-----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, KheEA9+RYQsR7It/GL4xhIGerznUx7f2piKtJWttwt2TVBqd2knTekWjWCRNd1VS mTqo9zxLA0yX3EtX8vVrgA== 0000912057-96-025763.txt : 19961113 0000912057-96-025763.hdr.sgml : 19961113 ACCESSION NUMBER: 0000912057-96-025763 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECOLAB INC CENTRAL INDEX KEY: 0000031462 STANDARD INDUSTRIAL CLASSIFICATION: SOAP, DETERGENT, CLEANING PREPARATIONS, PERFUMES, COSMETICS [2840] IRS NUMBER: 410231510 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09328 FILM NUMBER: 96659951 BUSINESS ADDRESS: STREET 1: ECOLAB CTR STREET 2: 370 N WABASHA ST CITY: ST PAUL STATE: MN ZIP: 55102 BUSINESS PHONE: 6122932233 FORMER COMPANY: FORMER CONFORMED NAME: ECONOMICS LABORATORY INC DATE OF NAME CHANGE: 19861203 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------- ----------------- Commission File No. 1-9328 ------ ECOLAB INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 41-0231510 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Ecolab Center, St. Paul, Minnesota 55102 - -------------------------------------------------------------------------------- (Address of principal executive offices)(Zip Code) 612-293-2233 ------------ (Registrant's telephone number, including area code) (Not Applicable) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of October 31, 1996. 64,545,900 shares of common stock, par value $1.00 per share. PART I - FINANCIAL INFORMATION ECOLAB INC. CONSOLIDATED STATEMENT OF INCOME Third Quarter Ended September 30 (thousands, except per share) 1996 1995 -------- -------- (unaudited) Net Sales $392,065 $348,519 Cost of Sales 175,232 156,594 Selling, General and Administrative Expenses 160,534 142,643 -------- -------- Operating Income 56,299 49,282 Interest Expense, Net 3,592 3,436 -------- -------- Income Before Income Taxes and Equity in Earnings of Joint Venture 52,707 45,846 Provision for Income Taxes 22,263 17,979 Equity in Earnings of Henkel-Ecolab Joint Venture 5,084 2,010 -------- -------- Net Income $ 35,528 $ 29,877 -------- -------- -------- -------- Net Income Per Common Share $ 0.55 $ 0.46 Dividends Per Common Share $ 0.14 $ 0.125 Average Common Shares Outstanding 64,366 64,537 See notes to consolidated financial statements. -2- ECOLAB INC. CONSOLIDATED STATEMENT OF INCOME Nine Months Ended Year Ended September 30 December 31 (thousands, except per share) 1996 1995 1995 ---------- -------- ---------- (unaudited) Net Sales $1,098,981 $991,493 $1,340,881 Cost of Sales 498,677 444,537 603,167 Selling, General and Administrative Expenses 464,858 426,261 575,028 ---------- -------- ---------- Operating Income 135,446 120,695 162,686 Interest Expense, Net 11,616 8,453 11,505 ---------- -------- ---------- Income Before Income Taxes and Equity in Earnings of Joint Venture 123,830 112,242 151,181 Provision for Income Taxes 50,780 44,672 59,694 Equity in Earnings of Henkel-Ecolab Joint Venture 9,721 6,540 7,702 ---------- -------- ---------- Net Income $ 82,771 $ 74,110 $ 99,189 ---------- -------- ---------- ---------- -------- ---------- Net Income Per Common Share $ 1.28 $ 1.11 $ 1.50 Dividends Per Common Share $ 0.42 $ 0.375 $ 0.515 Average Common Shares Outstanding 64,421 66,574 66,097 See notes to consolidated financial statements. -3- ECOLAB INC. CONSOLIDATED BALANCE SHEET September 30 September 30 December 31 (thousands) 1996 1995 1995 ------------ ------------ ----------- (unaudited) ASSETS Cash and cash equivalents $ 51,681 $ 27,682 $ 24,718 Accounts receivable, net 203,461 186,770 198,432 Inventories 114,738 108,432 106,117 Deferred income taxes 21,848 21,193 21,617 Other current assets 11,408 12,416 7,188 --------- --------- ---------- Current Assets 403,136 356,493 358,072 Property, Plant and Equipment, Net 322,806 270,647 292,937 Investment in Henkel-Ecolab Joint Venture 297,267 300,802 302,298 Other Assets 158,109 99,504 107,573 ---------- ---------- ---------- Total Assets $1,181,318 $1,027,446 $1,060,880 ---------- ---------- ---------- ---------- ---------- ---------- See notes to consolidated financial statements. (Continued) -4- ECOLAB INC. CONSOLIDATED BALANCE SHEET, (Continued) September 30 September 30 December 31 (thousands, except per share) 1996 1995 1995 ------------ ------------ ----------- (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Short-term debt $ 25,972 $ 54,951 $ 71,647 Accounts payable 82,997 74,775 81,931 Compensation and benefits 67,619 55,479 59,766 Income taxes 33,049 16,605 18,248 Other current liabilities 100,965 75,746 78,946 ---------- ---------- ---------- Current Liabilities 310,602 277,556 310,538 Long-Term Debt 163,814 103,952 89,402 Postretirement Health Care and Pension Benefits 78,254 79,243 70,666 Other Liabilities 133,170 133,201 133,616 Shareholders' Equity (common stock, par value $1.00 per share; shares outstanding: September 30 1996 - 64,409; September 30,1995 - 64,611; December 31, 1995 - 64,701) 495,478 433,494 456,658 ---------- ---------- ---------- Total Liabilities and Shareholders' Equity $1,181,318 $1,027,446 $1,060,880 ---------- ---------- ---------- ---------- ---------- ---------- See notes to consolidated financial statements. -5- ECOLAB INC. CONSOLIDATED STATEMENT OF CASH FLOWS Nine Months Ended Year Ended September 30 December 31 (thousands) 1996 1995 1995 -------- -------- ----------- (unaudited) OPERATING ACTIVITIES Net income $ 82,771 $ 74,110 $ 99,189 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 56,108 48,209 64,651 Amortization 10,116 8,543 11,628 Deferred income taxes (625) 1,554 (759) Equity in earnings of joint venture (9,721) (6,540) (7,702) Joint venture 9,990 4,444 5,610 Other, net 817 442 801 Changes in operating assets and liabilities: Accounts receivable 3,291 (18,154) (26,843) Inventories (919) (8,089) (4,136) Other assets (6,957) (13,408) (11,371) Accounts payable (4,439) (2,416) 4,561 Other liabilities 36,258 20,871 27,834 -------- -------- -------- Cash provided by continuing operations 