Borrower or any Subsidiary of the Borrower shall fail to make any payment in respect of any Debt having an aggregate principal amount outstanding at such time equal to or exceeding $100,000,000 (other than the Notes) when due or within any applicable grace period; (g) any event or condition shall occur which results in the acceleration of the maturity of any Debt having an aggregate principal amount outstanding at such time equal to or exceeding $100,000,000 of the Borrower or any Subsidiary of the Borrower or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's 44 behalf to accelerate the maturity thereof or terminate its commitment in respect thereof; (h) the Borrower or any Subsidiary of the Borrower shall: (i) commence a voluntary case or other proceeding seeking (1) liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or (2) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property; (ii) consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it; (iii) make a general assignment for the benefit of creditors; (iv) except for trade payables, fail generally to pay its debts as they become due; or (v) take any corporate action to authorize any of the foregoing; provided that no event otherwise constituting an Event of Default under this clause (h) shall be an Event of Default if the total assets of all entities with respect to which events have occurred and are continuing (calculated in each case at the time such event occurred) which would otherwise have constituted Events of Default under this clause (h) or clause (i) below do not exceed $150,000,000 on a cumulative basis; (i) (i) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary of the Borrower seeking (1) liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or (2) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or (ii) an order for relief shall be entered against the Borrower or any Subsidiary of the Borrower under the federal bankruptcy laws as now or hereafter in effect; provided that no event otherwise constituting an Event of Default under this clause (i) shall be an Event of Default if the total assets of all entities with respect to which events have occurred and are continuing (calculated in each case at the 45 time such event occurred) which would otherwise have constituted Events of Default under this clause (i) or clause (h) above do not exceed $150,000,000 on a cumulative basis; (j) (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay under Title IV of ERISA; (ii) notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; (iii) 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 Material Plan; (iv) a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or (v) 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 one or more members of the ERISA Group to incur a current payment obligation in excess of $25,000,000; (k) a judgment or order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Subsidiary and shall remain unsatisfied for a period of ten consecutive days during which ten-day period execution shall not be effectively stayed; or (l) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 30% or more of the outstanding shares of common stock of the Borrower; or Continuing Directors shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such event, the Administrative Agent shall: (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower, terminate the Commitments and they shall thereupon terminate, and 46 (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Borrower, declare the Notes (together with accrued interest thereon) to be, and the Notes (together with accrued interest thereon) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (h) or (i) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice under Section 6.01(d) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 AGENTS SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agents and Affiliates. The Chase Manhattan Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and The Chase Manhattan Bank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. SECTION 7.03. Action by Administrative Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall 47 not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.04. Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Administrative Agent. Neither the Administrative Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks (or such different number of Banks as any provision hereof expressly requires for such consent or request) or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. The Co-Syndication Agents have no responsibilities, and shall have no liability, under this Agreement or the Notes in their capacities as Co-Syndication Agents. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. 48 SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon any Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Administrative Agent. (a) The Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor to such Administrative Agent which shall be a Bank. If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a Bank. Upon the acceptance of its 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 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 hereunder as an Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. (b) If at any time the Administrative Agent shall have assigned its rights and obligations in respect of all of its Commitment hereunder, the Administrative Agent shall resign as the Administrative Agent in accordance with the procedures set forth in subsection (a) of this Section 7.08. ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Loan (other than a Money Market Absolute Rate Loan): (a) the Reference Banks notify (stating the reason therefor) the Administrative Agent that deposits in Dollars (in the applicable amounts) are not 49 being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments notify (stating the reason therefor) the Administrative Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, or to continue or convert outstanding Loans as or into CD Loans or Euro- Dollar Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Reference Rate for such day. SECTION 8.02. Illegality. (a) If, after the date of this Agreement, the adoption of, or any change in, any applicable law, rule or regulation, 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 Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall promptly so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. 50 (b) Before giving any such notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day or (ii) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day. Interest and principal on any such Base Rate Loan shall be payable on the same dates as, and on a pro rata basis with, the interest and principal payable on the related Euro- Dollar Loans of the other Banks. SECTION 8.03. Increased Cost and Reduced Return. (a) If, after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of, or any change in, any applicable law, rule or regulation, 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 Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Loans, its Note to the extent evidencing Fixed Rate Loans or its obligation to make Fixed Rate Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Loans or any other amounts due under this Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit 51 or the London interbank market any other condition affecting its Fixed Rate Loans, its Note to the extent evidencing Fixed Rate Loans or its obligation to make Fixed Rate Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall notify (stating the reason therefor) the Borrower that, after the date hereof, the adoption of, or any change in, any applicable law, rule or regulation regarding capital adequacy, 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 any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has the effect of reducing the rate of return on capital of such Bank as a consequence of such Bank's obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder, accompanied by a computation thereof in reasonable detail, shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. (d) If any Bank has demanded compensation under this Section, the Borrower: 52 (i) shall have the right, with the assistance of the Administrative Agent and upon notification to such Bank, to require such Bank to transfer, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto, its Note and Commitment to a substitute bank or banks satisfactory to the Borrower and the Administrative Agent (which may be one or more of the Banks) or (ii) may elect to terminate this Agreement as to such Bank, and in connection therewith to prepay any Base Rate Loan made pursuant to Section 8.04, provided that the Borrower (1) notifies the Administrative Agent (which will forthwith notify such Bank) of such election at least three Euro-Dollar Business Days before any date fixed for such a prepayment, and (2) either (x) repays all of such Bank's outstanding Loans at the end of the respective Interest Periods applicable thereto or as otherwise required by Section 8.02 or (y) subject to Section 2.12, prepays all of such Bank's outstanding Loans (other than Money Market Loans). Upon receipt by the Administrative Agent of such notice, the Commitment of such Bank shall terminate. SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans. Subject to Sections 2.10 and 2.12, if (i) the obligation of any Bank to make, or to continue to convert outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (as continued or as converted to) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. 53 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. All notices, requests, instructions and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address, facsimile number or telex number (if any) set forth on the signature pages hereof, (y) in the case of any Bank, at its address, facsimile number or telex number (if any) set forth in its Administrative Questionnaire or (z) in the case of any party hereto, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 8 shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agents, including reasonable fees and disbursements of one special counsel (Davis Polk & Wardwell) for the Agents, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agents or any Bank, including reasonable fees and disbursements of counsel (including the cost of staff counsel when used in lieu of separate special counsel), in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. The Borrower shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement or the Notes. 54 (b) The Borrower shall indemnify each Bank and its directors, officers and employees for, and hold each Bank and its directors, officers and employees harmless from and against (i) any and all damages, losses and other liabilities of any kind, including, without limitation, judgments and costs of settlement, and (ii) any and all out-of-pocket costs and expenses of any kind, including, without limitation, reasonable fees and disbursements of counsel, including the cost of staff counsel where used in lieu of separate special counsel, and any other costs of defense, including, without limitation, costs of discovery and investigation, for such Bank and its officers and directors (all of which shall be paid or reimbursed by the Borrower monthly), suffered or incurred in connection with any investigative, administrative or judicial proceeding (whether or not such Bank shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that such Bank and its directors, officers and employees shall have no right to be indemnified or held harmless hereunder for its own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. The Borrower shall indemnify and hold harmless each Agent, in its capacity as an Agent hereunder, to the same extent that the Borrower indemnifies and holds harmless each Bank pursuant to this Section. SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise (other than pursuant to Section 8.03(d)(ii)), receive payment of a proportion of the aggregate amount of principal and interest then due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest then due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that if at any time thereafter, the Bank that originally received such payment is required to repay (whether to the Borrower or to any other Person) all or any portion of such payment, each other Bank shall promptly (and in any event within five Domestic Business Days of its receipt of notification from such Bank requiring such repayment) repay to such Bank the portion of such payment previously received by it under this Section 9.04, together with such amount (if any) as is equal to the appropriate portion of any interest (in respect of the period during which such other Bank held such amount) such Bank shall have been obligated to pay when repaying such amount as aforesaid, in exchange for such participation in the Note of such other Bank as was previously purchased by such Bank. Nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes. 55 SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of any Agent are affected thereby, by such Agent). Notwithstanding the foregoing, no such amendment or waiver shall, (a) unless signed by all the Banks, (i) increase the Commitment of any Bank or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, (v) amend or waive the provisions of this Section 9.05; or (b) unless signed by a Designated Lender or its Designating Bank, (i) subject such Designated Lender to any additional obligation, (ii) affect its rights hereunder (unless the rights of all the Banks hereunder are similarly affected) or (iii) change this clause 9.05(b). The exercise by the Borrower of its right to decrease the Commitments pursuant to Section 2.09 or to decrease the Commitment of a Bank pursuant to Section 8.03(d) shall not be deemed to require the consent of any party to this Agreement. The exercise by the Borrower of its option to increase the aggregate amount of the Commitments pursuant to Section 2.18 shall not require the consent of any Person except for the consent of such Persons required by Section 2.18. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. 56 (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agents, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agents shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement and such Bank's Note. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder and under the Notes including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i) (only to the extent such modification, amendment or waiver would decrease the Commitment of such Bank), (ii) or (iii) of Section 9.05 or to any modification, amendment or waiver that would have the effect of increasing the amount of a Participant's participation in such Bank's Commitment, in any such case without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to subsection (f) below. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with the subscribed consent of the Borrower, not to be unreasonably withheld, in consultation with the Administrative Agent and with the subscribed acknowledgment of the Administrative Agent; provided that if an Assignee is (i) any Person which controls, is controlled by, or is under common control with, or is otherwise substantially affiliated with such transferor Bank or (ii) another Bank, no such consent shall be required; and provided further that any assignment shall not be less than $5,000,000, or, if less, shall constitute an assignment of all of such Bank's rights and obligations under this Agreement and the Notes. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the 57 transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee and the transferor Bank and the original Note is canceled, and the Administrative Agent shall notify the other Agents of such assignment. In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee of $3,500 for processing such assignment. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.15. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) The Administrative Agent and the Borrower may, for all purposes of this Agreement, treat any Bank 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. (f) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (g) If any Reference Bank assigns its Note to an unaffiliated institution, the Administrative Agent shall, with the consent of the Borrower and the Required Banks, appoint another Bank to act as a Reference Bank hereunder. SECTION 9.07. Designated Lenders. (a) Subject to the provisions of this subsection (a), any Bank may at any time designate an Eligible Designee to provide all or a portion of the Loans to be made by such Bank pursuant to this Agreement; provided that such designation shall not be effective unless the Borrower and the Administrative Agent consent thereto in writing (which consents shall not be unreasonably withheld). When a Bank and its Eligible Designee shall have signed an agreement substantially in the form of Exhibit H 58 hereto (a "Designation Agreement") and the Borrower and the Administrative Agent shall have signed their respective consents thereto, such Eligible Designee shall become a Designated Lender for purposes of this Agreement. The Designating Bank shall thereafter have the right to permit such Designated Lender to provide all or a portion of the Loans to be made by such Designating Bank pursuant to Section 2.01 or 2.03, and the making of such Loans or portion thereof shall satisfy the obligation of the Designating Bank to the same extent, and as if, such Loans or portion thereof were made by the Designating Bank. As to any Loans or portion thereof made by it, each Designated Lender shall have all the rights that a Bank making such Loans or portion thereof would have had under this Agreement and otherwise; provided that (x) its voting rights under this Agreement shall be exercised solely by its Designating Bank and (y) its Designating Bank shall remain solely responsible to the other parties hereto for the performance of such Designated Lender's obligations under this Agreement, including its obligations in respect of the Loans or portion thereof made by it. No additional Note shall be required to evidence the Loans or portion thereof made by a Designated Lender; and the Designating Bank shall be deemed to hold its Note as agent for its Designated Lender to the extent of the Loans or portion thereof funded by such Designated Lender. Each Designating Bank shall act as administrative agent for its Designated Lender and give and receive notices and other communications on its behalf. Any payments for the account of any Designated Lender shall be paid to its Designating Bank as administrative agent for such Designated Lender and neither the Borrower nor the Administrative Agent shall be responsible for any Designating Bank's application of such payments. In addition, any Designated Lender may, with notice to (but without the prior written consent of) the Borrower and the Administrative Agent, (i) assign all or portions of its interest in any Loans to its Designating Bank or to any financial institutions consented to in writing by the Borrower and the Administrative Agent that provide liquidity and/or credit facilities to or for the account of such Designated Lender to support the funding of Loans or portions thereof made by it and (ii) disclose on a confidential basis any non-public information relating to its Loans or portions thereof to any rating agency, commercial paper dealer or provider of any guarantee, surety, credit or liquidity enhancement to such Designated Lender. (b) Each party to this Agreement agrees that it will not institute against, or join any other person in instituting against, any Designated Lender any bankruptcy, insolvency, reorganization or other similar proceeding under any federal or state bankruptcy or similar law, for one year and a day after all outstanding senior indebtedness of such Designated Lender is paid in full. The Designating Bank for each Designated Lender agrees to indemnify, save, and hold harmless each other party hereto for any loss, cost, damage and expense arising out of its inability to institute any such proceeding against such Designated Lender. This subsection (b) shall survive the termination of this Agreement. 59 SECTION 9.08. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE BORROWER 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 BORROWER 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 BORROWER, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 9.09. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and the writings referred to in Section 3.01(i) constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.10. Confidentiality. In addition to any confidentiality requirements under applicable law, each of the Agents and Banks (each a "Bank Party" and, collectively, the "Bank Parties") agrees that through and including the later of (x) the Termination Date and (y) a date three years from the relevant Bank Party's receipt of the relevant information, it will take normal and reasonable precautions so that (i) all information provided to it by the Borrower, any Person on behalf of the Borrower, or by any other Bank Party on behalf of the Borrower, in connection with this Agreement or the transactions contemplated hereby will be held and treated by such Bank Party and its respective directors, affiliates, officers, agents and employees in confidence and 60 (ii) neither it nor any of its respective directors, affiliates, officers, agents or employees shall, without the prior written consent of the Borrower, use any such information for any purpose or in any manner other than pursuant to the terms of and for the purposes contemplated by this Agreement. Notwithstanding the immediately preceding sentence, any Bank Party may disclose any such information or portions thereof (a) that is or becomes publicly available other than through a breach by such Bank Party of its obligations hereunder; (b) that is also provided to such Bank Party by a Person other than the Borrower not in violation, to the actual knowledge of such Bank Party, of any duty of confidentiality; (c) at the request of any bank regulatory authority or examiner; (d) pursuant to subpoena or other court process; (e) when required by applicable law; (f) at the written request or the express direction of any other authorized government agency; (g) to its independent auditors, counsel and other professional advisors in connection with their provision of professional services to such Bank Party; (h) to any (i) Participant or (ii) prospective Participant or prospective Bank, if such Participant, prospective Participant or prospective Bank (which prospective Bank is promptly identified to the Borrower), prior to any such disclosure, agrees in writing to keep such information confidential to the same extent required of the Bank Parties hereunder; or (i) to any affiliate of such Bank Party, solely to enable such affiliate to assess the creditworthiness of the Borrower in connection with any transaction between such affiliate and the Borrower or any of its Subsidiaries; provided that any Bank Party's failure to comply with the provisions of this Section 9.10 shall not affect the obligations of the Borrower hereunder. SECTION 9.11. Severability. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or 61 non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. SECTION 9.12. Termination of Existing Credit Agreement. The Borrower and each of the Banks that is also a party to the Existing Credit Agreement agree that the "Commitments" as defined in the Existing Credit Agreement shall terminate in their entirety on the Effective Date. Each such Bank waives (a) any requirement of notice of such termination pursuant to Section 2.09 of the Existing Credit Agreement and (b) any claim to any commitment fees or other fees under the Existing Credit Agreement for any day on or after the Effective Date. The Borrower agrees that (i) no loans will be outstanding under the Existing Credit Agreement on or at any time after the Effective Date and (ii) all accrued and unpaid commitment fees, facility fees and other amounts due and payable under the Existing Credit Agreement on or before the Effective Date will be paid on or before the Effective Date. SECTION 9.13. Collateral. Each of the Banks represents to the Agents and each of the other Banks that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. 62 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. PRAXAIR, INC. By: /s/ James S. Sawyer --------------------------------------------- Title: Vice President, Treasurer and Interim Chief Financial Officer 39 Old Ridgebury Road Danbury, CT 06810-5113 Telecopy number: (203) 837-2480 Attention: Treasurer's Group THE CHASE MANHATTAN BANK, as Administrative Agent By: /s/ Stacey L. Haimes --------------------------------------------- Title: Vice President 270 Park Avenue New York, NY 10017 Attention: Stacey Haimes Telecopy number: (212) 270-7939 Commitments $58,333,333.32 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Dennis Wilczek --------------------------------------------- Title: Associate 63 $58,333,333.33 BANK OF AMERICA, N.A. By: /s/ Wendy J. Gorman ---------------------------------------------- Title: Vice President $58,333,333.33 CREDIT SUISSE FIRST BOSTON By: /s/ William S. Lutkins ---------------------------------------------- Title: Vice President By: /s/ Vitaly G. Butenko ---------------------------------------------- Title: Assistant Vice President $58,333,333.33 THE CHASE MANHATTAN BANK By: /s/ Stacey L. Haimes ---------------------------------------------- Title: Vice President $40,000,000 ABN-AMRO BANK NV By: /s/ David Mandell ---------------------------------------------- Title: Senior Vice President By: /s/ Patricia Christy --------------------------------- Title: Assistant Vice President 64 $40,000,000 BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Pamela Donnelly --------------------------------------------- Title: Vice President $40,000,000 BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH By: /s/ Steven Atwell --------------------------------------------- Title: Director By: /s/ Alexander M. Blodi --------------------------------------------- Title: Director $40,000,000 CITIBANK, N.A. By: /s/ James N. Simpson --------------------------------------------- Title: Managing Director $40,000,000 COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ Robert J. Donohue --------------------------------------------- Title: Senior Vice President By: /s/ Peter T. Doyle --------------------------------------------- Title: Assistant Vice President 65 $40,000,000 CREDIT AGRICOLE INDOSUEZ By: /s/ Sarah McClintock ---------------------------------------------- Title: Vice President By: /s/ John McCloskey ---------------------------------------------- Title: First Vice President $40,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: /s/ Jean M. Hannigan ---------------------------------------------- Title: Vice President By: /s/ Annette Walter --------------------------------------------- Title: Associate $40,000,000 FLEET NATIONAL BANK By: /s/ Irene Bertozzi Bartenstein --------------------------------------------- Title: Vice President $40,000,000 ROYAL BANK OF CANADA By: /s/ Gordon C. MacArthur --------------------------------------------- Title: Senior Manager 66 $40,000,000 THE SANWA BANK, LIMITED By: /s/ Masahito Okubo -------------------------------------------- Title: Vice President $40,000,000 THE INDUSTRIAL BANK OF JAPAN, LTD. By: /s/ John Dippo -------------------------------------------- Title: Senior Vice President $40,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE By: /s/ Cynthia M. Niesen -------------------------------------------- Title: Managing Director By: /s/ Walter T. Duffy III -------------------------------------------- Title: Associate Director $26,666,666.67 BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH By: /s/ Frank Maffei -------------------------------------------- Title: Authorized Signature By: /s/ Joseph Carlani -------------------------------------------- Title: Vice President 67 $26,666,666.67 BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH By: /s/ Frederic W. Hall ---------------------------------------------- Title: Vice President By: /s/ Leonardo Valentini ---------------------------------------------- Title: First Vice President $26,666,666.67 CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Stephen M. Poppel ---------------------------------------------- Title: First Vice President $26,666,666.67 MELLON BANK N.A. By: /s/ Charles E. Frankenberry ---------------------------------------------- Title: Lending Officer $26,666,666.67 THE BANK OF NEW YORK By: /s/ Eliza S. Adams ---------------------------------------------- Title: Vice President 68 $26,666,666.67 THE SUMITOMO BANK, LIMITED By: /s/ Edward D. Henderson, Jr. ---------------------------------------------- Title: Senior Vice President $26,666,666.67 TORONTO DOMINION (TEXAS), INC. By: /s/ Sheila M. Conley ---------------------------------------------- Title: Vice President $20,000,000 BANCA DI ROMA, NEW YORK BRANCH By: /s/ Alessandro Paoli ---------------------------------------------- Title: Assistant Treasurer By: /s/ Steven Paley ---------------------------------------------- Title: First Vice President $20,000,000 BANCO BILBAO VIZCAYA ARGENTARIA S.A. By: /s/ John Martini ---------------------------------------------- Title: Vice President Corporate Banking By: /s/ Alberto Conde ---------------------------------------------- Title: Vice President Corporate Banking 69 $20,000,000 BANCO SANTANDER CENTRALE HISPANO, S.A. NEW YORK BRANCH By: /s/ Javier Guibert -------------------------------------------- Title: Vice President By: /s/ Rebecca Rains 6 -------------------------------------------- Title: Assistant Vice President $20,000,000 BNP PARIBAS By: /s/ Sophie Revillard Kaufman --------------------------------------------- Title: Vice President By: /s/ Richard Pace --------------------------------------------- Title: Vice President Corporate Banking Division $20,000,000 STANDARD CHARTERED BANK By: /s/ Peter G. R. Dodds --------------------------------------------- Title: Senior Credit Officer Coin 98/62 By: /s/ Shafiq Ur Rahman --------------------------------------------- Title: Senior Vice President - ------------------ TOTAL COMMITMENTS: $1,000,000,000 ============== 70 PRICING SCHEDULE The "CD Margin", "Euro-Dollar Margin", and "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row and column corresponding to the Status and Utilization that exist on such day.