176,690 109,566 163,463 Cash provided by discontinued operations 3,000 3,000 -------- -------- -------- Cash provided by operating activities $176,690 $112,566 $166,463 -------- -------- -------- -------- -------- -------- Bracketed amounts indicate a use of cash. See notes to consolidated financial statements. (Continued) -6- ECOLAB INC. CONSOLIDATED STATEMENT OF CASH FLOWS, (Continued) Nine Months Ended Year Ended September 30 December 31 (thousands) 1996 1995 1995 --------- -------- ----------- (unaudited) INVESTING ACTIVITIES Capital expenditures $ (82,018) $ (74,465) $(109,894) Property disposals 1,945 1,177 1,806 Businesses acquired (41,150) (7,423) (26,437) Sale of investments in securities 4,007 Other, net (1,148) 2,527 6,991 --------- --------- --------- Cash used for investing activities (122,371) (78,184) (123,527) --------- --------- --------- FINANCING ACTIVITIES Notes payable (43,407) 12,283 29,355 Long-term debt borrowings 75,000 25,000 2,141 Long-term debt repayments (20,640) (26,237) (20,060) Reacquired shares (19,279) (90,056) (90,391) Dividends (27,088) (25,042) (33,114) Other, net 8,256 (828) (4,561) --------- --------- --------- Cash used for financing activities (27,158) (104,880) (116,630) --------- --------- --------- Effect of exchange rate changes on cash (198) (75) 157 --------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 26,963 (70,573) (73,537) Cash and Cash Equivalents, at beginning of period 24,718 98,255 98,255 --------- --------- --------- Cash and Cash Equivalents, at end of period $ 51,681 $ 27,682 $ 24,718 --------- --------- --------- --------- --------- --------- Bracketed amounts indicate a use of cash. See notes to consolidated financial statements. -7- ECOLAB INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS The unaudited consolidated statements of income for the third quarter and nine months ended September 30, 1996 and 1995, reflect, in the opinion of management, all adjustments necessary for a fair statement of the results of operations for the interim periods. The results of operations for any interim period are not necessarily indicative of results for the full year. The consolidated balance sheet data as of December 31, 1995 and the related consolidated statements of income and cash flows data for the year then ended were derived from audited consolidated financial statements, but do not include all disclosures required by generally accepted accounting principles. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Coopers & Lybrand L.L.P., the Company's independent accountants, have performed a limited review of the interim financial information included herein. Their report on such review accompanies this filing. BALANCE SHEET INFORMATION September 30 September 30 December 31 (thousands) 1996 1995 1995 ------------ ------------ ----------- (unaudited) Accounts Receivable, Net Accounts receivable $ 212,755 $ 195,632 $ 206,763 Allowance for doubtful accounts (9,294) (8,862) (8,331) --------- --------- --------- Total $ 203,461 $ 186,770 $ 198,432 --------- --------- --------- --------- --------- --------- Inventories Finished goods $ 47,818 $ 46,885 $ 47,035 Raw materials and parts 70,813 64,995 62,132 Excess of fifo cost over lifo cost (3,893) (3,448) (3,050) --------- --------- --------- Total $ 114,738 $ 108,432 $ 106,117 --------- --------- --------- --------- --------- --------- Property, Plant and Equipment, Net Land $ 7,616 $ 6,398 $ 6,941 Buildings and leaseholds 127,110 110,677 117,042 Machinery and equipment 205,558 183,544 188,453 Merchandising equipment 321,429 282,304 292,962 Construction in progress 11,188 8,424 14,571 --------- --------- --------- 672,901 591,347 619,969 Accumulated depreciation and amortization (350,095) (320,700) (327,032) --------- --------- --------- Total $ 322,806 $ 270,647 $ 292,937 --------- --------- --------- --------- --------- --------- -8- ECOLAB INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) BALANCE SHEET INFORMATION (Continued) September 30 September 30 December 31 (thousands) 1996 1995 1995 ------------ ------------ ----------- (unaudited) Other Assets Intangible assets, net $ 98,125 $ 42,529 $ 50,773 Investments in securities 5,000 5,000 5,000 Deferred income taxes 27,847 25,749 27,383 Other 27,137 26,226 24,417 -------- -------- -------- Total $158,109 $ 99,504 $107,573 -------- -------- -------- -------- -------- -------- Short-Term Debt Notes payable $ 10,690 $ 38,225 $ 54,950 Long-term debt, current maturities 15,282 16,726 16,697 -------- -------- -------- Total $ 25,972 $ 54,951 $ 71,647 -------- -------- -------- -------- -------- -------- Shareholders' Equity Common stock $ 70,268 $ 69,983 $ 70,078 Additional paid-in capital 174,506 168,129 171,765 Retained earnings 384,184 309,539 325,674 Deferred compensation (8,344) (7,210) (6,484) Cumulative translation 12,903 13,458 16,272 Treasury stock (138,039) (120,405) (120,647) -------- -------- -------- Total $495,478 $433,494 $456,658 -------- -------- -------- -------- -------- -------- Interest expense related to all debt was $14,604,000 and $11,936,000 for the nine months ended September 30, 1996 and 1995, respectively, and $15,857,000 for the year ended December 31, 1995. Other noncurrent liabilities included income taxes payable of $96 million at September 30, 1996 and December 31, 1995, and $97 million at September 30, 1995. In January 1996, the Company issued $75 million of 7.19 percent senior notes to a group of insurance companies. The notes mature in January 2006. Proceeds from the debt were used to reduce short-term borrowings and for business acquisitions and other general corporate purposes. In September 1996, the Company replaced its $150 million credit facility with a $225 million Multicurrency Credit Agreement. The terms of the new agreement are similar to the credit facility which it replaced. The agreement originally expires in September 2001 and includes a covenant regarding the ratio of total debt to