- ---------------------------------- --------- ---------- ---------- --------- ---------- ------------ Level I Level II Level III Level IV Level V Level VI - ---------------------------------- --------- ---------- ---------- --------- ---------- ------------ Euro-Dollar Margin if .12% .25% .375% .475% .775% 1.20% Utilization is equal to or less than 33% - ---------------------------------- --------- ---------- ---------- --------- ---------- ------------ Euro-Dollar Margin If .17% .35% .50% .60% .90% 1.20% Utilization exceeds 33% - ---------------------------------- --------- ---------- ---------- --------- ---------- ------------ CD Margin If Utilization is .245% .375% .50% .60% .90% 1.325% equal to or less than 33% - ---------------------------------- --------- ---------- ---------- --------- ---------- ------------ CD Margin If Utilization exceeds .295% .475% .625% .725% 1.025% 1.325% 33% - ---------------------------------- --------- ---------- ---------- --------- ---------- ------------ Facility Fee Rate .08% .10% .125% .15% .225% .30% - ---------------------------------- --------- ---------- ---------- --------- ---------- ------------
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, (i) the Borrower's long- term debt is rated at least A by S&P and at least A3 by Moody's or (ii) the Borrower's long-term debt is rated at least A- by S&P and at least A2 by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower's long-term debt is rated (x) at least A- by S&P and at least Baa1 by Moody's or (y) at least BBB+ by S&P and at least A3 by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower's long-term debt is rated (x) at least BBB+ by S&P and at least Baa2 by Moody's or (y) at least BBB by S&P and at least Baa1 by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or higher by Moody's and (ii) none of Level I Status, Level II Status and Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower's long- term debt is rated BBB- or higher by S&P and Baa3 or higher by Moody's and (ii) none of Level I Status, Level II Status, Level III and Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. 1 "Moody's" means Moody's Investors Service, Inc. "S&P" means Standard & Poor's Ratings Group. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, or Level V or Level VI Status exists at any date. "Utilization" means at any date the percentage equivalent of a fraction (i) the numerator of which is the aggregate outstanding principal amount of the Loans at such date, after giving effect to any borrowing or payment on such date and (ii) the denominator of which is the aggregate amount of the Commitments at such date, after giving effect to any reduction of the Commitments on such date. If for any reason any Loans remain outstanding following termination of the Commitments in their entirety, Utilization shall be deemed to exceed 33%. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. 2 EXHIBIT A NOTE New York, New York ________ __, 200__ For value received, PRAXAIR, INC., a Delaware corporation (the "Borrower"), promises to pay to the order of ______________ (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Chase Manhattan Bank, 270 Park Avenue, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Five-Year Credit Agreement dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. 1 PRAXAIR, INC. By________________________ Name: Title: 2 Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL Amount of Amount of Type of Principal Notation Made Date Loan Loan Repaid By - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 3 EXHIBIT B FORM OF MONEY MARKET QUOTE REQUEST [Date] To: The Chase Manhattan Bank (the "Administrative Agent") From: Praxair, Inc. (the "Borrower") Re: Five-Year Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount 1 Interest Period 2 $ Such Money Market Quotes should offer a Money Market [LIBOR Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. PRAXAIR, INC By________________________ Name: Title: - -------- 1 Amount must be $25,000,000 or a larger multiple of $1,000,000. 2 Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. 1 EXHIBIT C FORM OF INVITATION FOR MONEY MARKET QUOTES [Date] To: [Name of Bank] Re: Invitation for Money Market Quotes to Praxair, Inc. (the "Borrower") Pursuant to Section 2.03 of the Five-Year Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [LIBOR Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than 11:00 A.M. (New York City time) on [date]. Terms used herein have the meanings assigned to them in the Credit Agreement. The Chase Manhattan Bank, as Administrative Agent By________________________ Authorized Officer 1 EXHIBIT D FORM OF MONEY MARKET QUOTE [Date] The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue NY, NY 10017 Attention: Re: Money Market Quote to Praxair, Inc. (the "Borrower") In response to your invitation on behalf of the Borrower dated __________ we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: ________________________________ 3. Date of Borrowing: ____________________1 - -------- 1 As specified in the related Invitation. 1 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market Amount 1 Period 2 [LIBOR Margin] 3 [Absolute Rate] 4 - ------------------------------------------------------------------------------ $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]1 We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Five-Year Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Terms used herein have the meanings assigned to them in the Credit Agreement. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer - -------- 1 Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. 2 Not more than 12 months or not less than 7 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. 3 Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". 4 Specify rate of interest per annum (rounded to the nearest 1/10,000th of 1%). 2 EXHIBIT E FORM OF OPINION OF CAHILL GORDON & REINDEL, SPECIAL COUNSEL FOR THE BORROWER [Effective Date] To the Banks and the Agents Referred to Below c/o The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue NY, NY 10017 Re: Praxair, Inc. Ladies and Gentlemen: We have acted as special counsel to Praxair, Inc., a Delaware corporation (the "Borrower"), in connection with the Five-Year Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Bank of America, N.A., Credit Suisse First Boston and Morgan Guaranty Trust Company of New York, as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. In such capacity, we have examined the Credit Agreement and such corporate records, instruments and other documents, and such questions of law, as we have deemed necessary or appropriate to enable us to render the opinions expressed herein. As to various questions of fact material to our opinion, we have relied upon and assumed the accuracy of (i) the representations and warranties contained in the Credit Agreement, (ii) certificates or other documents furnished by the Borrower and the officers of the Borrower and (iii) certificates from various state authorities and public officials. 1 In connection with this opinion, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the appropriate authentic original documents of all documents submitted to us as certified, conformed or photostatic or facsimile copies. We have further assumed the due authorization, execution and delivery of the Credit Agreement by, or on behalf of, all parties thereto, other than the Borrower. Based on the foregoing and subject to the qualifications set forth below, we are of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business as a foreign corporation under the laws of the States of Connecticut and New York. 2. The Borrower has the corporate power and corporate authority to execute, deliver and perform its obligations under the Credit Agreement and the Notes. 3. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes have been duly authorized by all requisite corporate action on the part of the Borrower. 4. The Credit Agreement and the Notes have been duly executed and delivered by the Borrower and are valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, fraudulent conveyance and transfer, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (regardless of whether considered in a proceeding in equity or at law). 5. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes do not contravene any United States Federal or New York State law or the General Corporation Law of the State of Delaware. 6. No consent or approval of, or action by or filing with, any court or administrative or governmental body is required under the General Corporation Law of the State of Delaware or the laws of the State of New York or the United States of America for the Borrower to execute and deliver the Credit Agreement and the Notes and to perform its obligations thereunder. 7. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes will not (i) violate the certificate of incorporation 2 or by laws of the Borrower or (ii) result in a breach of, or constitute a default under, or require any consent under, any indenture or other agreement or instrument known to us evidencing or governing indebtedness for borrowed money of the Borrower. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction. In particular, we are expressing no opinion as to the effect, if any, of any law of any jurisdiction (except the State of New York) in which any Bank is located that may limit the rate of interest that may be charged or collected by such bank. In addition, with respect to the enforceability against and the performance by the Borrower of the Credit Agreement and the Notes, we express no opinion as to any contractual provisions purporting to provide indemnification insofar as such indemnification might be deemed inconsistent with public policy. This opinion is furnished at the request of the Borrower pursuant to Section 3.01(c) of the Credit Agreement by us as special counsel for the Borrower to you as Banks and Agents and is solely for your benefit in connection with the above transaction and may not be relied upon by you for any other purpose or relied upon by any other person, firm or corporation for any purpose without our prior written consent. The opinions we express herein are as of the date hereof, and we do not assume or undertake any responsibility or obligation to supplement such opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in the law which may occur after the date hereof. Very truly yours, 3 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENTS [Effective Date] To the Banks and the Agents Referred to Below c/o The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue NY, NY 10017 Dear Sirs: We have participated in the preparation of the Five-Year Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc. (the "Borrower"), the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co- Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent, for the purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 1 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, 2 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, ____ among [ASSIGNOR] (the "Assignor"), [and] [ASSIGNEE] (the "Assignee"), [and PRAXAIR, INC. (the "Borrower")]. W I T N E S S E T H: WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Five-Year Credit Agreement dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent (as amended, the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Committed Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: 1 SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assumption. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, [and] the Assignee[, the Borrower and the Administrative Agent] and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $_________.1 It is understood that facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof with respect to the Assigned Amount are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower. This Agreement is conditioned upon the consent of the Borrower pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver Notes payable to the order of the Assignee (and, if necessary, to the Assignor) to evidence the assignment and assumption provided for herein.] - -------- 1 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 2 SECTION 5. Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, the Sole Lead Arranger, any Co-Arranger, any Co-Syndication Agent, any Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By______________________________ Name: Title: [ASSIGNEE] By______________________________ Name: Title: [PRAXAIR, INC.] By______________________________ Name: Title: Acknowledged this ____ day of ________ by The Chase Manhattan Bank, as Administrative Agent By___________________________ Name: 4 EXHIBIT H DESIGNATION AGREEMENT dated as of ________________, _____ Reference is made to the Five-Year Credit Agreement (the "Credit Agreement") dated as of July 12, 2000 among Praxair, Inc., the Banks party thereto, Morgan Guaranty Trust Company of New York, Credit Suisse First Boston and Bank of America, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meaning. _________________ (the "Designator") and ________________ (the "Designee") agree as follows: 1. The Designator designates the Designee as its Designated Lender under the Credit Agreement and the Designee accepts such designation. 2. The Designator makes no representations or warranties and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it is an Eligible Designee; (ii) appoints and authorizes the Designator as its administrative agent and attorney-in-fact and grants the Designator an irrevocable power of attorney to receive payments made for the benefit of the Designee under the Credit Agreement and to deliver and receive all communications and notices under the Credit Agreement, if any, that the Designee is obligated to deliver or has the right to receive thereunder; (iii) acknowledges that the Designator retains the sole right and responsibility to vote under the Credit Agreement, including, without limitation, the right to approve any amendment or waiver of any provision of the Credit Agreement; and (iv) agrees that the Designee shall be bound by all such votes, approvals, amendments and waivers and all other agreements of the Designator pursuant to or in connection with the Credit Agreement, all subject to Section 9.05(b) of the Credit Agreement. 4. The Designee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements referred to in Article 4 or delivered pursuant to Article 5 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement and (ii) agrees that it will, 1 independently and without reliance upon the Administrative Agent, the Designator or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action it may be permitted to take under the Credit Agreement. 5. Following the execution of this Designation Agreement by the Designator and the Designee and the consent hereto by the Borrower, it will be delivered to the Administrative Agent for its consent. This Designation Agreement shall become effective when the Administrative Agent consents hereto or on any later date specified on the signature page hereof. 6. Upon the effectiveness hereof, the Designee shall have the right to make Loans or portions thereof as a Bank pursuant to Section 2.01 or 2.03 of the Credit Agreement and the rights of a Bank related thereto. The making of any such Loans or portions thereof by the Designee shall satisfy the obligations of the Designator under the Credit Agreement to the same extent, and as if, such Loans or portions thereof were made by the Designator. 7. This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Designation Agreement to be executed by their respective officers hereunto duly authorized, as of the date first above written. Effective Date:______ , ____ [NAME OF DESIGNATOR] By: --------------------------------- Name: Title: [NAME OF DESIGNEE] By: --------------------------------- Name: Title: 2 The undersigned consent to the foregoing designation. PRAXAIR, INC. By: ---------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent By: ---------------------------------- Name: Title: 3 EX-12.01 3 0003.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- EXHIBIT 12.01 PRAXAIR, INC. AND SUBSIDIARIES Ratio of Earnings to Fixed Charges (Millions of dollars, except ratios) Years Ended December 31, ------------------------ 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- EARNINGS Income of consolidated companies before provision for income taxes $483 $627 $596 $622 $452 Capitalized interest (24) (30) (36) (32) (25) Depreciation of capitalized interest 10 9 7 7 9 Dividends from less than 50%-owned companies carried at equity 3 1 2 1 1 Praxair share of income (loss) before provision for income taxes of 50%-owned companies carried at equity 4 5 1 3 16 Total earnings, net of fixed charges $476 $612 $570 $601 $453 FIXED CHARGES Interest on long-term and short-term debt $224 $204 $260 $216 $195 Capitalized interest 24 30 36 32 25 Rental expenses representative of an interest factor 34 32 27 23 23 Praxair share of fixed charges of 50%-owned companies carried at equity 4 2 2 1 3 Total fixed charges $286 $268 $325 $272 $246 Total adjusted earnings available for payment of fixed charges $762 $880 $895 $873 $699 Preferred stock dividend requirements $ 4 $ 8 $ 8 $ 8 8 RATIO OF EARNINGS TO FIXED CHARGES 2.7 3.3 2.8 3.2 2.8 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS 2.6 3.2 2.7 3.1 2.7 EX-13.01 4 0004.txt [GRAPIC OMITTED - Operating Profit Bar Chart] [GRAPHIC OMITTED - Cash Dividends per Share Bar Chart] Financial Index Audited Financial Statements Consolidated Statement of Income 18 Consolidated Balance Sheet 19 Consolidated Statement of Cash Flows 20 Consolidated Statement of Shareholders' Equity 21 Management's Discussion and Analysis 22 Consolidated Results 22 Segment Discussion 23 Liquidity, Capital Resources and Financial Data 27 Raw Materials and Markets 29 Euro Conversion 29 New Accounting Standards 29 Market Risks and Sensitivity Analysis 30 Notes to Consolidated Financial Statements 31 Management's Statement of Responsibility for Financial Statements 47 Report of Independent Accountants 48 Five-Year Financial Summary 49 Investor Information 50 17 Consolidated Statement of Income (millions of dollars, except per share data)
Year Ended December 31, 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------- Sales $ 5,043 $ 4,639 $ 4,833 Cost of sales, exclusive of depreciation and amortization 3,075 2,732 2,807 Selling, general and administrative 683 641 644 Depreciation and amortization 471 445 467 Research and development 65 67 72 Other income (expenses)-net (42) 77 13 ================================================================================================================ Operating Profit 707 831 856 Interest expense 224 204 260 - ---------------------------------------------------------------------------------------------------------------- Income Before Taxes 483 627 596 Income taxes 103 152 127 - ---------------------------------------------------------------------------------------------------------------- Income of Consolidated Entities 380 475 469 Minority interests (27) (45) (55) Income from equity investments 10 11 11 - ---------------------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of Accounting Change 363 441 425 Cumulative effect of accounting change -- (10) -- - ---------------------------------------------------------------------------------------------------------------- Net Income $ 363 $ 431 $ 425 ================================================================================================================ Basic Earnings per Share: Income before cumulative effect of accounting change $ 2.28 $ 2.77 $ 2.68 Cumulative effect of accounting change -- (.06) -- Net income $ 2.28 $ 2.71 $ 2.68 Diluted Earnings per Share: Income before cumulative effect of accounting change $ 2.25 $ 2.72 $ 2.60 Cumulative effect of accounting change -- (.06) -- Net income $ 2.25 $ 2.66 $ 2.60 Weighted Average Shares Outstanding (000's): Basic shares outstanding 159,123 159,280 158,462 Diluted shares outstanding 161,092 162,222 163,356 ================================================================================================================
The accompanying notes on pages 31 to 46 are an integral part of these financial statements. 18
Consolidated Balance Sheet (millions of dollars) Year Ended December 31, 2000 1999 - ------------------------------------------------------------------------------------------------------------ Assets Cash and cash equivalents $ 31 $ 76 Accounts receivable 876 848 Inventories 297 310 Prepaid and other current assets 157 101 - ------------------------------------------------------------------------------------------------------------ Total Current Assets 1,361 1,335 Property, plant and equipment-net 4,771 4,720 Equity investments 242 234 Other long-term assets 1,388 1,433 - ------------------------------------------------------------------------------------------------------------ Total Assets $ 7,762 $ 7,722 ============================================================================================================ Liabilities and Equity Accounts payable $ 409 $ 361 Short-term debt 159 756 Current portion of long-term debt 341 128 Accrued taxes 71 75 Other current liabilities 459 405 - ------------------------------------------------------------------------------------------------------------ Total Current Liabilities 1,439 1,725 Long-term debt 2,641 2,111 Other long-term liabilities 548 562 Deferred credits 619 600 - ------------------------------------------------------------------------------------------------------------ Total Liabilities 5,247 4,998 ============================================================================================================ Minority interests 138 359 Preferred stock 20 75 Shareholders' equity: Common stock $.01 par value, authorized 500,000,000 shares, issued 166,309,105 shares in 2000 and 164,215,383 shares in 1999 2 2 Additional paid-in capital 1,658 1,613 Retained earnings 1,987 1,722 Accumulated other comprehensive income (loss) (1,011) (828) Less: Treasury stock, at cost (6,929,845 shares in 2000 and 5,167,801 shares in 1999) (279) (219) - ------------------------------------------------------------------------------------------------------------ Total Shareholders' Equity 2,357 2,290 - ------------------------------------------------------------------------------------------------------------ Total Liabilities and Equity $ 7,762 $ 7,722 ============================================================================================================ The accompanying notes on pages 31 to 46 are an integral part of these financial statements. 19
Consolidated Statement of Cash Flows (millions of dollars)
Year Ended December 31, 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Cash and Cash Equivalents Operations Net income $ 363 $ 431 $ 425 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 471 445 467 Deferred income taxes 35 53 11 Repositioning and special charges 158 -- 29 Other non-cash charges 10 19 9 Working capital: Accounts receivable (36) 93 17 Inventories (13) 12 18 Prepaid and other current assets (22) 20 (2) Payables and accruals 31 (10) (6) Long-term assets and liabilities (98) (94) (24) - ------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 899 969 944 - ------------------------------------------------------------------------------------------------------------- Investing Capital expenditures (704) (653) (781) Acquisitions (290) (136) (241) Divestitures and asset sales 106 103 206 - ------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (888) (686) (816) - ------------------------------------------------------------------------------------------------------------- Financing Short-term debt borrowings (repayments)-net 433 (167) (93) Long-term borrowings 22 29 388 Long-term debt repayments (328) (109) (331) Minority transactions and other (64) 78 (31) Issuances of common stock 124 89 109 Purchases of common stock (144) (73) (97) Dividends (98) (89) (79) - ------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (55) (242) (134) Effect of exchange rate changes on cash and cash equivalents (1) 1 (3) - ------------------------------------------------------------------------------------------------------------- Change in cash and cash equivalents (45) 42 (9) Cash and cash equivalents, beginning-of-year 76 34 43 - ------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end-of-year $ 31 $ 76 $ 34 ============================================================================================================= Supplemental Data: Taxes paid $ 80 $ 51 $ 66 Interest paid $ 227 $ 209 $ 265 Debt reclassifications (Note 5) $ 1,029 $ 627 $ -- Tax benefits from stock option exercises (Note 1) $ 5 $ 16 $ 8 South American rights offering (Note 7) $ -- $ 138 $ -- Effect of functional currency change (Note 1) $ -- $ -- $ 81 Acquired debt from acquisitions $ 12 $ -- $ 20 ============================================================================================================= The accompanying notes on pages 31 to 46 are an integral part of these financial statements. 20
Consolidated Statement of Shareholders' Equity (millions of dollars, shares in thousands)
Accumulated Additional Other Com- Common Stock Paid in Treasury Stock Retained prehensive Activity Shares Amounts Capital Shares Amounts Earnings Income(Loss) Total - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 159,970 $ 2 $ 1,471 2,597 $ (129) $ 1,034 $ (256) $ 2,122 =================================================================================================================================== Net income 425 425 Translation adjustments (99) (99) Effect of functional currency change (Note 1) (57) (57) ---------- Comprehensive income 269 Dividends on common stock ($.50 per share) (79) (79) Issuances of common stock: For the dividend reinvest- ment and stock purchase plan 80 1 1 For employee savings and incentive plans 1,467 56 (1,279) 60 116 Purchases of common stock 2,628 (97) (97) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1998 161,517 $ 2 $ 1,528 3,946 $ (166) $ 1,380 $ (412) $ 2,332 =================================================================================================================================== Net income 431 431 Translation adjustments (416) (416) ---------- Comprehensive income 15 Dividends on common stock ($.56 per share) (89) (89) Issuances of common stock: For the dividend reinvest- ment and stock purchase plan 64 1 1 For employee savings and incentive plans 2,634 84 (488) 20 104 Purchases of common stock 1,710 (73) (73) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1999 164,215 $ 2 $ 1,613 5,168 $ (219) $ 1,722 $ (828) $ 2,290 =================================================================================================================================== Net income 363 363 Translation adjustments (183) (183) ---------- Comprehensive income 180 Dividends on common stock ($.62 per share) (98) (98) Issuances of common stock: For the dividend reinvest- ment and stock purchase plan 73 1 1 For employee savings and incentive plans 2,021 44 (2,054) 84 128 Purchases of common stock 3,816 (144) (144) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 2000 166,309 $ 2 $ 1,658 6,930 $ (279) $ 1,987 $ (1,011) $ 2,357 =================================================================================================================================== The accompanying notes on pages 31 to 46 are an integral part of these financial statements. 21
Management's Discussion and Analysis Praxair's reported 2000 results versus 1999 reflect a 9% improvement in sales and a decrease in earnings due to repositioning and special charges of $117 million after tax. Excluding these charges, income before cumulative effect of accounting change increased 9% over 1999. These adjusted results reflect double digit earnings growth in the international industrial gases businesses, strong results in the U.S. industrial gases business despite high energy prices and a fourth quarter downturn, and disappointing results in Surface Technologies. Consolidated Results The following provides summary data for 2000, 1999 and 1998: (Millions of dollars) Year Ended December 31, 2000(a) 1999(a) 1998 - --------------------------------------------------------------------------- Sales $ 5,043 $ 4,639 $ 4,833 Cost of Sales $ 3,075 $ 2,732 $ 2,807 Selling, general and administrative $ 683 $ 641 $ 644 Depreciation and amortization $ 471 $ 445 $ 467 Other income (expenses)-net $ (42) $ 77 $ 13 Operating profit $ 707 $ 831 $ 856 Interest expense $ 224 $ 204 $ 260 Effective tax rate 21% 24% 21% Income before cumulative effect of accounting change $ 363 $ 441 $ 425 Number of employees 23,430 24,102 24,834 - --------------------------------------------------------------------------- Adjusted(b): Cost of Sales $ 3,028 $ 2,732 $ 2,807 Selling, general and administrative $ 662 $ 641 $ 644 Other income (expenses)net $ 49 $ 77 $ 42 Operating profit $ 866 $ 831 $ 885 Effective tax rate 23% 24% 25% Income before cumulative effect of accounting change $ 480 $ 441 $ 425 =========================================================================== (a) The results for 2000 and 1999 versus 1998 were significantly impacted by the devaluation of the Brazilian currency (Real) from a rate of 1.21 Reais to the U.S. Dollar at December 31, 1998 to 1.79 at December 31, 1999 and 1.96 at December 31, 2000 (1.83 and 1.81 average rate for 2000 and 1999, respectively; versus a 1.16 average rate for 1998). Reported amounts from Brazil were all reduced in proportion to the exchange rate changes. Also, as described in Note 5 to the consolidated financial statements, in January 1999 Praxair entered into various currency exchange forward contracts to hedge anticipated Brazilian net income and a portion of its net investment. The net income hedges were settled during 1999 resulting in a non-recurring pre-tax gain of $21 million ($14 million after taxes and minority interests). (b) Adjusted results exclude the following special items: In 2000 repositioning and special charges totaling $159 million and income from equity investment charges of $2 million ($117 million after tax). In 1998, special charges totaling $29 million ($18 million after tax) for an impairment loss in Indonesia and a provision for an anticipated loss on the sale of an air separation plant to a third party (see Note 2 to the consolidated financial statements). Additionally, in 1998 Praxair recorded non-recurring tax credits of $18 million related to the favorable settlement of various tax matters. These items are collectively referred to as special items. Special Items Reported amounts for 2000 and 1998 include special items that affect period-to-period comparisons. The management's discussion and analysis that follows excludes the impact of these special items as described in footnote (b) to the above table. 2000 compared with 1999 The sales increase of 9% for 2000 as compared to 1999 was due primarily to industrial gases volume growth in all industrial gases businesses; acquisitions in the Surface Technologies segment; and price improvements in North and South America. These increases were partially offset by unfavorable currency translation impacts, primarily in Europe. Operating profit increased 4% for 2000, excluding the impact of the special items, versus 1999. This increase was due primarily to the volume and price improvements described above, productivity improvements, and contributions from acquisitions in the Surface Technologies segment; partially offset by cost inflation and currency translation impacts. As a percentage of sales, selling, general and administrative expenses for 2000 were lower due primarily to productivity improvement initiatives and higher long-term incentive plan costs in 1999, partially offset by cost inflation and higher business development costs. The increase in depreciation and amortization expense reflects the impact of new projects coming on-stream, as well as Surface Technologies acquisitions. Other income (expenses)-net for 2000 was $49 million, a decrease of $7 million, excluding a $21 million currency hedge gain in 1999. (See Note 5 to the consolidated financial statements.) Income before accounting change, excluding the special items, increased 9% for 2000 versus 1999. This increase was due to the higher operating profit described above and lower minority interests, partially offset by higher interest expense. The decrease in minority interests is due to the impact of the increase in Praxair's ownership interest in White Martins (See Note 7 to the consolidated financial statements and Segment Discussion-South America). Interest expense increased due to higher debt levels to fund the acquisition of minority interests in Brazil and higher short-term interest rates. Based on Praxair's tax planning strategies, the effective tax rate was lowered in 2000 to 23% from 25% in 1999, excluding the impact of the special items and the $21 million hedge gain in Brazil. 22 The number of employees at December 31, 2000 was 23,430, which reflects a decrease of approximately 700 from December 31, 1999. The decrease is principally the result of a divestiture and continued productivity improvement initiatives in South America, employee reductions in the Surface Technologies business and the 2000 repositioning and special charges. 1999 compared with 1998 The sales decrease of 4% in 1999 as compared to 1998 was due primarily to unfavorable currency translation effects in South America. This was partially offset by the impact of price increases in North and South America, continued volume growth in Asia and Europe, and volume growth in North America. Excluding the impact of currency, sales grew 2%. Operating profit decreased 6% for 1999 as compared to 1998. This decrease was due to the sales decrease described above, cost inflation and currency translation impacts; partially offset by productivity improvements and the first quarter hedge gain in Brazil. Selling, general and administrative expenses for 1999 were slightly higher as a percentage of sales versus 1998 due primarily to long-term incentive plan costs, higher business development costs and cost inflation impacts; partially offset by productivity improvements. The decrease in depreciation and amortization expense reflects the impact of currency translation, primarily in Brazil, and the impact of the North American sale-leaseback transactions in 1999 and 1998; offset by new projects coming on-stream and packaged gases and Surface Technologies acquisitions. Interest expense decreased $56 million or 22% for 1999 versus 1998 due primarily to currency translation effects and lower consolidated debt levels, especially in the South American segment, which had high interest rates. Income before cumulative effect of accounting change increased 4% in 1999 as compared to 1998. This increase was due primarily to the lower interest expense and minority interests impacts offset by the lower operating profit. Praxair's return on average capital was 11.1% in 1999 and 1998. The effective tax rate remained at 25%, excluding the impact of the first quarter hedge gain in Brazil, which is consistent with the effective tax rate before special charges in 1998. The number of employees at December 31, 1999 decreased about 700 as compared to December 31, 1998 due primarily to Praxair's continued productivity improvement initiatives in North and South America and the divestiture of a business in Asia. The number of employees decreased despite the increase associated with about 500 employees added through acquisitions in Surface Technologies. Segment Discussion The following summary of sales and operating profit by segment provides a basis for the discussion that follows: (Millions of dollars) Year Ended December 31, 2000 1999 1998 - --------------------------------------------------------------- Sales: North America $ 3,026 $ 2,779 $ 2,752 South America 723 697 964 Europe 491 516 515 Surface Technologies 579 456 420 All Other 224 191 182 - --------------------------------------------------------------- Total $ 5,043 $ 4,639 $ 4,833 =============================================================== Segment Operating Profit(a): North America $ 559 $ 514 $ 533 South America 174 163 199 Europe 124 123 109 Surface Technologies 58 74 73 All Other (20) (17) (6) Corporate Overhead (29) (26) (23) - --------------------------------------------------------------- Total $ 866 $ 831 $ 885 =============================================================== (a) Excludes special items in 2000 and 1998. North America The North America operating segment includes Praxair's industrial and packaged gases operations in the United States, Canada, and Mexico. Praxair's U.S. and Canadian packaged gases operations within the North American industrial gases business are collectively referred to as Praxair Distribution. Sales for 2000 increased 9% as compared to 1999. This increase reflects strong growth in all geographies-U.S. and Canadian industrial gases increased 10%, Mexico increased 18%, and Praxair Distribution increased 4%. Overall, 5% of this increase is due to price increases, and 3% is due to volume growth, although sales volume declined in the U.S. in the fourth quarter reflecting a slowing U.S. economy. The price increases, in part, reflect higher natural gas costs, which pass through to on-site hydrogen customers without impacting operating profit. 23 Management's Discussion and Analysis Sales for 1999 increased 1% as compared to 1998. Sales increased 7% in Mexico, 1% in the U.S. and Canadian industrial gases operations, and Praxair Distribution's sales were essentially flat. Overall, this increase is due to price increases of about 1% with volume growth offsetting currency impacts. Operating profit increased 9% for 2000 versus 1999 primarily due to the increased sales volume of 10% and benefits of productivity improvements, partially offset by higher energy related costs and cost inflation. U.S. electricity costs and power dislocations are expected to remain an issue for industrial gas production and Praxair will attempt to mitigate the effects of these costs through aggressive pricing. Operating profit increased 6% in the U.S. and Canadian industrial gases operations, 20% in Mexico and 10% for Praxair Distribution. Operating profit decreased 4% in 1999 versus 1998. The decrease was due primarily to cost inflation, higher costs associated with significant product dislocations resulting from higher than expected energy costs and supplier feedstock curtailments, partially offset by the benefits of productivity improvements and the improvement in sales in the second half of 1999. In the U.S. and Canadian industrial gases business, operating profit decreased about 6%, Mexico's operating profit improved 2% and Praxair Distribution's operating profit improved by about 4% over 1998. South America Praxair's South American industrial gases operations are conducted by its majority owned subsidiary, S.A. White Martins (White Martins), which is the largest industrial gases company in Brazil. White Martins has operations throughout South America, including Argentina, Bolivia, Chile, Columbia, Peru and Venezuela. As a result of a tender offer in 2000 and a rights offering in 1999, Praxair increased its ownership interest in White Martins from 69.3% at December 31, 1998 to 76.6% at December 31, 1999, and to 98.6% at December 31, 2000. As consideration for the additional shares it purchased during the tender offer in 2000, Praxair paid $242 million and during the rights offering in 1999, Praxair used approximately $138 million of intercompany loans it had previously made to White Martins. Approximately $15 million of the rights offering was purchased by minority shareholders. As described above under the section on Consolidated Results, the results for 2000 and 1999 versus 1998 were significantly impacted by the devaluation of the Brazilian currency (Real) and the resulting recessionary conditions for much of 1999. The currency devaluation reduced 1999 sales by $284 million and reduced operating profit by $59 million as compared to 1998. The Brazilian economy has improved during late 1999 and 2000 and the currency has generally stabilized. In early January 1999 Praxair entered into various currency exchange forward contracts to hedge anticipated Brazilian net income and a portion of its net investment. The net income hedges resulted in a non-recurring pre-tax gain of $21 million, which is included in the South American operating profit for 1999. Sales for 2000 increased 4% primarily due to pricing improvements of 7% and volume increases of 3%. These increases were partially offset by the impact of the divestiture of the precipitated calcium carbonate business, unfavorable currency translation effects and an $8 million adjustment for sales that had been improperly recorded by Praxair's Colombian subsidiaries. Excluding the impact of the business divestiture sales increased by 8%. Sales for 1999 decreased 28% as compared to 1998. This was primarily due to the unfavorable currency translation effects, with 5% price increases offset by volume decreases. Excluding the currency effects, 1999 sales increased by 2%. The devaluation of the Real in Brazil and a recessionary environment in South America have contributed to volume decreases of approximately 4% for 1999 versus 1998. Operating profit for 2000 increased 7% as compared to 1999, excluding the impact of the special items (see Note 2 to the consolidated financial statements). This increase was primarily due to productivity improvement initiatives and the sales increase, partially offset by cost inflation and unfavorable currency translation effects. Operating profit for 2000 also includes $8 million of income related to the termination of a carbon dioxide raw material supplier contract in Brazil which was offset by the Colombia sales adjustment. 24 Operating profit for 1999 decreased 18% as compared to 1998. This decrease was caused primarily by the 1999 currency devaluation in Brazil, the reduction in sales and cost inflation; which offset productivity improvement initiatives and the $21 million first quarter hedge gain. Excluding the impacts of currency movements and the hedge gain, operating profit increased 1% in 1999 versus 1998. Europe Praxair's European industrial gases business is primarily in Spain and Italy with additional operations in Benelux, Germany, France, Israel and Poland. Sales for 2000 decreased 5% as compared to 1999, due primarily to unfavorable currency translation effects, partially offset by volume growth of 8% and price increases of 1%, which reflects strong performance in Spain and Italy. Excluding the currency translation effects for 2000, sales increased by 10%. Sales for 1999 were flat as compared to 1998. Volume growth of 3% and price increases of 1% were offset primarily by unfavorable currency translation effects. Most of this growth was reflected by good performance in Spain and Italy. Operating profit for 2000 increased 1%, as compared to 1999. Excluding currency translation effects for 2000, operating profit increased 14%. This was due to the sales volume impacts discussed above, and productivity improvement initiatives, partially offset by cost inflation. Operating profit for 1999 increased 13% as compared to 1998. This was due primarily to the sales impacts previously described, cost improvement initiatives, and net income hedge gains which helped to offset the impact of currency movements. Excluding currency effects, operating profit increased 9% in 1999. Surface Technologies Praxair's worldwide Surface Technologies business primarily includes operations in the U.S. and Europe, with smaller operations in Asia and Brazil. Sales for 2000 increased 27% as compared to 1999 due to the impact of 1999 acquisitions, which added 32% to overall growth in 2000. The increase was partially offset by core business volume and price decreases and unfavorable currency translation impacts. Volume declines were experienced in key aviation-related markets for aircraft engine overhaul services as well as original equipment manufacture (OEM) engine coatings. Weak market conditions also resulted in lower volumes of computer disk polishing slurries during 2000. Increased demand was experienced in the industrial gas turbine segment, while other general engineering markets remained flat or slightly weaker than 1999. Sales for 1999 increased 9% as compared to 1998. This increase was due to the impact of acquisitions, which added 11% to overall growth, partially offset by pricing pressures in the aerospace and printing markets, and currency impacts. Sales volumes remained flat, as increases related to new applications were offset by decreases in the base aviation and computer disk polishing markets. Operating profit for 2000 decreased 15%, excluding the $5 million repositioning charge and the $19 million repositioning and special charges in the first and fourth quarters, respectively, of 2000 as compared to 1999. This decrease reflects pricing pressures and cost inflation, partially offset by the contribution from acquisitions, savings realized through repositioning actions and ongoing productivity improvement initiatives. Pricing declines were experienced in aviation repair services and aviation OEM coatings, as well as segments of the general engineering market. Operating profit for 1999 increased 1% as compared to 1998. Productivity improvement initiatives and the impact of acquisitions were largely offset by cost inflation. All Other The All Other segment includes Praxair's industrial gases operations in Asia, its global supply systems business which designs, engineers and builds equipment that produces industrial gases (for internal use and external sale), and other globally managed functions, including procurement, global marketing and business development including MetFabCity, Inc. Praxair's operations in Asia are currently concentrated in China, India, Korea and Thailand, with smaller operations in Japan and Taiwan. Operations in China, Japan and India are also conducted through nonconsolidated joint venture companies. 