capitalization. -9- ECOLAB INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) BALANCE SHEET INFORMATION (Continued) In October 1996, the Company filed a shelf registration with the Securities and Exchange Commission for the issuance of up to $200 million of debt securities. The filing is intended to enhance the Company's future financial flexibility in funding general business needs. The Company has no immediate plans to issue the new debt. BUSINESS ACQUISITIONS On February 20, 1996, the Company acquired Huntington Laboratories, Inc. ("Huntington") of Huntington, Indiana. Huntington is a leading manufacturer and marketer of disinfectants, germicides, surgical scrubs and sterilants, primarily serving the U.S. healthcare and education janitorial markets. Huntington has become part of the Company's Professional Products Division (formerly the Janitorial Division), complementing the division's existing product lines. Included in the purchase was Huntington's QUATS-Surfactants disinfectant business which did not fit Ecolab's business strategies and, therefore, was sold in July 1996. The annual sales of the core Huntington operations, which the Company retained, are approximately $50 million. Ecolab's purchase price for Huntington included cash consideration and the assumption of existing indebtedness which the Company repaid concurrent with the consummation of the stock purchase transaction. On August 2, 1996 the Company acquired the Monarch division of H.B. Fuller Company of Saint Paul, Minnesota. Monarch is a provider of cleaning and sanitizing products and services to the food processing and farm markets in the United States and Canada. Monarch had sales of approximately $30 million in 1995 and has become part of the Company's Food & Beverage Division. Each of these acquisitions has been accounted for as a purchase and, accordingly, the results of their operations have been included in the financial statements of the Company from the dates of acquisition. For each acquisition, the allocation of the purchase price and the determination of the excess of the purchase price over the fair market value of the net assets acquired were preliminary as of September 30, 1996. The acquisitions were financed with a portion of the proceeds received from the issuance of $75 million of senior notes in January 1996 and with existing lines of credit. -10- ECOLAB INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) BUSINESS ACQUISITIONS (Continued) Net sales for the third quarter and nine months ended September 30, 1996 included approximately $18 million and $37 million, respectively of sales from these operations from the dates of acquisition. Operating income from these businesses for the third quarter and nine months ended September 30, 1996 was not significant. NET INCOME PER COMMON SHARE Net income per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding. Stock options did not have a significant dilutive effect. GEOGRAPHIC SEGMENTS The Company is a global developer and marketer of premium cleaning, sanitizing and maintenance products and services for the hospitality, institutional and industrial markets. Customers include hotels and restaurants; foodservice, healthcare and educational facilities; quickservice (fast-food) units; commercial laundries; light industry; dairy plants and farms; and food and beverage processors around the world. International consists of Canadian, Asia Pacific, Latin American and African operations and the international operations of Kay. In addition, the Company and Henkel KGaA of Dusseldorf, Germany, each have a 50% economic interest in the Henkel-Ecolab joint venture which operates institutional and industrial cleaning and sanitizing businesses in Europe. Information concerning the Company's equity in earnings of the Henkel-Ecolab joint venture is provided in a separate note to the consolidated financial statements. Third Quarter Nine Months Year Ended Ended September 30 Ended September 30 December 31 (thousands) 1996 1995 1996 1995 1995 -------- -------- ---------- -------- ---------- (unaudited) (unaudited) Net Sales United States $305,147 $267,219 $ 848,120 $764,475 $1,030,126 International 86,918 81,300 250,861 227,018 310,755 -------- -------- ---------- -------- ---------- Total $392,065 $348,519 $1,098,981 $991,493 $1,340,881 -------- -------- ---------- -------- ---------- -------- -------- ---------- -------- ---------- Operating Income United States $ 49,889 $ 44,416 $ 119,962 $109,878 $ 147,330 International 7,242 5,613 17,891 13,927 19,580 Corporate (832) (747) (2,407) (3,110) (4,224) -------- -------- ---------- -------- ---------- Total $ 56,299 $ 49,282 $ 135,446 $120,695 $ 162,686 -------- -------- ---------- -------- ---------- -------- -------- ---------- -------- ---------- -11- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) EQUITY IN EARNINGS OF HENKEL-ECOLAB JOINT VENTURE The Company's equity in earnings of the Henkel-Ecolab joint venture for the third quarter and nine months ended September 30, 1996 and 1995 and for the year ended December 31, 1995 was: Third Quarter Nine Months Year Ended Ended September 30 Ended September 30 December 31 (thousands) 1996 1995 1996 1995 1995 -------- -------- -------- -------- ----------- (unaudited) (unaudited) Joint venture Net sales $227,719 $235,422 $677,501 $674,193 $909,196 Gross profit 129,164 127,116 375,170 372,291 502,849 Income before income taxes 22,389 12,463 50,175 35,080 44,392 Net income $ 12,455 $ 5,904 $ 26,097 $ 17,892 $ 22,406 Ecolab equity in earnings Ecolab equity in net income $ 6,227 $ 2,952 $ 13,049 $ 8,946 $ 11,203 Ecolab royalty income from joint venture, net of income taxes 1,122 1,436 3,534 4,553 5,814 Amortization expense for the excess of cost over the underlying net assets of the joint venture (2,265) (2,378) (6,862) (6,959) (9,315) -------- -------- -------- -------- -------- Equity in earnings of Henkel-Ecolab joint venture $ 5,084 $ 2,010 $ 9,721 $ 6,540 $ 7,702 