25 Management's Discussion and Analysis Sales for 2000 increased 17% compared to 1999. Asia experienced 35% sales growth for 2000 of which 34% was due largely to volume growth. This increase was partially offset by a decline in global supply system sales due to a decrease in the volume of third party equipment sales. The level of activity for global supply systems is reflective of the overall capacity in the industry and local economic conditions, and is subject to fluctuation from one year to the next. Sales for 1999 increased 5% as compared 1998. Asia experienced 43% sales growth due primarily to strong volume growth of about 41%, particularly in Korea and Thailand, new plants coming on stream in China and India, and favorable currency translation effects (8%). Plant sales to third parties decreased 39% in 1999 versus 1998, as fewer plants were sold to customers. Operating Profit for 2000 decreased $3 million compared to 1999. Improvements in Asia and global supply systems were more than offset by business development costs primarily related to Praxair's e-business programs, including MetFabCity, Inc. In addition, 2000 was helped by a $5 million recovery from the cash settlement of litigation related to a previously divested business. Operating profit for the segment is significantly influenced by third party plant sales and by the costs associated with the globally managed functions, all of which fluctuate from year to year. Operating profit for 1999 was down $11 million when compared to 1998. This was due to the decreases in the global supply systems business and higher business development costs, partially offset by a 57% improvement in Asia. Selling, General and Administrative Expenses Selling, general and administrative expenses as a percentage of sales was 13.1% in 2000 as compared to 13.8% in 1999. This decrease is due to continuing productivity improvement initiatives and currency impacts; partially offset by increased cost inflation and MetFabCity, Inc. costs. In 1999, selling, general and administrative expenses were $641 million, a $3 million decrease from the 1998 amount. This decrease is due to continuing productivity improvement initiatives and currency impacts (primarily in Brazil); partially offset by increased business development costs, acquisitions and cost inflation. Selling, general and administrative expenses as a percentage of sales was 13.8% in 1999 as compared to 13.3% in 1998. Other income (expenses)-net Other income (expenses)-net was $49 million in 2000, excluding the special items (see Note 2 to the consolidated financial statements) versus $56 million excluding a $21 million hedge gain in 1999. 1999 includes income related to the redemption of preference shares and the collection of a note receivable from earlier business sales, and European net income hedge gains, which offset the currency translation effects in the European segment; offset by costs incurred for postemployment benefits and a third party plant sale. Other income (expenses)-net was $77 million in 1999 versus $42 million in 1998, excluding the 1998 special charges (see Note 2 to the consolidated financial statements). This increase was primarily due to the $21 million hedge gain in Brazil in 1999 and the other items discussed in the above paragraph. Interest Expense Interest expense increased $20 million or 10% for 2000 versus 1999. This increase was due to increased debt resulting from the purchase of minority shares in Brazil and higher short-term interest rates during most of the year. Interest expense decreased $56 million or 22% for 1999 versus 1998 due primarily to currency translation effects and lower consolidated debt levels, especially in the South American segment, which had high interest rates. Income Taxes Excluding the special items, the effective tax rate for 2000 decreased to 23%, compared with 25% for 1999, excluding the impact of the 1999 hedge gain in Brazil. The effective tax rate in 1998 was also 25%. Praxair currently expects the effective tax rate to remain at approximately the 23% level in 2001. 26 Minority Interests During 2000, minority interests consisted primarily of minority shareholders' investments in two affiliates: S.A. White Martins (Brazil) and Rivoira S.p.A. (Italy). Additionally, Praxair records the dividends on preferred stock in minority interests ($3 million in 2000). Minority shareholders' share of income for 2000 was $27 million, a decrease of $18 million as compared to the 1999 amount of $45 million. This decrease is due primarily to the acquisitions of minority interests of White Martins and will continue to decrease in 2001. Minority shareholders' share of income for 1999 was $45 million, a decrease of $10 million compared to 1998. This decrease was due to currency impacts in Brazil and the 1999 first quarter rights offering which increased Praxair's ownership interest in White Martins. Income from Equity Investments Praxair's more significant equity investments are in Belgium, China, India, Italy and Turkey. Praxair's share of net income from corporate equity investments increased slightly to $12 million in 2000, excluding a $2 million repositioning charge, compared to $11 million for 1999 and 1998. Costs Relating to the Protection of the Environment Praxair's principal operations relate to the production and distribution of atmospheric and other industrial gases, which historically have not had a significant impact on the environment. However, worldwide costs relating to environmental protection may continue to grow due both to increasingly stringent laws and regulations and to Praxair's ongoing commitment to rigorous internal standards. Environmental protection costs in 2000 were approximately $5 million of capital expenditures and $13 million of expenses. Included in the expenses were approximately $1 million for remedial projects. Praxair anticipates that future environmental protection expenditures will approximate the level of those in 2000 and will not have a material adverse effect on the consolidated financial position or on the consolidated results of operations or cash flows in a given year. Commitments and Contingencies See Note 13 to the consolidated financial statements for information concerning commitments and contingencies. Liquidity, Capital Resources and Financial Data (Millions of dollars) Year Ended December 31, 2000 1999 1998 - ----------------------------------------------------------------------------- Net Cash Provided by (Used for): Operating Activities: Net income plus depreciation and amortization(a) $ 992 $ 876 $ 921 Working capital (40) 115 27 Other-net (53) (22) (4) - ----------------------------------------------------------------------------- Total from operating activities $ 899 $ 969 $ 944 ============================================================================= Investing Activities: Capital expenditures $ (704) $ (653) $ (781) Acquisitions (290) (136) (241) Divestitures and asset sales 106 103 206 - ----------------------------------------------------------------------------- Total used for investing $ (888) $ (686) $ (816) ============================================================================= Financing Activities: Debt increases (reductions) $ 127 $ (247) $ (36) Minority transactions and other (64) 78 (31) Issuances (purchases) of stock (20) 16 12 Cash dividends (98) (89) (79) - ----------------------------------------------------------------------------- Total used for financing $ (55) $ (242) $ (134) ============================================================================= Debt-to-Capital Ratio, at December 31: Debt $ 3,141 $ 2,995 $ 3,274 Capital(b) $ 5,656 $ 5,719 $ 6,168 Debt-to-capital ratio 55.5% 52.4% 53.1% ============================================================================= (a) Includes repositioning and special charges. (b) Includes debt, minority interests, preferred stock and shareholders' equity. Cash Flow from Operations Cash flow from operations decreased $70 million to $899 million in 2000 from $969 million in 1999. This decrease is mainly due to increased working capital levels in support of sales growth, the 1999 improvement in working capital that was maintained in 2000, and a decrease in tax benefits from exercised stock options. In 2000, the repositioning and special charges did not have a significant impact on operating cash flow, however, management anticipates about $54 million will be paid in 2001. [GRAPHIC OMITTED - Working Capital as a Percent of Sales Bar Chart] 27 Management's Discussion and Analysis Cash flow from operations increased to $969 million in 1999 from $944 million in 1998. The increase is primarily related to the improvement in working capital requirements; a direct result of Praxair's continuing work process improvement initiatives. Investing Cash flow used for investing in 2000 totaled $888 million, an increase of $202 million from 1999. This increase was due to capital expenditures and acquisitions, primarily related to the purchase of minority interests in Brazil (see Segment Discussion-South America). Cash flow used for investing in 1999 totaled $686 million, a decrease of $130 million from 1998. This decrease was due primarily to the net impact of lower capital and acquisition expenditures, partially offset by lower proceeds from divestitures and asset sales. Capital expenditures for 2000 totaled $704 million an increase of $51 million from 1999 expenditures of $653 million. This was due to an increase in e-commerce investments along with capital expenditure increases in all segments except Surface Technologies. Capital expenditures for 1999 totaled $653 million, down $128 million from 1998. The lower level of capital expenditures reflects the Company's strategy to seek higher returns from its capital spending program, and is primarily due to decreased spending in South America, the United States and Europe, and currency impacts in South America. Acquisition expenditures for 2000 totaled $290 million, an increase of $154 million from 1999. The increase is due primarily to the buyout of minority interests in Praxair's South American subsidiary for $242 million (see Segment Discussion-South America). 1999 acquisition expenditures totaled $136 million, a decrease of $105 million from 1998. Acquisition expenditures in 1999 were primarily related to acquisitions in the Surface Technologies' business, with other acquisitions in North America, China and India. Divestitures and asset sales in 2000 totaled $106 million, an increase of $3 million from 1999. The 2000 divestitures primarily relate to the disposal of the precipitated calcium carbonate business in South America. The 1999 amount relates primarily to the sale leaseback transaction in the United States (see Note 12 to the consolidated financial statements). On a worldwide basis, capital expenditures for the full year 2001 are expected to be in the $600 to $700 million range. Acquisition expenditures will depend on the availability of opportunities at attractive prices. Financing At December 31, 2000, Praxair's total debt outstanding was $3,141 million, an increase of $146 million from 1999. As of December 31, 2000, there were no borrowings under Praxair's $1.5 billion U.S. bank credit facilities and Praxair's investment grade credit rating for long-term debt was maintained at A3/BBB+. [GRAPHIC OMITTED - Debt-to-Capital Ratio Bar Chart] In July 2000, Praxair entered into a new $500 million, 364-day revolving credit agreement and a new $1 billion, five-year revolving credit agreement to replace its existing credit agreement. At December 31, 2000, $852 million of short-term borrowings were classified as long-term debt under the terms of the existing credit agreements (see Note 5 to the consolidated financial statements). At December 31, 1999, such borrowings had been classified as short-term because the then existing credit agreement expired within one year. During 1999 and 1998, Praxair sold and leased back certain U.S. distribution and liquid storage equipment for $80 million and $150 million, respectively. The proceeds from the sale of the equipment were used to pay down debt. In 1999, the "Minority transactions and other" caption includes cash proceeds of approximately $89 million relating to the pre-tax gain on net investment hedges in Brazil (see Note 5 to the consolidated financial statements). 28 Praxair's debt-to-capital ratio increased to 55.5% at December 31, 2000 from 52.4% at December 31, 1999. This increase is due to the impact of funding the purchases of additional minority interests in Brazil with debt. Praxair's financing strategy is to secure sufficient funds to support its operations in the United States and around the world using a combination of local borrowings and intercompany lending in order to minimize the total cost of funds and to manage and centralize currency exchange exposures. Praxair manages its exposure to interest rate changes through the use of financial derivatives (see Note 5 to the consolidated financial statements and the section titled "Market Risks and Sensitivity Analysis"). Raw Materials and Markets Energy is the single largest cost in the production and distribution of industrial gases. Most of Praxair's energy requirements are in the form of electricity. Other important elements are natural gas, waste hydrogen (for hydrogen) and diesel fuel (for distribution). A shortage or interruption of energy, or increases in energy prices that cannot be passed through to customers, are risks to Praxair's business and financial performance. Because many of Praxair's contracts with customers are long term, with pass-through provisions, Praxair has not, historically, experienced significant difficulties related to recovery of energy costs. Supply of energy also has not been a significant issue. However, during 2000 and continuing into 2001, there has been unprecedented volatility in the cost and supply of electricity and in natural gas prices in the United States, particularly in California. To date, Praxair has been able to substantially mitigate the financial impact of these costs by passing them on to customers. In anticipation of continued volatility, the company has taken aggressive pricing actions, is strengthening its energy-management program for purchased power, and is implementing new customer contract terms and conditions. However, the outcome of the U.S. energy situation and its impact on the U.S. economy is unpredictable at this time and may pose unforeseen future risk. For carbon dioxide, carbon monoxide, helium, hydrogen, specialty gases and surface technologies, raw materials are largely purchased from outside sources. Praxair has contracts or commitments for, or readily available sources of, most of these raw materials; however, their long-term availability and prices are subject to market conditions. Praxair's industrial gases are used by a diverse group of customers in a variety of industries including metal fabrication, primary metals, chemicals & refining, healthcare, food & beverage, semiconductor materials, aerospace, pulp and paper, glass, environmental remediation and numerous other markets. By using the gases Praxair produces and, in many cases, the proprietary processes that it invents, customers benefit through improved product quality, increased productivity, lower operating costs, conservation of energy and the attainment of environmental improvement objectives. Praxair has a large number of customers and no single customer accounts for a significant portion of Praxair's annual sales. Aircraft engines are Surface Technologies' primary market, but it also serves the printing, textile, semiconductor materials, chemical and primary metals markets. Aircraft engine and airframe component overhaul services are other offerings. Euro Conversion Effective January 1, 1999, the euro became the new common currency for 11 European countries (including Belgium, France, Germany, Italy, and Spain; where Praxair has most of its European operations). During the transition period, payments can be made using both the euro and the national currencies at fixed exchange rates. Praxair successfully implemented the systems and processes necessary to conduct business in both the euro and the respective national currency. Management currently believes that Praxair has in place the appropriate programs and plans to make any required changes to its systems and processes to accommodate a complete and timely conversion to a euro functional currency by 2002. The external costs associated with implementing systems to conduct business in the euro have not been and are not expected to be material in any year. Also, management currently believes the business and market implications, if any, of the euro conversion will not be material. New Accounting Standards See Note 1 to the consolidated financial statements for information concerning new accounting standards. 29 Management's Discussion and Analysis Market Risks and Sensitivity Analysis Like other global companies, Praxair is exposed to market risks relating to fluctuations in interest rates and currency exchange rates. The objective of financial risk management at Praxair is to minimize the negative impact of interest rate and foreign exchange rate fluctuations on the Company's earnings, cash flows and equity. To manage these risks, Praxair uses various derivative financial instruments, including interest rate swap, forward starting interest rate swap and currency swap, forward and option contracts. Praxair only uses commonly traded and non-leveraged instruments. These contracts are entered into with major financial institutions thereby minimizing the risk of credit loss. Also, refer to Notes 1 and 5 to the consolidated financial statements for a more complete description of Praxair's accounting policies and use of such instruments. As required by Securities and Exchange Commission rules, the following analysis presents the sensitivity of the market value, earnings and cash flows of Praxair's financial instruments to hypothetical changes in interest and exchange rates as if these changes occurred at December 31, 2000. The range of changes chosen for this analysis reflects Praxair's view of changes which are reasonably possible over a one-year period. Market values are the present values of projected future cash flows based on the interest rate and exchange rate assumptions. These forward-looking disclosures are selective in nature and only address the potential impacts from financial instruments. They do not include other potential effects, which could impact Praxair's business as a result of these changes in interest and exchange rates. Interest Rate and Debt Sensitivity Analysis At December 31, 2000, Praxair has debt totaling $3,141 million ($2,995 million at December 31, 1999) and interest rate swaps (including forward starting swaps) with a notional value of $780 million ($80 million in 1999). Interest rate swaps are entered into as a hedge of underlying financial instruments to effectively change the characteristics of the interest rate without actually changing the financial instrument. At December 31, 2000, the interest rate swap agreements convert outstanding floating rate debt and lease payments to fixed rate payments for the period of the swap agreements. For fixed rate instruments, interest rate changes affect the fair market value but do not impact earnings or cash flows. Conversely for floating rate instruments, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. At December 31, 2000 after adjusting for the effect of interest rate swap agreements (including the forward starting swaps), Praxair has fixed rate debt of $2,566 million ($2,114 at December 31, 1999) and floating rate debt of $575 million ($881 million in 1999) or about 82% and 18%, respectively, of total debt. Holding other variables constant (such as foreign exchange rates, swaps and debt levels), a one percentage point decrease in interest rates would increase the unrealized fair market value of the fixed rate debt by approximately $72 million ($89 million in 1999). At December 31, 2000, the after-tax earnings and cash flows impact for the next year resulting from a one percentage point increase in interest rates would be approximately $4 million ($6 million at December 31, 1999), holding other variables constant. Exchange Rate Sensitivity Analysis Praxair's exchange rate exposures result primarily from its investments and ongoing operations in South America (primarily Brazil), Europe (primarily Spain and Italy), Canada, Mexico, Asia (primarily China, India, Korea and Thailand) and certain other business transactions such as the procurement of equipment from foreign sources. Among other techniques, Praxair utilizes foreign exchange forward contracts to hedge these exposures. At December 31, 2000, Praxair had $248 million notional amount ($272 million at December 31, 1999) of foreign exchange contracts of which $199 million ($235 million in 1999) hedged recorded balance sheet exposures or firm commitments and $49 million ($37 million in 1999) are to hedge anticipated future net income in Argentina, Mexico, and Thailand. Holding other variables constant, if there were a ten percent adverse change in foreign currency exchange rates, the market value of foreign currency contracts outstanding at December 31, 2000 would decrease by approximately $26 million ($23 million at December 31, 1999). Of this decrease, only about $3 million ($3 million at December 31, 1999) would impact earnings since the gain (loss) on the majority of these contracts would be offset by an equal (gain) loss on the underlying exposure being hedged. 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 Summary of Significant Accounting Policies Operations-Praxair, Inc. (Praxair or Company) was founded in 1907 and became an independent publicly traded company in 1992. Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide. The Company is also the world's largest supplier of carbon dioxide. Praxair produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings to a diverse group of industries including metal fabrication, chemicals & refining, primary metals, food and beverage, healthcare, semiconductor materials, aerospace, glass, pulp and paper, and environmental remediation. Principles of Consolidation-The consolidated financial statements include the accounts of all significant subsidiaries where control exists. Equity investments generally consist of 20-50% owned operations. Operations less than 20% owned are generally carried at cost. Pre-tax income from equity investments, which are partnerships or limited liability corporations (LLC), is included in other income (expenses)-net with related taxes included in income taxes. Partnership net assets are reported as equity investments in the balance sheet. Praxair does not allocate corporate costs to its equity investments. Significant intercompany transactions are eliminated. Use of Estimates-The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While actual results could differ, management believes such estimates to be reasonable. Revenue Recognition-Revenue is recognized when product is shipped or services are provided to customers. Revenues from long-term construction contracts are recognized using the percentage-of-completion method. Under this method, revenues for sales of major equipment, such as large air separation facilities, are recognized primarily based on cost incurred to date compared with total estimated cost. Changes to total estimated cost and anticipated losses, if any, are recognized in the period determined. Cash and Cash Equivalents-Cash equivalents are considered to be highly liquid securities with original maturities of three months or less. Inventories-Inventories are stated at the lower of cost or market. Cost is determined generally using the last-in, first-out (LIFO) method for certain U.S. operations and the average cost method for most other operations. Property, Plant and Equipment-net-Property, plant and equipment are carried at cost, net of accumulated depreciation. Depreciation is calculated on the straight-line method based on the estimated useful lives of the assets which range from 3 to 40 years. Praxair generally uses accelerated depreciation methods for tax purposes where appropriate. The Company periodically reviews the recoverability of long-lived assets based upon anticipated cash flows generated from such assets. Foreign Currency Translation-For international subsidiaries where the local currency is the functional currency, translation gains and losses are reported as part of the accumulated other comprehensive income (loss) (cumulative translation adjustment) component of shareholders' equity. For international subsidiaries operating in hyperinflationary economies, the U.S. dollar is the functional currency and translation gains and losses are included in income. As required by accounting standards, effective January 1, 1998, Brazil is no longer a hyperinflationary economy. Accordingly, Praxair's majority owned subsidiary in Brazil (White Martins) designated the Brazilian Real as its functional currency instead of the U.S. dollar. This change required Praxair to record a one-time cumulative adjustment for additional deferred income taxes of $81 million with offsetting balance sheet adjustments to the accumulated other comprehensive income (loss) (cumulative translation adjustment) component of shareholders' equity, and minority interests of $57 million and $24 million, respectively. Financial Instruments-Praxair enters into various derivative financial instruments to manage its exposure to fluctuating interest and currency exchange rates. Such instruments include interest rate swap and forward rate agreements, and currency swap, forward and option contracts. These instruments are not entered into for trading purposes. Praxair only uses commonly traded and non-leveraged instruments. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Interest rate swap and forward rate agreements involve the exchange of fixed and floating interest payments without the exchange of the underlying principal amounts. The differential to be paid or received is recognized as an adjustment to interest expense. The notional amounts of interest rate swap and forward rate agreements do not exceed the underlying debt principal amounts. If an interest rate swap or forward rate agreement is terminated before its maturity, any gain or loss is deferred and amortized as interest expense over the remaining life of the underlying debt or the remaining life of the swap, if shorter. Currency swap, forward and option contracts are generally entered into to hedge recorded balance sheet amounts related to international operations, firm commitments that create currency exposures and projected net income. Gains and losses on hedges of assets and liabilities are recorded in other income (expenses)-net as offsets to the gains and losses from the underlying hedged amounts; gains and losses on hedges of net investments are reported on the balance sheet as part of the accumulated other comprehensive income (loss) (cumulative translation adjustment) within shareholders' equity; and gains and losses on hedges of firm commitments are recorded on the balance sheet and included in the basis of the underlying transaction. Forward exchange contracts that cover exposures which do not qualify for hedge accounting (e.g., net income hedges) are recorded in other income (expenses)- net on a fair market value basis. Praxair uses the following methods and assumptions to estimate the fair value of each class of financial instrument. Due to their nature, the carrying value of cash, short-term investments and short-term debt, receivables and payables approximates fair value. The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues. The fair value of interest rate swaps and currency exchange contracts are estimated based on market prices obtained from dealer quotes. Such quotes represent the estimated amount Praxair would receive or pay to terminate the agreements taking into consideration current rates and the credit worthiness of the counterparties (see Note 5). Patents, Trademarks And Goodwill-Amounts paid for patents and the excess of the purchase price over the fair value of the net assets of acquired operations (goodwill) are recorded as other long-term assets. Patents are amortized over their remaining useful lives, while trademarks and goodwill are amortized over the estimated period of benefit, up to forty years. Praxair periodically evaluates the recoverability of patents, trademarks and goodwill by assessing whether the unamortized balance can be recovered over its remaining life through cash flows generated by the underlying tangible assets. Should the expected undiscounted cash flows be less than the carrying amount of the intangible asset, an impairment loss would be recognized. Research And Development-Research and development costs are charged to expense as incurred. Income Taxes-Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using current tax rates. Retirement Programs-Most Praxair employees worldwide are covered by various pension plans. The cost of pension benefits under these plans is determined using the "projected unit credit" actuarial cost method. Funding of pension plans varies and is in accordance with local laws and practices. Praxair accrues the cost of retiree life and health insurance benefits during the employees' service period when such benefits are earned. Postemployment Benefits-Praxair recognizes the estimated cost of future benefits provided to former and inactive employees after employment but before retirement on the accrual basis. Stock-Based Compensation-Praxair accounts for incentive plans and stock options using the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Pro forma information required by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, is included in Note 9. Earnings Per Share-Basic earnings per share is computed by dividing net income for the period by the weighted average number of Praxair common shares outstanding. Diluted earnings per share is computed by dividing net income for the period by the weighted average number of Praxair common shares outstanding and dilutive common stock equivalents. Stock options for 6,662,005 and 4,604,610 shares were not included 32 in the computation of diluted earnings per share for the years ended December 31, 2000 and December 31, 1999, respectively, because the exercise prices were greater than the average market price of the common stock. All references in the consolidated financial statements are to diluted earnings per share unless stated otherwise. The difference between the number of shares used in the basic earnings per share calculation compared to the diluted earnings per share calculation is due to the dilutive effect of outstanding stock options. Accounting Change-In accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities, Praxair recorded an after-tax-charge of $10 million in the first quarter of 1999 as the cumulative effect of an accounting change. Recently Issued Accounting Standards- In June 1998, The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, and later amended by SFAS No. 137 and 138, and is effective January 1, 2001. SFAS No. 133 requires all derivatives to be recorded at their fair values. Changes in their fair values will be recognized in earnings as offsets to the changes in the fair values of the hedged assets, liabilities, and firm commitments; or, deferred as a separate component of accumulated other comprehensive income (loss) until the hedged transaction occurs and is recognized in earnings. The ineffective portion of a hedging derivative's change in fair value will be immediately recognized in earnings. As summarized in Note 5, at December 31, 2000, Praxair has interest rate swap or forward starting swap agreements outstanding with a notional value totaling $780 million. Of these, swaps with notional amounts totaling $700 million have been designated as, and are effective as, hedges of outstanding debt instruments or lease obligations. The Company also has currency exchange forward contracts outstanding with notional amounts totaling $248 million which are effective economic hedges but, are not designated as hedges for accounting purposes. For the quarter ended March 31, 2001, Praxair will record a one- time after-tax charge as a cumulative effect adjustment for the initial adoption of SFAS No. 133 totaling $2 million in its statement of operations, and an unrealized loss of $4 million in accumulated other comprehensive income (loss). In accordance with Emerging Issues Task Force (EITF) Consensus No. 2000-15, Classification in the Statement of Cash Flows of the Income Tax Benefit Received by a Company Upon Exercise of a Nonqualified Employee Stock Option, Praxair has included the tax benefit associated with the exercise of stock options as cash flows from operations. Such tax benefits were previously reported as financing cash flows ($5 million in 2000, $16 million in 1999 and $8 million in 1998). Reclassifications-Certain prior years' amounts have been reclassified to conform to the current year's presentation. 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 Special Charges 2000 Repositioning and Special Charges-In the fourth quarter of 2000, Praxair recorded pre-tax charges totaling $159 million and $2 million of equity income charges ($117 million after tax, or $0.73 per diluted share) for severance and other costs associated with a repositioning program that will realign Praxair's resources with its target markets. The charge also includes costs related to asset write-downs associated with non-strategic activities and related working capital. The charges were determined based on formal plans approved by management using the best information available. Any differences with amounts ultimately incurred will be adjusted when determined. The severance costs of $48 million are for the termination of 811 employees in connection with initiatives in North and South America, Northern Europe, Surface Technologies, Asia, global supply systems, and corporate. These initiatives involve a number of actions to reorganize Praxair's marketing, business support and administrative functions around the world in order to align the organization more closely with its customers and to improve productivity. In North America, the U.S. business is consolidating its operations into four geographic regions and the segment is taking other actions to streamline the organization and increase productivity. The South America and Europe initiatives are related to ongoing productivity improvements. Praxair's Surface Technologies' business is taking actions in the U.S., Europe and Asia to close or consolidate various operations and facilities, and to improve productivity. In the All Other segment, several actions have been initiated or are planned: (i) Praxair will consolidate certain packaged gases operations and facilities in India; (ii) Praxair has shutdown and written-off its investment in MetFabCity and e-business support activities in India; and, (iii) corporate and global supply systems will reduce staff as a result of continued productivity initiatives. At December 31, 2000, approximately 200 positions were eliminated and the remaining actions are planned to be completed in 2001. In 2000, MetFabCity losses recorded in consolidated operating profit were $12 million. Other costs include plant closures, consolidations, or cancellations (primarily in Asia and global supply systems), and product-line termination costs totaling $44 million; and, the write-off of other assets totaling an additional $67 million. Other assets include Praxair's investment in MetFabCity and other e-commerce initiatives ($22 million), future lease obligations for space that will no longer be used ($16 million), and various other assets and working capital write-offs or write-downs. The cash requirements of the repositioning program are estimated to be approximately $68 million in total of which approximately $54 million is expected to be paid in 2001. Cash requirements in 2000 were minimal and remaining amounts beyond 2001, primarily for long-term lease obligations, will be paid primarily through 2006. The repositioning and special charges are recorded as follows: $47 million in cost of sales, $21 million in selling, general and administrative and $91 million in other income (expenses)-net (see Note 7). Additionally, in the first quarter of 2000 Praxair initiated a program to reposition the Surface Technologies operations as a result of adverse market conditions in the aerospace original equipment and computer disk drive markets. Praxair recorded a $5 million pre-tax charge to other income (expenses)-net, including approximately $4 million for employee severance costs and $1 million related to other exit costs. The program included the closure of two U.S. facilities and headcount reductions of 150 employees located at these facilities and others. As of December 31, 2000, the program is completed. 34 1998 Special Charges-In the fourth quarter of 1998, Praxair recorded a charge of $29 million ($18 million after tax, or $0.11 per diluted share) related to its investment in Indonesia ($19 million or $11 million after tax) and an anticipated loss on an air separation plant under construction for a third party ($10 million or $7 million after tax). Refer to Note 10 for an analysis of the accrued liability balances related to these and previous special charges. Note 3 Segment Information Praxair operates principally in the industrial gases business through three reportable operating segments: North America, South America and Europe. In addition, Praxair operates its worldwide Surface Technologies business through its wholly-owned subsidiary, Praxair Surface Technologies, Inc. The All Other category is composed of Praxair's industrial gases business in Asia, Praxair's global supply systems business which designs, engineers and builds equipment that produces industrial gases (for internal use and external sale), and other globally managed functions including procurement, global marketing and business development, which includes MetFabCity, Inc. Corporate includes costs related to corporate functions. The accounting policies of the operating segments are the same as those described in Note 1. Praxair evaluates the performance of its operating segments based primarily on operating profit, excluding intercompany royalties and special charges. Sales are determined based on the country in which the legal subsidiary is domiciled and intersegment sales are not material. Research and development costs relating to Praxair's industrial gases business are managed globally and for purposes of segment reporting are allocated to operating segments based on sales. Long-lived assets includes property, plant and equipment; and patents, trademarks and goodwill. The table below presents information about reported segments for the years ended December 31, 2000, 1999, and 1998: (Millions of dollars) Segment Information 2000 1999 1998 - ---------------------------------------------------------------------------- Sales: North America $ 3,026 $ 2,779 $ 2,752 South America 723 697 964 Europe 491 516 515 Surface Technologies 579 456 420 All Other 224 191 182 - ---------------------------------------------------------------------------- Total sales $ 5,043 $ 4,639 $ 4,833 ============================================================================ Segment Operating Profit(a): North America $ 559 $ 514 $ 533 South America(b) 174 163 199 Europe 124 123 109 Surface Technologies 58 74 73 All Other (20) (17) (6) Corporate (29) (26) (23) - ---------------------------------------------------------------------------- Total segment operating profit $ 866 $ 831 $ 885 ============================================================================ Total Assets(c): North America $ 4,191 $ 3,987 $ 3,917 South America 1,684 1,796 2,313 Europe 730 769 871 Surface Technologies 722 705 523 All Other 435 465 472 - ---------------------------------------------------------------------------- Total assets $ 7,762 $ 7,722 $ 8,096 ============================================================================ Depreciation and Amortization: North America $ 273 $ 260 $ 267 South America 89 86 116 Europe 44 49 47 Surface Technologies 39 30 23 All Other 26 20 14 - ---------------------------------------------------------------------------- Total depreciation and amortization $ 471 $ 445 $ 467 ============================================================================ Capital Expenditures and Acquisitions: North America $ 353 $ 339 $ 501 South America 396(d) 128 180 Europe 58 52 87 Surface Technologies 62 198 130 All Other 125 72 124 - ---------------------------------------------------------------------------- Total capital expenditures and acquisitions $ 994 $ 789 $ 1,022 ============================================================================ (continued) 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars) Segment Information 2000 1999 1998 - ---------------------------------------------------------------------------- Sales by Major Country: United States $ 2,737 $ 2,518 $ 2,508 Brazil 543 507 786 All Other Foreign 1,763 1,614 1,539 - ---------------------------------------------------------------------------- Total sales $ 5,043 $ 4,639 $ 4,833 ============================================================================ Long-Lived Assets by Major Country: United States $ 2,823 $ 2,752 $ 2,707 Brazil 941 1,037 1,505 All Other Foreign 2,105 2,044 1,935 - ---------------------------------------------------------------------------- Total long-lived assets $ 5,869 $ 5,833 $ 6,147 ============================================================================ (a) During 2000, Praxair recorded pre-tax charges totaling $159 million for repositioning and special charges and during 1998, Praxair recorded pre-tax special charges totaling $29 million for an impairment loss in Indonesia and a provision for an anticipated loss on the sale of an air separation plant to a third party, both of which are not included in segment operating profit. Following is a reconciliation of segment operating profit to reported consolidated operating profit: (Millions of dollars) Special Charges 2000 1999 1998 - ---------------------------------------------------------------------------- Segment operating profit $ 866 $ 831 $ 885 Less special charges: North America (19) -- -- South America (8) -- -- Europe (9) -- -- Surface Technologies (19) -- -- All Other (104) -- (29) - ---------------------------------------------------------------------------- Consolidated operating profit $ 707 $ 831 $ 856 - ---------------------------------------------------------------------------- (b) 1999 includes a $21 million operating profit benefit from net income hedges in Brazil that were effectively closed out in the 1999 first quarter. (c) Includes equity investments as follows: (Millions of dollars) Equity Investments 2000 1999 1998 - ---------------------------------------------------------------------------- North America $ 73 $ 71 $ 66 Europe 75 77 101 Surface Technologies -- 1 -- All other (Asia) 94 85 84 - ---------------------------------------------------------------------------- Total $242 $234 $251 ============================================================================ (d) Includes $242 million related to the acquisition of additional minority interests of White Martins in Brazil (see Note 7). Note 4 Income Taxes Pre-tax income applicable to U.S. and foreign operations is as follows: (Millions of dollars) Year Ended December 31, 2000 1999 1998 - ---------------------------------------------------------------------------- United States $114 $262 $277 Foreign 369 365 319 - ---------------------------------------------------------------------------- Total income before income taxes $483 $627 $596 ============================================================================ The following is an analysis of the provision for income taxes: (Millions of dollars) Year Ended December 31, 2000 1999 1998 - ---------------------------------------------------------------------------- Current tax expense (benefit) U.S. Federal $ (2) $ 39 $ 54 State and local 4 11 12 Foreign 66 49 50 - ---------------------------------------------------------------------------- Total current 68 99 116 - ---------------------------------------------------------------------------- Deferred tax expense (benefit) U.S. Federal 20 49 29 Foreign 15 4 (18) - ---------------------------------------------------------------------------- Total deferred 35 53 11 - ---------------------------------------------------------------------------- Total income taxes $ 103 $ 152 $ 127 ============================================================================ Net deferred tax liabilities are comprised of the following: (Millions of dollars) December 31, 2000 1999 - ---------------------------------------------------------------------------- Deferred Tax Liabilities Fixed assets $715 $685 State and local 11 10 Other 145 164 - ---------------------------------------------------------------------------- Total deferred tax liabilities 871 859 - ---------------------------------------------------------------------------- Deferred Tax Assets Benefit plans and related 175 194 Inventory 22 22 Alternative minimum tax and other credits 77 58 Carryforwards-gross 98 115 Other 119 72 - ---------------------------------------------------------------------------- 491 461 Less: Valuation allowances 10 5 - ---------------------------------------------------------------------------- Total deferred tax assets 481 456 - ---------------------------------------------------------------------------- Net deferred tax liabilities $390 $403 ============================================================================ 36 An analysis of the difference between the provision for income taxes and the amount computed by applying the U.S. statutory income tax rate to pre-tax income follows: (Millions of dollars)