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- At September 30, 1996, the Company's investment in the Henkel-Ecolab joint venture included approximately $182 million of unamortized excess of the Company's investment over its equity in the joint venture's net assets. -12- REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors Ecolab Inc. We have reviewed the accompanying consolidated balance sheet of Ecolab Inc. as of September 30, 1996 and 1995, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 1996 and 1995, and the consolidated statements of cash flows for the nine-month periods ended September 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1995, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 26, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1995, and the related consolidated statements of income and cash flows for the year then ended is fairly presented, in all material respects, in relation to the consolidated balance sheet and statements of income and cash flows from which it has been derived. /s/ Coopers & Lybrand L.L.P COOPERS & LYBRAND L.L.P. Saint Paul, Minnesota October 22, 1996 -13- ECOLAB INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996 Net sales for the third quarter ended September 30, 1996 were $392 million, an increase of 12 percent over net sales of $349 million for the third quarter of last year. For the first nine months of 1996, net sales totaled $1,099 million and increased 11 percent over net sales of $991 million in the first nine months of last year. These increases in sales reflected good growth in the Company's core businesses, the benefits of significant new product introductions and business acquisitions in both the United States and International operations. Business acquisitions accounted for approximately one-half of the growth in sales. The gross profit margin for the third quarter of 1996 was 55.3 percent of net sales, up slightly from the gross profit margin of 55.1 percent of net sales in the third quarter of last year. For the nine-month period ended September 30, 1996, the gross profit margin was 54.6 percent of net sales, a decrease from the gross profit margin of 55.2 percent of net sales for the the comparable period of last year. The decrease in gross profit margin for the nine-month period reflects increased raw material costs, limited selling price increases due to competitive pressures, and product mix. The improvement in gross profit margin for the third quarter reflects stabilizing raw material costs, more favorable product mix and the benefits of the Company's cost control efforts. Selling, general and administrative expenses for the third quarter totaled $161 million, or 40.9 percent of net sales, an increase of 13 percent over selling, general and administrative expenses of $143 million, or 40.9 percent of net sales for the third quarter of last year. For the first nine months of 1996, selling, general and administrative expenses were $465 million, or 42.3 percent of net sales, an increase of 9 percent over selling, general and administrative expenses of $426 million, or 43.0 percent of net sales for the comparable period of last year. For the nine-month period, the decrease in the ratio of these expenses to net sales was primarily due to strong sales during 1996 and to the Company's continued cost control efforts. An emphasis on cost controls has resulted in significant cost savings over the last few years. Therefore, the Company expects it to be more difficult to attain further improvement in the comparison of the ratio of these expenses as a percentage of net sales in future periods. For the third quarter of 1996, net income totaled $36 million, and increased 19 percent over net income of $30 million for the third quarter of last year. For the nine-month period, net income was $83 million, an increase of 12 percent over net income of $74 million for the comparable period of 1995. These net income improvements reflected the benefits of higher sales, the effects of the Company's cost control efforts and higher equity in earnings of the Henkel- Ecolab joint venture, partially offset by an increase in income taxes. For the nine-month period, these benefits were also partially offset by a decrease in gross profit margin and by higher net interest expense. On a per share basis, net income per share for the third quarter of 1996 was $0.55, an increase of 20 percent over -14- ECOLAB INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) net income per share of $0.46 in the third quarter of last year. For the first nine months of 1996, net income per share was $1.28, up 15 percent compared to net income per share of $1.11 for the comparable period of last year. For the nine-month period, the comparison of net income per share benefited from a smaller number of average shares outstanding due to the purchase of approximately 3.5 million shares of the Company's common stock in June 1995 and the purchase of approximately 600,000 additional shares during the first nine months of 1996. Net sales for the Company's United States operations were $305 million for the third quarter of 1996, an increase of 14 percent over third quarter 1995 net sales of $267 million. United States sales for the first nine months of 1996 totaled $848 million, up 11 percent compared to net sales of $764 million during the first nine months of last year. United States sales benefited from business acquisitions, significant new product introductions, new customer business and favorable economic conditions in the hospitality and lodging industries. Business acquisitions accounted for approximately one-half of the sales increase for both the third quarter and nine-month periods. Sales of the U.S. Institutional Division increased 5 percent for the third quarter and 3 percent for the first nine months of 1996. Institutional's sales growth included sales to new customers and continued double-digit growth in the Ecotemp warewashing program. The Pest Elimination Division continued