Year ended December 31, 2000 1999 1998 - ------------------------------------------------------------------------------------- $ % $ % $ % - ------------------------------------------------------------------------------------- U.S. statutory income tax rate 169 35.0 219 35.0 208 35.0 State and local taxes 3 0.6 7 1.1 8 1.3 U.S. tax credits (6) (1.2) (4) (0.6) (3) (0.5) Foreign taxes (49) (10.2) (72) (11.6) (80) (13.4) Other-net (14) (2.9) 2 0.3 (6) (1.0) - ------------------------------------------------------------------------------------- Provision for income taxes 103 21.3 152 24.2 127 21.4 =====================================================================================
The valuation allowances increased $5 million in 2000 (decreased $1 million in 1999 and $4 million in 1998) all relating to foreign net operating loss carryforwards activity. At December 31, 2000, Praxair has approximately $9 million of foreign net operating loss carryforwards that expire principally through 2005, for which the deferred tax asset has been fully reserved by valuation allowances. During 2000, Italy decreased its top marginal tax rate. During 1999, France, Japan and the United Kingdom decreased and Brazil increased their top marginal tax rate. The effects of these tax rate changes were immaterial. Provision has not been made for additional Federal or foreign taxes at December 31, 2000 on $1,143 million of undistributed earnings of foreign subsidiaries that are planned to be reinvested indefinitely. These earnings could become subject to additional tax if they were remitted as dividends, loaned to Praxair, or upon sale of the subsidiary's stock. It is not practicable to estimate the amount or timing of the additional tax, if any, that might eventually be payable on the foreign earnings. Note 5 Debt and Financial Instruments Debt-The following is a summary of Praxair's outstanding debt at December 31, 2000 and 1999: (Millions of dollars) Debt 2000 1999 - ------------------------------------------------------------------- Short-Term Commercial paper and U.S. borrowings $ -- $ 632 Canadian borrowings 5 6 South American borrowings 73 65 Other International borrowings 81 53 - ------------------------------------------------------------------- Total short-term debt 159 756 - ------------------------------------------------------------------- Long-Term U.S.: Commercial paper and U.S. borrowings 852 -- 6.25% Notes due 2000 -- 75 6.70% Notes due 2001 250 250 6.625% Notes due 2003 75 75 6.75% Notes due 2003 300 300 6.15% Notes due 2003 250 250 6.85% Notes due 2005 150 150 6.90% Notes due 2006 250 250 6.625% Notes due 2007 250 250 8.70% Debentures due 2022 (Redeemable after 2002) 300 300 Other borrowings 42 31 Canadian borrowings 176 177 South American borrowings 66 80 Other International borrowings 14 43 Obligations under capital leases 7 8 - ------------------------------------------------------------------- 2,982 2,239 Less: current portion of long-term debt 341 128 - ------------------------------------------------------------------- Total long-term debt 2,641 2,111 - ------------------------------------------------------------------- Total debt $3,141 $2,995 =================================================================== In July 2000, Praxair entered into two new credit agreements, that expire through 2005, totaling $1.5 billion to support commercial paper and other short-term U.S. bank borrowings. These new agreements replaced the previous credit agreement that was due to expire in December 2000. The terms and financial covenants contained in the new credit agreements are not significantly different from the terms of its previous credit agreement. No borrowings were outstanding under these agreements at December 31, 2000 or 1999. At December 31, 2000, $852 million of short-term borrowings were classified as long-term debt because of the Company's intent to refinance this debt on a long-term basis and the availability of such financing 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under the terms of the credit agreements. At December 31, 1999, such borrowings were reclassified as short-term debt because the existing credit agreement expired within one year. At December 31, 2000 and December 31, 1999, the weighted-average interest rate on commercial paper and U.S bank borrowings was 6.6% and 5.5%, respectively. Praxair's major bank credit and long-term debt agreements contain various covenants which may, among other things, restrict the ability of Praxair to merge with another entity, incur or guarantee debt, sell or transfer certain assets, create liens against assets, enter into sale and leaseback agreements, or pay dividends and make other distributions beyond certain limits. These agreements also require Praxair to meet leverage and net worth ratios. At December 31, 2000, Praxair was in compliance with all such covenants. Excluding commercial paper and U.S. bank borrowings, scheduled maturities on long-term debt are: 2001, $341 million; 2002, $83 million; 2003, $686 million; 2004, $21 million; 2005, $159 million and $840 million thereafter. At December 31, 2000, $174 million of Praxair's assets (principally international fixed assets) were pledged as security for long-term debt including the current portion of long-term debt. At December 31, 2000, the estimated fair value of Praxair's long-term debt portfolio was $2,985 million versus a carrying value of $2,982 million. At December 31, 1999, the estimated fair value of long-term debt was $2,207 million versus a carrying value of $2,239 million. These differences are attributable to interest rate changes subsequent to when the debt was issued. Financial Instruments-Praxair has entered into various fixed interest rate swap agreements that effectively convert variable rate interest and lease payments to fixed rate interest and lease payments. At December 31, 2000 and 1999 respectively, Praxair had $430 million and $80 million notional amount of interest rate swap agreements outstanding. The scheduled maturities of the swap agreements are: 2001, $330 million and 2002, $100 million. Additionally, at December 31, 2000, Praxair entered into $350 million notional amount of forward starting fixed interest rate swaps, effective January 2, 2001 and expiring in 2002. The fair market value of these swaps at December 31, 2000 was a loss of $7 million. At December 31, 1999, the fair market value of the swaps approximated their carrying amounts. Praxair is also a party to currency exchange forward contracts to manage its exposure to changing currency exchange rates. At December 31, 2000 and 1999, respectively, Praxair had $248 million and $272 million of currency exchange forward contracts outstanding: $195 million to hedge recorded balance sheet exposures ($222 million in 1999), $4 million to hedge firm commitments generally for the purchase of equipment related to construction projects ($13 million in 1999) and $49 million to hedge future net income, accounted for on a fair market value basis ($37 million in 1999, accounted for on a mark- to-market basis). Additionally, at December 31, 2000, there was $6 million notional value of currency exchange forward contracts that effectively offset ($56 million in 1999). At December 31, 2000 and 1999, the fair market value of currency exchange contracts approximated their carrying amounts and the deferred gains and losses on these contracts were not material. In January 1999, Praxair entered into currency exchange forward contracts totaling $325 million for estimated Brazilian net income in 1999 and to hedge a portion of its Brazilian net investment. The net income hedge contracts resulted in a pre-tax gain of $21 million ($14 million after tax and minority interest) and the net investment hedge contracts resulted in a gain of approximately $60 million (after tax and minority interest) which was recognized on the balance sheet in the accumulated other comprehensive income (loss) (cumulative translation adjustment) component of shareholders' equity. The cash proceeds relating to the pre-tax gain on the net investment hedges (approximately $89 million) is shown in the financing section of the consolidated statement of cash flows under the caption "Minority transactions and other", and the pre-tax gain relating to the net income hedges is shown under the caption "Net income" in operating cash flows. Counterparties to interest rate derivative contracts and currency exchange forward contracts are major financial institutions with credit ratings of investment grade or better and no collateral is required. There are no significant risk concentrations. Management believes the risk of incurring losses related to credit risk is remote and any losses would be immaterial. 38 Note 6 Shareholders' Equity At December 31, 2000, there were 500,000,000 shares of common stock authorized (par value $.01 per share) of which 166,309,105 shares were issued and 159,379,260 were outstanding. The Board of Directors of Praxair declared a dividend distribution of one common stock purchase right (a "Right") for each share of Praxair's common stock outstanding at the close of business on June 30, 1992. The holders of any additional shares of Praxair's common stock issued after June 30, 1992 and before the redemption or expiration of the Rights are also entitled to one Right for each such additional share. Each Right entitles the registered holders, under certain circumstances, to purchase from Praxair one share of Praxair's common stock at $47.33 (subject to adjustment). At no time will the Rights have any voting power. The Rights may not be exercised until 10 days after a person or group acquires 15 percent or more of Praxair's common stock, or announces a tender offer that, if consummated, would result in 15 percent or more ownership of Praxair's common stock. Separate Rights certificates will not be issued and the Rights will not be traded separately from the stock until then. Should an acquirer become the beneficial owner of 15 percent or more of Praxair's common stock (other than as approved by Praxair's Board of Directors) and under certain additional circumstances, Praxair Rightholders (other than the acquirer) would have the right to buy common stock in Praxair, or in the surviving enterprise if Praxair is acquired, having a value of two times the exercise price then in effect. Also, Praxair's Board of Directors may exchange the Rights (other than the acquirer's Rights which will have become void), in whole or in part, at an exchange ratio of one share of Praxair common stock (and/or other securities, cash or other assets having equal value) per Right (subject to adjustment). The Rights will expire on June 30, 2002, unless exchanged or redeemed prior to that date. The redemption price is $.001 per Right. Praxair's Board of Directors may redeem the Rights by a majority vote at any time prior to the 20th day following public announcement that a person or group has acquired 15 percent of Praxair's common stock. Under certain circumstances, the decision to redeem requires the concurrence of a majority of the independent directors. Note 7 Supplementary Income Statement Information (Millions of dollars) Year Ended December 31, 2000 1999 1998 - ------------------------------------------------------------------------------- Cost of Sales Cost of sales $ 3,028 $ 2,732 $ 2,807 Repositioning and special charges(a) 47 -- -- - ------------------------------------------------------------------------------- $ 3,075 $ 2,732 $ 2,807 =============================================================================== Selling, General and Administrative Selling $ 329 $ 314 $ 328 General and administrative 333 327 316 Repositioning and special charges(a) 21 -- -- - ------------------------------------------------------------------------------- $ 683 $ 641 $ 644 =============================================================================== Depreciation and Amortization Depreciation and other $ 438 $ 413 $ 430 Goodwill amortization 33 32 37 - ------------------------------------------------------------------------------- $ 471 $ 445 $ 467 =============================================================================== Other Income (Expenses)-Net Investment income $ 10 $ 9 $ 14 Currency(b) 10 38 1 Partnership income 9 7 12 Repositioning and special charges(a) (91) -- (29) Other 20 23(c) 15 - ------------------------------------------------------------------------------- $ (42) $ 77 $ 13 =============================================================================== Interest Expense Interest incurred on debt $ 248 $ 234 $ 296 Interest capitalized (24) (30) (36) - ------------------------------------------------------------------------------- $ 224 $ 204 $ 260 =============================================================================== Minority Interests Minority interests(d) $ (24) $ (39) $ (49) Preferred stock dividends (3) (6) (6) - ------------------------------------------------------------------------------- $ (27) $ (45) $ (55) =============================================================================== (a) During the fourth quarter 2000, Praxair recorded pre-tax repositioning and special charges totaling $159 million and in 1998, Praxair recorded pre-tax special charges of $29 million (see Note 2). (b) Includes a $21 million gain related to net income hedges in Brazil in 1999 (see Note 5) and gains from net income hedges in both 2000 and 1999, primarily in Europe. (c) Includes $50 million of income related to the redemption of preference shares from an earlier business sale and $12 million of income related to the collection of a note receivable from an earlier business sale, with offsetting costs related to postemployment benefits and an anticipated loss on the sale of an air separation plant under construction for a third party. (d) As a result of a tender offer in 2000 and a rights offering in 1999, Praxair increased its ownership interest in its South American subsidiary, S.A. White Martins (White Martins), from 69.3% at December 31, 1998 to 76.6% at December 31, 1999, and to 98.6% at December 31, 2000. Praxair paid $242 million in connection with the tender offer in 2000, and as consideration for the additional shares it purchased during the rights offering in 1999, Praxair used approximately $138 million of intercompany loans it had previously made to White Martins. Approximately $15 million of the 1999 rights offering was purchased by minority shareholders. 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 8 Preferred Stock At December 31, 2000 and 1999, there were 25,000,000 shares of preferred stock (par value $.01 per share) authorized, of which, 200,000 shares were issued and outstanding at December 31, 2000 (750,000 shares were outstanding in 1999). During the second quarter of 2000, the 7.48% Series A Cumulative Preferred Stock was redeemed for $55,000,000. No dividends may be paid on Praxair common stock unless preferred stock dividends have been paid, and the preferred stock has limited voting rights. Dividends are included in minority interests on the consolidated statement of income. Following is a summary of the Series B Preferred Stock outstanding at December 31, 2000: Series B Preferred Stock-There are 200,000 outstanding shares of Praxair 6.75% Cumulative Preferred Stock, Series B which are entitled to receive cumulative annual dividends of $6.75 per share, payable quarterly. The Series B Preferred Stock is mandatorily redeemable on, but not prior to, September 5, 2002 at a price of $100 per share and has a liquidation preference of $100 per share. Note 9 Incentive Plans and Stock Options At December 31, 2000, the 1992 Praxair Long-Term Incentive Plan (the "1992 Plan") and the 1996 Praxair, Inc. Performance Incentive Plan (the "1996 Plan") provide for granting of nonqualified or incentive stock options, stock grants, performance awards, and other stock-related incentives for key employees. On February 21, 2001, the Board of Directors terminated the 1996 Plan effective on February 28, 2001 and adopted the 2002 Praxair, Inc. Long-Term Incentive Plan (the "2002 Plan"), effective January 1, 2002. Under the 1992 Plan, which expires on December 31, 2001, the total number of shares available for options or stock grants in each calendar year may not exceed one percent of the number of shares outstanding on the first day of each year, plus any shares that were available but not used in a prior year up to two percent of the total number of shares outstanding on the first day of the year of the grant. Exercise prices for Incentive Stock Options must be equal to the closing price of Praxair's common stock on the date of the grant. The options issued under the 1992 Plan become exercisable only after one or more years, and the option term can be no more than ten years. Under the 1996 Plan, before being terminated effective on February 28, 2001, the number of shares of stock available for options or share grants in each calendar year was limited to a percentage of the total number of shares of common stock outstanding. The provisions of the 1996 Plan governing the granting and administration of stock options are identical to those in the 1992 Plan. Under the 2002 Plan, the number of shares available for option or stock grants is limited to a total of 7,900,000 shares for the ten-year term of the Plan. The 2002 Plan provides for the granting of only nonqualified and incentive stock options, stock grants and performance awards and further provides that the aggregate number of shares granted as restricted stock or pursuant to performance awards may not exceed 20% of the total shares available under the Plan. The 2002 Plan also provides calendar year per-participant limits on grants of options, restricted stock and performance awards. Exercise prices for options granted under the 2002 Plan may not be less than the closing market price of the Company's common stock on the date of grant and granted options may not be repriced or exchanged without shareholder approval. Options granted under the 2002 Plan become exercisable after a minimum of one year and have a maximum duration of 10 years. Both officer and non-officer employees are eligible for awards under the 2002 Plan. 40 Effective January 1, 1997, Praxair initiated a three-year long-term incentive program by granting performance share equivalents and stock options to corporate officers and other key employees under the applicable Incentive Plan. Because Praxair's average annual earnings per share growth for the three year performance period was 10.7% versus the 15% target established for this program, 71.1% of the performance share equivalents or 652,421 share equivalents vested on January 1, 2000, according to a pre-determined formula. Vested performance share equivalents were distributed primarily in shares of Praxair, Inc. common stock in March 2000. Pre-tax compensation expense related to this plan totaled $33 million ($10 million in 1999, $8 million in 1998 and $15 million in 1997). The following table summarizes the changes in outstanding shares under option and performance share equivalents for 2000, 1999, and 1998 (options in thousands): Stock Options ---------------------- Average Performance Exercise Share Activity Options Price Equivalents(a) - -------------------------------------------------------------------- Outstanding at December 31, 1997 10,899 $ 25.20 968 Granted 2,022 $ 40.98 14 Exercised (889) $ 19.63 -- Cancelled or expired (60) $ 46.00 (31) - -------------------------------------------------------------------- Outstanding at December 31, 1998 11,972 $ 28.17 951 Granted 2,946 $ 40.98 -- Exercised (2,138) $ 19.48 -- Cancelled or expired (104) $ 44.78 (299) - -------------------------------------------------------------------- Outstanding at December 31, 1999 12,676 $ 32.47 652 Granted 3,050 $ 42.40 -- Exercised (1,001) $ 15.19 -- Vested -- -- (652) Cancelled or expired (179) $ 43.72 -- - -------------------------------------------------------------------- Outstanding at December 31, 2000(b) 14,546 $ 35.60 -- - -------------------------------------------------------------------- Options exercisable at: December 31, 1998 7,728 $ 18.95 December 31, 1999 6,650 $ 23.86 December 31, 2000(b) 8,684 $ 31.48 ==================================================================== (a) The weighted-average price per share on the date performance share equivalents were granted was $50.26 in 1998 and $46.25 in 1997. (b) The following table summarizes information about options outstanding and exercisable at December 31, 2000 (options in thousands, life in years): Outstanding Exercisable ----------- ----------- Range of Average Number Average Number Average Exercise Remaining of Exercise of Exercise Prices Life Options Price Options Price - ------------------------------------------------------------------- $ 9.80-$13.95 0.7 1,254 $12.37 1,254 $12.37 $15.50-$24.38 2.9 2,531 $18.12 2,531 $18.12 $26.25-$36.25 7.5 2,206 $33.92 1,031 $33.47 $36.44-$46.00 8.6 4,980 $41.84 1,253 $40.59 $46.13-$56.13 7.0 3,575 $48.49 2,615 $48.42 - ------------------------------------------------------------------- $9.80-$56.13 6.4 14,546 $35.60 8,684 $31.48 =================================================================== Pro forma information: SFAS No. 123 requires Praxair to disclose pro forma net income and pro forma earnings per share amounts as if compensation expense was recognized for options granted after 1994. Using this approach, pro forma net income and the related basic and diluted earnings per share amounts would be as follows: Year Ended December 31, 2000 1999 1998 - --------------------------------------------------------- Net Income: As reported $ 363 $ 431 $ 425 Pro forma $ 335 $ 411 $ 409 Basic Earnings per Share: As reported $ 2.28 $ 2.71 $ 2.68 Pro forma $ 2.11 $ 2.58 $ 2.58 Diluted Earnings per Share: As reported $ 2.25 $ 2.66 $ 2.60 Pro forma $ 2.08 $ 2.53 $ 2.50 - --------------------------------------------------------- The weighted average fair value of options granted during 2000 was $15.46 ($13.80 in 1999 and $12.57 in 1998). These values, which were used as a basis for the pro forma disclosures, were estimated using the Black-Scholes Options-Pricing Model with the following weighted average assumptions used for grants in 2000, 1999, and 1998: Year Ended December 31, 2000 1999 1998 - ------------------------------------------------------------------------------ Dividend yield 1.0% 1.0% 1.0% Volatility 33.0% 31.0% 28.0% Risk-free interest rate 6.4% 5.5% 5.2% Expected term-years 5.0 5.0 5.0 - ------------------------------------------------------------------------------ These pro forma disclosures may not be representative of the effects for future years since options vest over several years, and additional awards generally are made each year. 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 Supplementary Balance Sheet Information (Millions of dollars) December 31, 2000 1999 - ------------------------------------------------------------------------------ Accounts Receivable Trade $ 873 $ 846 Other 39 36 - ------------------------------------------------------------------------------ 912 882 Less: allowance for doubtful accounts(a) 36 34 - ------------------------------------------------------------------------------ $ 876 $ 848 ============================================================================== Inventories(b) Raw materials and supplies $ 98 $ 104 Work in process 38 50 Finished goods 161 156 - ------------------------------------------------------------------------------ $ 297 $ 310 ============================================================================== Property, Plant and Equipment-Net Land and improvements $ 199 $ 190 Buildings 566 562 Machinery and equipment 7,589 7,209 Construction in progress and other 539 620 Less: accumulated depreciation 4,122 3,861 - ------------------------------------------------------------------------------ $ 4,771 $ 4,720 ============================================================================== Other Long-Term Assets Patents, trademarks and goodwill(c) $ 1,097 $ 1,113 Deposits(d) 35 34 Other 256 286 - ------------------------------------------------------------------------------ $ 1,388 $ 1,433 ============================================================================== Other Current Liabilities Accrued accounts payable $ 136 $ 132 Payrolls 93 102 Employee benefits and related 25 41 Special charges(e) 59 5 Accrued interest payable 39 37 Other 107 88 - ------------------------------------------------------------------------------ $ 459 $ 405 ============================================================================== Other Long-Term Liabilities Employee benefits and related $ 441 $ 462 Special charges(e) 19 7 Other(d) 88 93 - ------------------------------------------------------------------------------ $ 548 $ 562 ============================================================================== Deferred Credits Income taxes(f) $ 461 $ 434 Deferred gain on sale leaseback (Note 12) 152 152 Other 6 14 - ------------------------------------------------------------------------------ $ 619 $ 600 ============================================================================== (continued) (Millions of dollars) December 31, 2000 1999 - ------------------------------------------------------------------------------ Accumulated Other Comprehensive Income (Loss) (cumulative translation adjustment) North America $ (177) $ (167) South America(g) (593) (494) Europe (174) (123) Surface Technologies (17) (8) All Other (50) (36) - ------------------------------------------------------------------------------ $(1,011) $ (828) ============================================================================== (a) Provisions to the allowance for doubtful accounts were $19 million, $22 million and $13 million in 2000, 1999, and 1998, respectively. (b) Approximately 33% of total inventories were valued using the LIFO method at December 31, 2000 (31% in 1999). If inventories had been valued at current costs, they would have been approximately $28 million and $26 million higher than reported at December 31, 2000 and 1999, respectively. (c) Net of accumulated amortization of $180 million in 2000 and $161 million in 1999. (d) $35 million and $24 million of other long-term assets and other long-term liabilities in Brazil have been offset in 2000 and 1999, respectively. (e) The table below summarizes the activity (primarily new charges, cash payments and asset write-offs) in the accrual for special charges. The accrual includes special programs in 1996 and 1997 as described in the table below, and other programs in 1998 and 2000 as described in Note 2. The remaining other charges at December 31, 2000 are related to the 2000 repositioning program and future lease payments from earlier programs. (Millions of dollars) Other Total Accrual-- Special Charges Severance Charges Accrual - ----------------------------------------------------------------- Balance, January 1, 1996 $ -- $ -- $ -- CBI integration* 50 35 85 1996 activity (29) (10) (39) - ----------------------------------------------------------------- Balance, December 31, 1996 21 25 46 North American packaged gases* -- 10 10 1997 activity (21) (9) (30) - ----------------------------------------------------------------- Balance, December 31, 1997 -- 26 26 1998 activity -- (8) (8) - ----------------------------------------------------------------- Balance, December 31, 1998 -- 18 18 1999 activity -- (6) (6) - ----------------------------------------------------------------- Balance, December 31, 1999 -- 12 12 Surface Technologies repositioning program 4 1 5 Repositioning and special charges 48 111 159 2000 activity (7) (91) (98) - ----------------------------------------------------------------- Balance, December 31, 2000 $ 45 $ 33 $ 78 ================================================================= * In 1996, Praxair recorded a charge of $85 million for the integration of the Liquid Carbonic business of CBI and Praxair, and in 1997 recorded a $10 million charge related primarily to profit improvement initiatives in its North American packaged gases business. (f) Deferred income taxes related to current items are included in prepaid and other current assets in the amount of $71 million in 2000 and $31 million in 1999. The increase in 2000 is a result of the repositioning program (see Note 2). (g) Consists primarily of currency translation adjustments in Brazil and is net of a $60 million gain related to Brazilian net investment hedges (see Note 5). 42 Note 11 Retirement Programs Pensions-Praxair has two main U.S. retirement programs which are non-contributory defined benefit plans, the Praxair Retirement Program and the CBI Retirement Program. Pension benefits for both are based predominantly on years of service, age and compensation levels prior to retirement. Pension coverage for employees of Praxair's international subsidiaries generally is provided by those companies through separate plans. Obligations under such plans are typically provided for by depositing funds with trustees, under insurance policies, or by book reserves. Praxair's North American packaged gases business has two defined contribution plans. Company contributions to these plans are calculated as a percentage of salary based on age plus service. U.S. employees may supplement the company contributions up to the maximum allowable by IRS regulations. Certain international subsidiaries of the Company (including White Martins in Brazil, effective in 2000) also sponsor defined contribution plans where contributions are determined under various formulas. The cost for these plans was $7 million in 2000, and $5 million in 1999 and 1998 (not included in the tables that follow). U.S. employees other than the packaged gas business are eligible to participate in a defined contribution savings plan. Employees may contribute up to 18% of their compensation, subject to the maximum allowable by IRS regulations. Company contributions to this plan are calculated on a graduated scale based on employee contributions to the plan. The cost for this plan was $10 million in 2000, 1999 and 1998 (not included in the tables that follow). Postretirement Benefits Other Than Pensions (OPEB)- Praxair provides health care and life insurance benefits to certain eligible retired employees. These benefits are provided through various insurance companies and health care providers. Praxair is obligated to make payments for a portion of postretirement benefits related to retirees of Praxair's former parent. As part of the CBI acquisition in 1996, Praxair assumed responsibility for health care and life insurance benefit obligations for CBI's retired employees. Praxair does not currently fund its postretirement benefits obligations. Praxair retiree plans may be changed or terminated by Praxair at any time for any reason with no liability to current or future retirees. Pension and Postretirement Benefit Costs The components of net pension and OPEB costs for 2000, 1999 and 1998 are shown below:
(Millions of dollars) Pensions OPEB ------------------------ ------------------------ Year Ended December 31, 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------- Net Benefit Cost Service cost $ 30 $ 35 $ 35 $ 6 $ 7 $ 7 Interest cost 64 63 59 15 13 13 Expected return on assets (78) (72) (67) -- -- (1) Curtailment/Settlement (gains) (6) -- -- -- -- -- Net amortization and deferral (3) (1) -- (5) (7) (9) - ------------------------------------------------------------------------------------------- Net periodic benefit cost $ 7 $ 25 $ 27 $ 16 $ 13 $ 10 ===========================================================================================
43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The changes in benefit obligation and plan assets and the funded status reconciliation as of December 31, 2000 and 1999 for Praxair's significant pension and OPEB programs are shown below:
(Millions of dollars) Pensions --------------------------------------- 2000 1999 OPEB ----------------- ------------------ ------------------ Year Ended December 31, US INTL US INTL 2000 1999 - -------------------------------------------------------------------------------------------------------------- Change in Benefit Obligation Benefit obligation, January 1 $ 661 $ 310 $ 678 $ 339 $ 215 $ 227 Service cost 22 8 24 11 6 7 Interest cost 50 15 46 18 16 14 Participant contributions -- -- -- -- 9 8 Plan amendments (9) -- -- -- (9) (12) Actuarial loss (gain) 18 (4) (60) (2) 20 2 Benefits paid (37) (18) (27) (15) (25) (25) Curtailment/Settlement (gains) -- (50) -- -- -- -- Currency translation -- (18) -- (41) (2) (6) - -------------------------------------------------------------------------------------------------------------- Benefit obligation, December 31 $ 705 $ 243 $ 661 $ 310 $ 230 $ 215 - -------------------------------------------------------------------------------------------------------------- Change in Plan Assets Fair value of plan assets, January 1 $ 696 $ 299 $ 643 $ 285 $ 5 $ 7 Actual return on plan assets (2) 20 77 41 -- 1 Company contributions -- 2 -- 7 -- -- Settlement (gains) -- (35) -- -- -- -- Benefits paid (28) (18) (24) (12) (5) (3) Currency translation -- (9) -- (22) -- -- - -------------------------------------------------------------------------------------------------------------- Fair value of plan assets, December 31 $ 666 $ 259 $ 696 $ 299 $ -- $ 5 - -------------------------------------------------------------------------------------------------------------- Funded Status Reconciliation Funded status, December 31 $ (39) $ 16 $ 35 $ (11) $(230) $(210) Unrecognized (gains) losses-net (66) (34) (145) (29) 14 (7) Unrecognized prior service cost (5) 2 5 7 (24) (22) Unrecognized transition amount -- (2) (2) -- -- -- - -------------------------------------------------------------------------------------------------------------- Prepaid (accrued) benefit cost, December 31 $(110) $ (18) $(107) $ (33) $(240) $(239) - --------------------------------------------------------------------------------------------------------------
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $173 million, $153 million, and $117 million, respectively, as of December 31, 2000 ($192 million, $176 million and $126 million, respectively, as of December 31, 1999). The weighted average or range of assumptions for the Company's pension and OPEB benefit plans were as follows: U.S. Plans International Plans -------------------- ---------------------- Year Ended December 31, 2000 1999 2000 1999 - -------------------------------------------------------------------------------- Discount rate 7.50% 7.75% 3-11% 4-9% Rate of increase in compensation levels 4.50% 4.75% 3-8% 2-7% Expected long-term rate of return on plan assets 9.5% 9.5% 7-12% 6-10% - -------------------------------------------------------------------------------- For measurement purposes, a 7.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001, gradually reducing to 5.25% in 2005 and thereafter. These health care cost trend rate assumptions have an impact on the amounts reported. To illustrate the effect, a one-percentage point change in assumed health care cost trend rates would have the following effects: (Millions of dollars) One-Percentage One-Percentage Sensitivity Point Increase Point Decrease - ---------------------------------------------------------------------- Effect on the total of service and interest cost components of net OPEB benefit cost $1 $(1) Effect on OPEB benefit obligation $8 $(8) - ---------------------------------------------------------------------- 44 Note 12 Leases For operating leases, primarily involving manufacturing and distribution equipment and office space, noncancelable commitments extending for more than one year will require the following future minimum payments at December 31, 2000: Lease Payments* (Millions of dollars) - ---------------------------------------------------- 2001 $99 2004 $ 43 2002 $66 2005 $ 36 2003 $52 after 2005 $136 - ---------------------------------------------------- *Excludes $16 million related to the 2000 repositioning and special charges (see Note 2). Included in these totals are $45 million of lease commitments to Praxair's former parent company, principally for office space. Total lease and rental expenses under operating leases were $95 million in 2000, $94 million in 1999 and $80 million in 1998, excluding $16 million related to the 2000 repositioning and special charges (see Note 2). The present value of the future lease payments under operating leases is approximately $328 million at December 31, 2000. During 1999 and 1998, Praxair sold and leased back certain U.S. distribution and liquid storage equipment for $80 million and $150 million, respectively. These operating leases have an initial two-year term with purchase and lease renewal options at projected future fair market values beginning in 2001 and 2000, respectively. In September 2000, Praxair renewed the $150 million operating lease for an additional year. In December 2000, Praxair notified the lessor of its intent to renew the $80 million operating lease commencing March 2001. Note 13 Commitments and Contingencies In the normal course of business, Praxair is involved in legal proceedings and claims with both private and governmental parties. These cover a variety of items, including product liability and environmental matters. In some of these cases, the remedies that may be sought or damages claimed are substantial. While it is impossible at this time to determine with certainty the ultimate outcome of any of these cases, in the opinion of management, they will not have a material adverse effect on the consolidated financial position of Praxair or on the consolidated results of operations or cash flows in a given year. Should any losses be sustained in connection with any of these cases in excess of provisions therefore, they will be charged to income in the future. Praxair has entered into operating leases on distribution and liquid storage equipment which include residual value guarantees not to exceed $196 million. Management expects any losses under these guarantees to be remote. At December 31, 2000, the estimated cost of completing authorized construction projects in the normal course of business is $175 million. 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 14 Quarterly Data (Unaudited)
(Millions of dollars, except per share data) 2000 1Q 2Q 3Q 4Q(a) Year - --------------------------------------------------------------------------------------------------------------------- Sales $ 1,230 $ 1,265 $ 1,275 $ 1,273 $ 5,043 Cost of sales $ 722 761 776 816 $ 3,075 Depreciation and amortization $ 118 118 117 118 $ 471 Operating profit $ 213 219 218 57 $ 707 - --------------------------------------------------------------------------------------------------------------------- Net income $ 114 $ 122 $ 122 $ 5 $ 363 - --------------------------------------------------------------------------------------------------------------------- Basic per Share Data: Net income $ .72 $ .77 $ .77 $ .03 $ 2.28 Weighted average shares (000's) 159,433 158,515 158,912 159,633 159,123 - --------------------------------------------------------------------------------------------------------------------- Diluted per Share Data: Net income $ .71 $ .76 $ .76 $ .03 $ 2.25 Weighted average shares (000's) 161,575 160,629 160,854 161,305 161,092 ===================================================================================================================== (Millions of dollars, except per share data) 1999 1Q 2Q 3Q 4Q Year - --------------------------------------------------------------------------------------------------------------------- Sales $ 1,118 $ 1,149 $ 1,169 $ 1,203 $ 4,639 Cost of sales $ 652 673 691 716 $ 2,732 Depreciation and amortization $ 113 111 111 110 $ 445 Operating profit(b) $ 211 201 208 211 $ 831 - --------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of an accounting change(b) $ 108 $ 107 $ 112 $ 114 $ 441 Cumulative effect of an accounting change(c) (10) -- -- -- (10) Net income(b) $ 98 $ 107 $ 112 $ 114 $ 431 - --------------------------------------------------------------------------------------------------------------------- Basic per Share Data:(b) Income before cumulative effect of an accounting change $ .68 $ .67 $ .70 $ .71 $ 2.77 Cumulative effect of an accounting change(c) (.06) -- -- -- (.06) Net income $ .62 $ .67 $ .70 $ .71 $ 2.71 Weighted average shares (000's) 158,138 159,363 159,704 159,915 159,280 - --------------------------------------------------------------------------------------------------------------------- Diluted per Share Data:(b) Income before cumulative effect of an accounting change $ .67 $ .66 $ .69 $ .70 $ 2.72 Cumulative effect of an accounting change(c) (.06) -- -- -- (.06) Net income $ .61 $ .66 $ .69 $ .70 $ 2.66 Weighted average shares (000's) 161,819 162,641 162,564 162,566 162,222 =====================================================================================================================
(a) The fourth quarter 2000 includes $159 million of pre-tax charges ($117 million after tax, or $0.73 per diluted share) related to repositioning and special charges (see Note 2). (b) Operating profit, net income and per share amounts for the 1999 first quarter and year include income of $21 million, $14 million and $.09 per share, respectively related to net income hedges in Brazil (see Note 5). (c) Related to a required accounting change for start-up costs (see Note 1). 46 Management's Statement of Responsibility for Financial Statements Praxair's consolidated financial statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applied on a consistent basis except for accounting changes as disclosed and include amounts that are estimates and judgments. All historical financial information in this annual report is consistent with the accompanying financial statements. Praxair maintains accounting systems, including internal accounting controls monitored by a staff of internal auditors, that are designed to provide reasonable assurance of the reliability of financial records and the protection of assets. The concept of reasonable assurance is based on recognition that the cost of a system should not exceed the related benefits. The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict- of-interest standards, policies and procedures for coordinating the management of corporate resources and the leadership and commitment of top management. Praxair's consolidated financial statements are audited by PricewaterhouseCoopers LLP, independent accountants, in accordance with auditing standards generally accepted in the United States of America. These standards provide for a review of Praxair's internal accounting controls to the extent they deem appropriate in order to issue their opinion on the financial statements. The Audit Committee of the Board of Directors, which consists solely of non-employee directors, is responsible for overseeing the functioning of the accounting system and related controls and the preparation of annual financial statements. The Audit Committee periodically meets with management, internal auditors and the independent accountants to review and evaluate their accounting, auditing and financial reporting activities and responsibilities. The independent accountants and internal auditors have full and free access to the Audit Committee and meet with the Committee, with and without management present. /s/ Dennis H. Reilley Dennis H. Reilley Chairman, President and Chief Executive Officer /s/ James S. Sawyer James S. Sawyer Vice President and Chief Financial Officer /s/ George P. Ristevski George P. Ristevski Vice President and Controller Danbury, Connecticut February 8, 2001 47 REPORT OF INDEPENDENT ACCOUNTANTS [PricewaterhouseCoopers logo] To the Board of Directors and Shareholders of Praxair, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, shareholders' equity and cash flows present fairly, in all material respects, the financial position of Praxair, Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP Stamford, Connecticut February 8, 2001, except as to Note 9, which is as of February 21, 2001 48 FIVE-YEAR FINANCIAL SUMMARY (millions of dollars, except per share data)