its pattern of double-digit sales growth with sales increases of 13 percent for the third quarter and 12 percent for the nine-month period. Sales of the Textile Care Division increased 11 percent for both the third quarter and nine-month periods and reflected new products and continued success in sales to the commercial laundry and hospitality markets. Sales of the Company's Professional Products Division (formerly the Janitorial Division) nearly doubled due to the February 1996 acquisition of Huntington Laboratories. Excluding Huntington's sales, Professional Products sales increased 2 percent for the third quarter and 1 percent for the first nine months of 1996, due to increased sales of its Airkem products. Operating results of the Food & Beverage Division include the operations of Monarch since its acquisition from H.B. Fuller in the beginning of August 1996. Excluding sales of the Monarch operations, Food & Beverage sales increased 9 percent for the third quarter and 5 percent for the nine-month period. Food & Beverage sales benefited from sales to new customers, and good growth in sales to the food processing industries. Sales of Kay's U.S. operations increased 7 percent for the third quarter and 13 percent for the first nine months of 1996. The benefits of new customers and good general growth of the quickservice market were partially offset by the unfavorable effects of a change in distribution and delivery patterns to certain customers. Sales of the Company's recently formed Water Care Services Division increased by over 150 percent for both the third quarter and nine-month periods, due to businesses which were acquired during 1995 and to new customers which have been added, in part by leveraging alliances with the Company's other divisions. -15- ECOLAB INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operating income for the Company's United States operations was $50 million for the third quarter of 1996, an increase of 12 percent over operating income of $44 million in the third quarter of last year. For the first nine months of 1996, United States operating income totaled $120 million and increased 9 percent over nine-month 1995 operating income of $110 million. Third quarter operating income of the Institutional Division was equal to the third quarter of last year reflecting continued competitive markets and investments in the sales-and-service force. Kay reported a modest decrease in operating income versus last year's third quarter, reflecting the change in distribution and delivery patterns to certain customers. All of the Company's other United States businesses reported significant double-digit increases in operating income for the third quarter of 1996. United States operating income margins were down slightly from the comparable periods of last year. For the third quarter, the United States operating income margin was 16.3 percent, compared to 16.6 percent last year. The operating income margin for the nine-month period was 14.1 percent, and compared to last year's nine-month operating income margin of 14.4 percent. Operating income margins reflected increased sales and the benefits of cost controls which were offset by higher raw material costs and competitive pricing pressures. Sales of the Company's International Operations were $87 million for the third quarter of 1996, an increase of 7 percent compared to third quarter 1995 sales of $81 million. For the nine-month period, International's sales totaled $251 million, an increase of 11 percent over sales of $227 million in the first nine months of 1995. Approximately one-half of International's sales growth was due to business acquisitions. Changes in currency translation had a negative impact on reported sales of International's operations, particularly in the Asia Pacific region. Excluding the effects of currency translation, International's sales grew 13 percent for the third quarter and 15 percent for the first nine months of 1996. The Asia Pacific region reported a 3 percent decrease in sales for the third quarter and a 2 percent increase in sales for the first nine months of 1996. However, when measured in local currencies, the Asia Pacific region had sales growth of 5 percent for the third quarter and 8 percent for the nine-month period. Local currency sales included good growth in Japan and modest growth in the Australia/New Zealand region. Reported sales of the Latin American region increased 12 percent for both the third quarter and nine-month periods. Latin American sales included a continuation of significant double- digit growth in Brazil and good growth in Mexico. Sales in Canada increased 9 percent for the third quarter and 10 percent for the nine-month period. Canadian sales included the benefits of the Huntington and Monarch acquisitions and good growth in sales to the Institutional and Food & Beverage markets. -16- ECOLAB INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Company's International Operations reported operating income of $7 million for the third quarter of 1996, a 29 percent increase over operating income of $6 million in the comparable period of last year. For the nine-month period, operating income totaled $18 million in 1996 and increased 28 percent over operating income of $14 million last year. International operating income margins improved for both periods. For the third quarter of 1996, the International operating income margin was 8.3 percent, compared to a 6.9 percent operating income margin last year. For the nine-month period, International's operating income margin of 7.1 percent improved from last year's operating income margin of 6.1 percent. International's operating income results included double-digit growth in each of the major regions of operations, with a continuation of particularly strong growth in Brazil. The Company's equity in earnings of the Henkel-Ecolab joint venture was $5 million for the third quarter of 1996, a significant increase over $2 million of equity