Year Ended December 31, 2000 1999 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- From the Income Statement Sales $ 5,043 $ 4,639 $ 4,833 $ 4,735 $ 4,449 Cost of sales 3,075(a) 2,732 2,807 2,764 2,564 Selling, general and administrative 683(a) 641 644 662 688 Depreciation and amortization 471 445 467 444 420 Research and development 65 67 72 79 72 Other income (expenses)-net(a) (42) 77 13 52 (58) - -------------------------------------------------------------------------------------------------------------------------------- Operating profit 707 831 856 838 647 Interest expense 224 204 260 216 195 - -------------------------------------------------------------------------------------------------------------------------------- Income before taxes 483 627 596 622 452 Income taxes 103 152 127(a) 151 110 - -------------------------------------------------------------------------------------------------------------------------------- Income of consolidated entities 380 475 469 471 342 Minority interests (27) (45) (55) (66) (68) Income from equity investments 10(a) 11 11 11 8 - -------------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting changes 363 441 425 416 282 Cumulative effect of accounting changes(b) -- (10) -- (11) -- - -------------------------------------------------------------------------------------------------------------------------------- Net income $ 363 $ 431 $ 425 $ 405 $ 282 ================================================================================================================================ Per Share Data(b) Basic earnings per share: Income before cumulative effect of accounting changes $ 2.28 $ 2.77 $ 2.68 $ 2.63 $ 1.85 Net income $ 2.28 $ 2.71 $ 2.68 $ 2.56 $ 1.85 Diluted earnings per share: Income before cumulative effect of accounting changes $ 2.25 $ 2.72 $ 2.60 $ 2.53 $ 1.77 Net income $ 2.25 $ 2.66 $ 2.60 $ 2.46 $ 1.77 Cash dividends per share $ 0.62 $ 0.56 $ 0.50 $ 0.44 $ 0.38 - -------------------------------------------------------------------------------------------------------------------------------- Weighted Average Shares Outstanding (000's) Basic shares outstanding 159,123 159,280 158,462 158,095 152,654 Diluted shares outstanding 161,092 162,222 163,356 164,053 159,038 ================================================================================================================================ Capital Total debt $ 3,141 $ 2,995 $ 3,274 $ 3,305 $ 3,265 Minority interests 138 359 487 521 493 Preferred stock 20 75 75 75 75 Shareholders' equity 2,357 2,290 2,332 2,122 1,924 - -------------------------------------------------------------------------------------------------------------------------------- Total capital $ 5,656 $ 5,719 $ 6,168 $ 6,023 $ 5,757 ================================================================================================================================ Other Information and Ratios Operating profit as a percentage of sales(a) 17.2% 17.9% 18.3% 17.9% 16.5% After-tax return on capital(a,c) 12.0% 11.1% 11.1% 11.1% 12.7% Capital expenditures $ 704 $ 653 $ 781 $ 902 $ 893 Cash flow from operations $ 899 $ 969 $ 944 $ 769 $ 627 Total assets $ 7,762 $ 7,722 $ 8,096 $ 7,810 $ 7,538 Shares outstanding at year-end (000's) 159,379 159,048 157,571 157,373 157,489 Debt-to-capital ratio 55.5% 52.4% 53.1% 54.9% 56.7% Number of employees 23,430 24,102 24,834 25,388 25,271(d) - -------------------------------------------------------------------------------------------------------------------------------- (a) In 2000, operating profit includes a $159 million pre-tax charge and income from equity investments includes a $2 million charge ($117 million after tax, or $0.73 per diluted share) related to repositioning and special charges (shown $47 million in cost of sales; $21 million in selling, general and administrative expenses; and $91 million in other income (expenses)-net. In 1998, other income (expenses)-net includes special charges of $29 million. See Note 2 to the consolidated financial statements for a description of these 2000 and 1998 charges. Other income (expenses)-net in 1997 includes a $10 million special charge related primarily to profit improvement initiatives in the North American packaged gases business, and in 1996 includes an $85 million special charge related to CBI integration activities. 1998 income taxes include $18 million special tax credits. Operating profit as a percentage of sales excludes the impact of these special charges. After-tax return on capital excludes these special items and is based on income before cumulative effect of accounting changes. (b) 1999 net income includes the cumulative effect of a change in accounting for previously capitalized start-up costs of $10 million or $0.06 per share for both basic and diluted earnings per share. 1997 net income includes the cumulative effect of a change in accounting for previously capitalized business process reengineering and information technology transformation costs of $11 million or $0.07 per share for both basic and diluted earnings per share. (c) After-tax return on capital is defined as after-tax operating profit plus income from equity investments, divided by average capital. (d) Number of employees excludes those at facilities held for sale. 49
INVESTOR INFORMATION Praxair Investor Relations Praxair, Inc. 39 Old Ridgebury Road Danbury, CT 06810-5113 e-mail: investor_relations@praxair.com (203) 837-2210 Investor Information at www.praxair.com o Request Investor Package o Receive Regular Investor Updates o Stock Information o Financial Guidance o Annual Reports o SEC Filings o Press Releases o Recent Investor Presentations o Quarterly Earnings Information o Contact Praxair Investor Relations o FAQs Common Stock Listing (Symbol:PX) New York Stock Exchange Other Stock Exchanges Trading Praxair Stock o Cincinnati o Midwest o Pacific o Frankfurt, Germany Number of Shareholders There were 28,165 shareholders of record as of December 31, 2000. Dividend Policy Dividends on Praxair's common stock are usually declared and paid quarterly. Praxair's objective is to continue quarterly dividends and consider annual dividend increases in conjunction with continued growth in earnings per share. Stock Transfer Agent and Record Keeping The Bank of New York is Praxair's stock transfer agent and registrar, and maintains shareholder records. For information about account records, stock certificates, change of address and dividend payments, contact: 1-800-432-0140 or, From outside the U.S.: (212) 815-5800 e-mail address: Shareowner-svcs@bankofny.com website address: http://stockbny.com Address Shareholder Inquiries to: Shareholder Relations, Department 11E P.O. Box 11258 Church Street Station New York, New York 10286-1258 Send certificates for transfer and address changes to: Receive and Deliver Department 11W P.O. Box 11002 Church Street Station New York, New York 10286-1258 Dividend Reinvestment Plan Praxair provides investors a convenient and low- cost program that allows for purchases of Praxair stock without commissions and automatically reinvests dividends by purchasing additional shares of stock. Contact The Bank of New York for full details at the address at left. Annual Shareholders Meeting The 2001 annual meeting of shareholders of Praxair, Inc. will be held at 9:30 a.m. on Tuesday, April 24, 2001 at the Sheraton Danbury (formerly the Danbury Hilton and Towers), 18 Old Ridgebury Road, Danbury, CT. NYSE Quarterly Stock Price and Dividend Information Dividend Market Price High Low Per Share - ------------------------------------------------------- 2000 First quarter $54.500 $31.813 $0.155 Second quarter $47.938 $36.563 $0.155 Third quarter $45.000 $35.563 $0.155 Fourth quarter $44.375 $31.688 $0.155 - ------------------------------------------------------- 1999 First quarter $37.563 $32.313 $0.14 Second quarter $58.125 $35.250 $0.14 Third quarter $50.938 $41.500 $0.14 Fourth quarter $51.125 $43.188 $0.14 - ------------------------------------------------------- 1998 First quarter $51.438 $40.563 $0.125 Second quarter $53.563 $44.438 $0.125 Third quarter $50.125 $31.250 $0.125 Fourth quarter $40.938 $32.000 $0.125 - ------------------------------------------------------- 50 PRAXAIR LOCATIONS World Headquarters Praxair, Inc. 39 Old Ridgebury Road Danbury, CT 06810-5113 USA 1-800-PRAXAIR (716) 879-4077 (from outside the U.S.) Praxair Surface Technologies, Inc. Indianapolis, IN USA (317) 240-2500 Brazil, France, Germany, Italy, Japan, Korea, Mexico, Singapore, Spain, Switzerland, United Kingdom North America Praxair, Inc. Danbury, CT USA 1-800-PRAXAIR (716) 879-4077 Praxair Mexico, S.A. de C.V. Mexico City, Mexico 52 (5) 627-9500 Praxair Canada Inc. Mississauga, Ontario (905) 803-1600 South America S.A. White Martins Rio de Janeiro, Brazil 55 (21) 588.6622 Argentina, Bolivia, Chile, Colombia, Paraguay, Peru, Uruguay, Venezuela Central America/Caribbean Praxair Puerto Rico Gurabo, PR (787) 258-7200 Belize, Costa Rica Europe Praxair Europe Madrid, Spain 34 91 556-1100 Austria, Belgium, Bulgaria, Croatia, Czech Republic, France, Germany, Hungary, Israel, Italy, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Switzerland, Turkey Asia Praxair Asia, Inc. Singapore (65) 736-3800 Australia, India, Japan, Malaysia, People's Republic of China, Singapore, South Korea, Taiwan, Thailand The forward-looking statements contained in this document concerning development and commercial acceptance of new products and services, financial outlook, earning growth, and other financial goals involve risks and uncertainties, and are subject to change based on various factors. These include the impact of changes in worldwide and national economies, the cost and availability of electric power and other energy and the ability to achieve price increases to offset such cost increases, development of operational efficiencies, changes in foreign currencies, changes in interest rates, the continued timely development and acceptance of new products and services, the impact of competitive products and pricing, and the impact of tax and other legislation and regulation in the jurisdictions in which the company operates. Praxair and the Flowing Airstream design, CoJet and Grab `n Go are trademarks or registered trademarks of Praxair Technology, Inc. in the United States and/or other countries. 51 OFFIERS, REGIONAL MANAGEMENT AND ADVISORY COUNCIL Office of the Chairman Dennis H. Reilley, Chairman, President & Chief Executive Officer Paul J. Bilek, Executive Vice President James S. Sawyer, Vice President & Chief Financial Officer Thomas W. von Krannichfeldt, Executive Vice President & President, Praxair Surface Technologies, Inc. Officers Michael J. Allan, Vice President & Treasurer Leonard M. Baker, Senior Vice President, Technology David H. Chaifetz, Vice President, General Counsel & Secretary Frank J. Crespo, Vice President, Semiconductor Materials Business Theodore W. Dougher, Vice President, Engineering and Supply Systems Michael J. Douglas, Vice President, Praxair Metals Technologies James J. Fuchs, President, Praxair Asia Robert F.X. Fusaro, Vice President, Mergers & Acquisitions Ivan Ferreira Garcia, President, Praxair South America & Chief Executive Officer, S.A. White Martins Barbara R. Harris, Vice President, Human Resources John F. Hill, Chief Information Officer Randy S. Kramer, Vice President, Procurement & Materials Management Michael R. Lutz, Vice President, Safety & Production Excellence Ricardo Malfitano, President, North American Industrial Gases & President, Praxair Canada Sunil Mattoo, Vice President, Strategic Planning & Marketing Nigel D. Muir, Vice President, Communications & Public Relations George P. Ristevski, Vice President & Controller Scott K. Sanderude, Vice President, Food & Beverage Market Sally A. Savoia, Vice President, Healthcare Market S. Mark Seymour, Vice President, Tax Alan J. Westendorf, President, Praxair Europe Wayne J. Yakich, President, Praxair Distribution, Inc. Regional Management North America Howard D. Brodbeck, Vice President, Northern U.S. Eduardo F. Menezes, Vice President, Western U.S. Theodore F. Trumpp III, Vice President, Eastern U.S. Daniel H. Yankowski, Vice President, Southern U.S. Murray G. Covello, Managing Director, Praxair Canada Cesar Guajardo, Managing Director, Praxair Mexico South America Domingos Bulus, Assistant Director, Andean Treaty Countries Albino Carneiro, Assistant Director, South Cone Countries Marcelo Pereira Quintaes, Vice President, Industrial Gases, Brazil Europe Miguel Martinez Astola, Managing Director, Spain and Portugal Robert Matthe, General Manager, Poland Franco Mazzali, Managing Director, Italy and Middle East Jean-Michel Tiard, Managing Director, Western Europe Asia K.H. Lee, President, Praxair Korea Brent Lok, President, Praxair China Indrajit Mookerjee, Managing Director, Praxair India Kitti Prapasuchart, Managing Director, Praxair Thailand South American Advisory Council Dennis H. Reilley, Chairman Ivan Ferreira Garcia, Deputy Chairman Ricardo Cillioniz, Board Member & Chief Executive Officer, Corporation Aceros Arequipa, Peru Enzo Debernardi, Consultant, Paraguay Felipe Lamarca, Chairman & Chief Executive Officer, Copec Group, Chile Carlos Langone, Consultant, Brazil Ricardo Paris, Chairman & Chief Executive Officer, Productos de Vidrio, Venezuela Jorge Peirano, Chairman, Chamber of Commerce & Services, Uruguay Agostino Rocca, President & Chief Executive Officer, Techint Group, Argentina Paolo Rocca, Executive Vice President, Siderca, Argentina Benjamin Steinbruch, Chaiman, Companhia Siderrgica Nacional, Brazil 52 EX-21.01 5 0005.txt - -------------------------------------------------------------------------------- Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- EXHIBIT 21.01 Place of Incorporation ------------- Accent Cay Holdings Inc. British Virgin Islands Adirondack Insurance Company Vermont Agas Servizi S.r.l. Italy Amko Service Company Ohio Asian Surface Technologies Pte. Ltd. Singapore Asistir Ltda. Colombia Beijing Praxair Huashi Carbon Dioxide Co., Ltd. China CBI Investments, Inc. Delaware CBI Terminal Company Delaware Chameleon Finance Company B.V. Netherlands Chanceller Servicos de Lavanderia Industrial Ltda. Brazil CILBRAS-Empresa Brasileira de Cilindros Ltda. Brazil Cilbras da Amazonia S.A. Brazil Coatec Gesellschaft Fur Oberflachentechnik GmbH Germany Companhia Nacional de Carbureto Brazil Consultora Rynuter S.A. Uruguay Cryo Teruel S.A. Portugal D'Angelo S.p.A. Italy Domolife S.r.l. Italy Dryce Italia S.r.l. Italy Eutecic + Castolin Technology Hldings, Inc. Italy Euro Cantley S.A. Colombia Fusion Inc. Texas Gases de Ensenada S/A Argentina Gas Tech, Incorporated Illinois Grenslandgas GmbH Germany Grupo Praxair S.A. de C.V. Mexico Hielo Seco S.A. Bolivia Hielogas S.A. Uruguay Indugas Holding B.V. Netherlands Indugas N.V. Belgium Indugas Netherland B.V. Netherlands Indugas S.A. France Indugas Vastgoed B.V. Netherlands Industria Paraguaya de Gases Paraguay Ingemedical S.A. Colombia Innovative Membrane Systems, Inc. Delaware International Cryogenic Equipment Corporation Delaware Julio Pastafiglia & Cia. S.A. Argentina Kelvin Finance Company Ireland Korea Liquid Carbonic Co., Ltd. Korea Kushan Praxair Co., Ltd. China L. Clausen & CIA. SRL Uruguay Liquid Carbonic Corporation Delaware Liquid Carbonic del Paraguay S.A. Paraguay Liquid Carbonic do Nordeste, S.A. Brazil Liquid Carboinc Industrias S.A. Brazil Liquid Carbonic LNG International, Inc. Delaware Liquid Carbonic of Oklahoma, Inc. Oklahoma Liquid Carbonico Colombiana S.A. Colombia Liquid Quimica S.A. Brazil Malaysian Industrial Gas Company Sdn. Bhd. Malaysia Material Research S.A. France Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- EXHIBIT 21.01 (cont'd.) Place of Incorporation ------------- Maxima Air Separation Center Limited Israel Medical Gases S.R.L. Argentina Medigas Iberica S.L. Spain MetFabCity, Inc. Delaware MRC Korea Co., Ltd. Korea Nitraco N.V. Belgium Nitropet, S.A. Mexico Oak Brook International Insurance Co. Ltd. Bermuda Old Danford S.A. Uruguay Operadora Perinorte, S.A. de C.V. Mexico Oxigenos de Colombia Efese S.A. Colombia Oxigenus S.L. Spain Oximesa S.L. Spain Plainfield, Inc. Delaware Praxair (China) Invesment Co., Ltd. China Praxair (Nanjing) Carbon Dioxide Co. Ltd. China Praxair (Shanghai) Co., Ltd. China Praxair (Thailand) Company, Ltd. Thailand Praxair (Yueyang) Co., Ltd. China praxair.com inc. Delaware Praxair & M.I.Services, S.r.l. Italy Praxair Asia, Inc. Delaware Praxair Argentina, S.A. Argentina Praxair Australia Pty. Ltd. Australia Praxair B.V. Netherlands Praxair Barqisimeto S.A. Venezuela Praxair Belize, Ltd. Belize Praxair Bolivia, S.A. Bolivia Praxair Canada Inc. Canada Praxair Carbondioxide Private Limited India Praxair Chemax Semiconductor Materials Co. Taiwan Praxair Chile S.A. Chile Praxair Comercio e Participacos Ltda. Brazil Praxair e Companhia - Comercio e Servicos Portugal Praxair Costa Rica, S.A. Costa Rica Praxair Deer Park Cogen, Inc. Delaware Praxair Distribution, Inc. Delaware Praxair Distribution Southeast, LLC Delaware Praxair E-Services Private Limited India Praxair Energy Resources, Inc. Delaware Praxair Energy Services, Inc. Delaware Praxair Espana, S.L. Spain Praxair Foreign Sales Corporation Virgin Islands Praxair G.m.b.H. Germany Praxair Holding Company Canada Praxair Holding Espana S.L. Spain Praxair Holding N.V. Belgium Praxair Holdings International, Inc. Delaware Praxair Hydrogen Supply, Inc. Delaware Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- EXHIBIT 21.01 (cont'd.) Place of Incorporation ------------- Praxair Iberica, S.A. Spain Praxair India Private Limited India Praxair Iwatani Electronics Gases Co. Japan Praxair K.K. Japan Praxair Korea Company Limited South Korea Praxair Management Services, Inc. Delaware Praxair Mexico, S.A. de C.V. Mexico Praxair Maritime Company Canada Praxair-Ozone,Inc. Delaware Praxair N.V. Belgium Praxair Pacific Limited Mauritius Praxair Partnership Delaware Praxair PC Partnership Canada Praxair Polska, SP. Z O.O Poland Praxair Paraguay S.R.L. Paraguay Praxair Peru S.A. Peru Praxair Portugal Gases S.A. Portugal Praxair Produccion Espana, S.L. Spain Praxair Production N.V. Belgium Praxair Puerto Rico, Inc. Delaware Praxair S.A. France Praxair S.p.A. Italy Praxair S. T. Technology, Inc. Delaware Praxair Services et Systemes S.A. France Praxair Services G.m.b.H. Germany Praxair Shanghai Meishan Inc. China Praxair Soldadura S.L. Spain Praxair Surface Holdings SARL France Praxair Surface Technologies do Brazil Ltda. Brazil Praxair Surface Technologies Co., Ltd. Korea Praxair Surface Technologies Espana S.A. Spain Praxair Surface Technologies (Europe) S.A. Switzerland Praxair Surface Technologies G.m.b.H. Germany Praxair Surface Technologies, Inc. Delaware Praxair Surface Technologies K.K. Japan Praxair Surface Technologies Limited United Kingdom Praxair Surface Technologies Mexico, S.A. de C.V. Mexico Praxair Surface Technologies Pte. Ltd. Singapore Praxair Surface Technologies S.A. France Praxair Surface Technologies S.p.A. Italy Praxair Technology, Inc. Delaware Praxair Uruguay S.A. Uruguay Praxair Venezuela, S.A. Venezuela Production Praxair Canada Inc. Canada Products Especiales Quimicos, S.A. Mexico Rapidox Gases Industriais Ltda. Brazil RBG Comercio de Metais Ltda. Brazil Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- EXHIBIT 21.01 (cont'd.) Place of Incorporation ------------- Rhee Beheer B.V. Netherlands Rivoira S.p.A. Italy S. A. White Martins Brazil Servicios Energeticos S.A. Chile Shanghai Praxair-Yidian, Inc. China Smeding B.V. Netherlands TAFA Incorporated Delaware Techno B. N.V. Belgium The Weldinghouse, Inc. Ohio Tianjin Praxair Inc. China Topaz Consultora S.A. Uruguay Transportes Flamingo S/A Peru Treffers Precision, Inc. Arizona UCISCO Canada Inc. Canada UCISCO, Inc. Texas Unigases Comercial Ltda. Brazil Voets B.V. Netherlands Wall Chemicals, Inc. Illinois Welco-CGI Gas Technologies, LLC Delaware Westair Cryogenics Company Delaware White Martins & White Martins Comercio e Servicos Portugal White Martins Administracao e Investimentos Ltda. Brazil White Martins de Camacari S.A. Bahia White Martins e Companhia Comercio e Servicos Portugal White Martins Gases Industriais do Nordeste S.A. Brazil White Martins Gases Industriais do Norte S.A. Brazil White Martins Gases Industriais S.A. Brazil White Martins Soldagem Ltda. Brazil XYZ Distribuidora e Transportadora Ltda. Brazil 02/12/01 EX-23.01 6 0006.txt Praxair, Inc. and Subsidiaries - -------------------------------------------------------------------------------- EXHIBIT 23.01 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-40003, 333-18141, and 33-48480) and in the Registration Statement on Form S-8 (Nos. 333-18111, 333-18113, 33-92868, 33-87274, 33-48479, and 33-48478) of Praxair, Inc. of our report dated February 8, 2001, except as to Note 9 which is as of February 21, 2001, relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP Stamford, Connecticut March 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----