in earnings of the joint venture in the third quarter of 1995. For the first nine months of 1996, the Company's equity in earnings of the joint venture was $10 million, and increased 49 percent over $7 million of equity in earnings for the comparable period of last year. Joint venture results reflected a number of cost control programs which were put into effect during 1996. Joint venture results also reflected some benefits from investments made in the joint venture beginning in late 1995. However, the hospitality industry in much of Europe has not showed signs of a sustained improvement and sales of the joint venture have remained sluggish during 1996. Corporate operating expense was $1 million for the third quarter and $2 million for the first nine months of 1996. Corporate operating expense represented overhead costs directly related to the joint venture. For the third quarter of 1996, net interest expense was approximately $4 million, an increase of 5 percent over net interest expense in the third quarter of 1995. For the nine-month period, net interest expense totaled $12 million and increased 37 percent over the first nine months of last year. The increase in net interest expense for the nine-month period was due to lower average cash levels and increased debt levels reflecting cash used during 1995 for the mid- year stock repurchase self-tender offer and for business acquisitions during 1995 and 1996. Debt levels were decreased during the third quarter of 1996 due to the proceeds received from the sale of Huntington's QUATS-Surfactants business and strong operating cash flows. For the nine months ended September 30, 1996 the provision for income taxes reflected an estimated effective rate of 41.0 percent and compared to last year's nine-month estimated rate of 39.8 percent. The third quarter 1996 effective tax rate of 42.2 percent increased from a rate of 39.2 percent for the third quarter of 1995. These increases in the effective tax rates were principally due to increased overall income tax rates related to the Company's international operations and to the effects of business acquisitions. -17- ECOLAB INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) FINANCIAL POSITION AND LIQUIDITY The Company's consolidated total assets at September 30, 1996 reflected the February 1996 acquisition of Huntington Laboratories and the August 1996 acquisition of the Monarch operations of H.B.Fuller. The increase in other noncurrent assets from year-end 1995 was principally due to these acquisitions. Total debt at September 30, 1996 was $190 million, an increase of $29 million from total debt of $161 million at December 31, 1995. The increase in debt was due to $75 million of 7.19 percent senior notes which were issued to a group of insurance companies in January of 1996. The notes mature in January 2006. Proceeds from the debt were used to reduce short-term borrowings and for general corporate purposes, including the Huntington and Monarch acquisitions. The ratio of total debt to capitalization increased to 28 percent at September 30, 1996 from 26 percent at December 31, 1995. In September 1996, the Company replaced its $150 million credit facility with a $225 million Multicurrency Credit Agreement. The terms of the new agreement are similar to the credit facility which it replaced. Also, in October 1996, the Company filed a shelf registration with the Securities and Exchange Commission for the issuance of up to $200 million of debt securities. The filing is intended to enhance the Company's future financial flexibility in funding general business needs. The Company has no immediate plans to issue the new debt. Cash provided by continuing operations was $177 million for the first nine months of 1996, an increase of 61 percent over cash provided from continuing operations of $110 million in the first nine months of last year. Strong earnings, additional cash flows from businesses acquired, favorable timing of payments and cash flows from the collection of accounts receivable related to strong fourth quarter 1995 sales were significant factors in this cash flow improvement. The Company expects strong and improved flows from operations for full year 1996; however, not at the rate of growth achieved during the nine months ended September 30, 1996. In May 1995, the Company announced a six million share repurchase program. As part of that program, the Company purchased approximately 3.5 million shares in June 1995 under a "Dutch Auction" self-tender offer. During the first nine months of 1996, the Company purchased approximately 35,000 shares under this program and at September 30, 1996 there were approximately 2.4 million shares remaining under the existing repurchase authorization. In addition, the Company maintains an ongoing systematic share repurchase program, which is intended to offset the dilutive effect of shares issued for employee benefit plans. During the first nine months of 1996, approximately 565,000 shares were purchased under this program. The Company intends to continue making purchases under both of these programs from time to time in open market and privately negotiated transactions. -18- PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following documents are filed as exhibits to this report: (4) Multicurrency Credit Agreement dated as of September 29, 1993, as Amended and Restated as of January 1, 1995, and as Further Amended and Restated as of September 30, 1996, Among Ecolab Inc., the Financial Institutions party thereto, Citibank, N.A., as Administrative Agent, Citibank International Plc, as Euro-Agent and Morgan Guaranty Trust Company of New York as Co-Agent. (15) Letter regarding unaudited interim financial information. (27) Financial Data Schedule. (b) Reports on Form 8-K: No Current Reports on Form 8-K were filed during the quarter ended September 30, 1996. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. ECOLAB INC. Date: November 12, 1996 By: /s/ Michael E. Shannon ------------------------------ Michael E. Shannon Chairman of the Board, Chief Financial and Administrative Officer (duly authorized officer and Principal Financial Officer) -19- EXHIBIT INDEX Paper (P) or Exhibit Description Electronic (E) - ------- ----------- --------------- (4) Multicurrency Credit Agreement dated E as of September 29, 1993, as Amended and Restated as of January 1, 1995, and as Further Amended and Restated as of September 30, 1996, Among Ecolab Inc., the Financial Institutions party thereto, Citibank, N.A.,as Administrative Agent, Citibank International Plc, as Euro-Agent and Morgan Guaranty Trust Company of New York as Co-Agent (15) Letter regarding unaudited interim E financial information (27) Financial Data Schedule E EX-4 2 EXHIBIT 4 MULTICURRENCY CREDIT AGREEMENT Dated as of September 29, 1993 As Amended and Restated as of January 1, 1995 and As Further Amended and Restated as of September 30, 1996 ECOLAB INC., a Delaware corporation (the "COMPANY"), the banks (the "BANKS") listed on the signature pages hereof, CITIBANK, N.A. ("CITIBANK") as administrative agent (the "AGENT") for the Banks hereunder, CITIBANK INTERNATIONAL PLC, as agent for the banks in connection with certain of the Eurocurrency Advances (the "EURO-AGENT") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as co-agent (the "CO-AGENT"), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A ADVANCE" means an advance by a Bank to a Borrower as part of an A Borrowing and refers to a Base Rate Advance, an Adjusted CD Rate Advance or a Eurocurrency Advance, each of which shall be a "TYPE" of A Advance. "A BORROWING" means a borrowing consisting of simultaneous A Advances of the same Type made to a single Borrower by each of the Banks pursuant to SECTION 2.01. "A NOTE" means a promissory note of a Borrower payable to the order of any Bank, in substantially the form of EXHIBIT A-1 hereto, evidencing the aggregate indebtedness of such Borrower to such Bank resulting from the A Advances made by such Bank to such Borrower. "ADDED BANK" means any Bank which becomes a Bank hereunder, or whose Commitment is increased (to the extent of such increase), pursuant to an Assumption and Acceptance as provided in SECTION 2.05(b). "ADJUSTED CD RATE" means, for any Interest Period for each Adjusted CD Rate Advance comprising part of the same A Borrowing, an interest rate per annum equal to the sum of: (a) the rate per annum obtained by dividing (i) the rate of interest determined by the Agent to be the average (rounded upward to the nearest whole multiple of 1/100 of 1% per annum, if such average is not such a multiple) of the consensus bid rates determined by each of the Reference Banks for the bid rates per annum, at 9:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period, of New York certificate of deposit dealers of recognized standing selected by such Reference Bank for the purchase at face value of certificates of deposit of such Reference Bank in an amount substantially equal to such Reference Bank's Adjusted CD Rate Advance comprising part of such Borrowing and with a maturity equal to such Interest Period, by (ii) a percentage equal to 100% minus the Adjusted CD Rate Reserve Percentage (as defined below) for such Interest Period, plus (b) the Assessment Rate (as defined below) for such Interest Period. The "ADJUSTED CD RATE RESERVE PERCENTAGE" for the Interest Period for each Adjusted CD Rate Advance comprising part of the same Borrowing means the reserve percentage applicable on the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion Dollars with respect to liabilities consisting of or including (among other liabilities) Dollar nonpersonal time deposits in the United States with a maturity equal to such Interest Period. The "ASSESSMENT RATE" for the Interest Period for each Adjusted CD Rate Advance comprising part of the same Borrowing means the annual assessment rate estimated by the Agent on the first day of such Interest Period for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring Dollar deposits of Citibank in the United States. The Adjusted CD Rate for each Interest Period for each Adjusted CD Rate Advance comprising part of the same Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks on the first day of such Interest Period, SUBJECT, HOWEVER, to the provisions of SECTION 2.09. "ADJUSTED CD RATE ADVANCE" means an Advance denominated in Dollars which bears interest as provided in SECTION 2.07(b). "ADVANCE" means an A Advance or a B Advance. "AGREEMENT" means this Multicurrency Credit Agreement, as it may from time to time be amended, restated, supplemented or otherwise modified. "ALTERNATIVE CURRENCY" means any lawful currency other than Dollars which is freely transferable and convertible into Dollars. -2- "ANNIVERSARY DATE" means each September 30 occurring during the term of this Agreement, commencing September 30, 1997, or if any such date is not a Business Day, the next preceding Business day. "APPLICABLE LENDING OFFICE" means, with respect to each Bank, such Bank's Domestic Lending Office in the case of a Base Rate Advance, such Bank's CD Lending Office in the case of an Adjusted CD Rate Advance, and such Bank's Eurocurrency Lending Office in the case of a Eurocurrency Advance, and, in the case of a B Advance, the office of such Bank notified by such Bank to the Agent as its applicable Lending office with respect to such B Advance. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance in substantially the form of EXHIBIT C hereto pursuant to which a Bank assigns all or a portion of such Bank's rights and obligations under this Agreement in accordance with the terms of SECTION 9.08. "ASSUMPTION AND ACCEPTANCE" means an assumption and acceptance in substantially the form of EXHIBIT C-1 hereto pursuant to which an Added Bank assumes a Commitment hereunder, or increases its Commitment hereunder, as applicable, in accordance with the terms of SECTION 2.05(b). "B ADVANCE" means an advance by a Bank to a Borrower as part of a B Borrowing resulting from the applicable auction bidding procedure described in SECTION 2.03. "B BORROWING" means a borrowing consisting of simultaneous B Advances to a Borrower from each of the Banks whose offer to make a B Advance as part of such borrowing has been accepted by the Company on behalf of such Borrower under the applicable auction bidding procedure described in SECTION 2.03. "B NOTE" means a promissory note of a Borrower payable to the order of any Bank, in substantially the form of EXHIBIT A-2 hereto, evidencing the indebtedness of such Borrower to such Bank resulting from a B Advance made by such Bank. "B REDUCTION" has the meaning specified in SECTION 2.01. "BASE RATE" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: -3- (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; or (b) one-half of one percent per annum above the Federal Funds Rate. "BASE RATE ADVANCE" means an A Advance denominated in Dollars which bears interest as provided in SECTION 2.07(a). "BORROWER" means the Company or any Borrowing Subsidiary, and their respective successors and permitted assigns, and "BORROWERS" means all of the foregoing. "BORROWING" means an A Borrowing or a B Borrowing. "BORROWING SUBSIDIARY" means any Subsidiary (i) that is a Wholly- Owned Consolidated Subsidiary, and (ii) as to which an Election to Participate shall have been delivered to the Agent, duly executed on behalf of such Borrowing Subsidiary and the Company, prior to the date of any Notice of Borrowing on behalf of such Borrowing Subsidiary. "BUSINESS DAY" means a day of the year (i) on which banks are not required or authorized to close in New York City, (ii) if the applicable Business Day relates to any Eurocurrency Advance, on which dealings are carried on in the London interbank market and (iii) if the applicable Business Day relates to a disbursement to or payment by a Borrowing Subsidiary, on which banks are not required or authorized to close in the city in which the chief executive office or principal place of business of such Borrowing Subsidiary is located. "CAPITALIZATION" means, as of any date, the sum of Total Debt plus Shareholders' Equity. "CD LENDING OFFICE" means, with respect to any Bank, the office of such Bank specified as its "CD Lending Office" opposite its name on SCHEDULE I hereto (or, if no such office is specified, its Domestic Lending Office), or such other office of such Bank as such Bank may from time to time specify to the Borrower and the Agent. "CHANGE OF CONTROL" means an event which shall be deemed to have occurred if any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of stock of the Company of any class or classes where the -4- stock the beneficial ownership of which is so acquired carries (otherwise than by reason only of the happening of a contingency) more than 50 percent of the ordinary voting power for the election of directors generally of the Company; or, during any period of 12 consecutive calendar months, individuals: (i) who were directors of the Company on the first day of such period, or (ii) whose election or nomination for election to the board of directors of the Company was recommended or approved by at least a majority of the directors then still in office who were directors of the Company on the first day of such period, or whose election or nomination for election was so approved shall cease to constitute a majority of the board of directors of the Company. "COMMITMENT" has the meaning specified in SECTION 2.01. "CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary the accounts of which would be consolidated with those of the Company in its consolidated financial statements at such date in accordance with GAAP. "CONVERT", "CONVERSION", and "CONVERTED" each refer to a conversion of A Advances of one Type into A Advances of another Type pursuant to SECTION 2.09, 2.10 or 2.13. "CREDIT RATING" means, at any time, the credit rating on the Company's long-term senior unsecured debt then most recently publicly announced by either Moody's or S&P and "CREDIT RATINGS" means both such credit ratings. "DEBT" means (but without duplication of any item) (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, excluding trade obligations and other accounts payable arising in the ordinary course of business, (iv) obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above, and (vi) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA. "DEBT" shall not include contingent obligations for the liabilities of any Joint Venture Entity imposed solely as a matter of law by virtue of ownership of equity interests in such Joint Venture Entity. -5- "DEFAULT" means any event which would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "DOLLARS" and the sign "$" each means lawful money of the United States. "DOMESTIC LENDING OFFICE" means, with respect to any Bank, the office of such Bank specified as its "Domestic Lending Office" opposite its name on SCHEDULE I hereto or such other office of such Bank as such Bank may from time to time specify to the Company and the Agent. "ELECTION TO PARTICIPATE" means an Election to Participate in substantially the form of EXHIBIT D hereto. "ELIGIBLE ASSIGNEE" means (i) a Bank or any affiliate of a Bank; (ii) a commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $250,000,000; or (iii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000 or the local currency equivalent thereof, provided that such bank is acting through a branch or agency located in the United States. "ERISA" means the Employment Retirement Income Security Act of 1974, as amended from time to time and the regulations promulgated and rulings issued thereunder. "ERISA AFFILIATE" shall mean any (i) corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the Company or any of its Subsidiaries, (ii) partnership, trade or business under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Company or any of its Subsidiaries, and (iii) member of the same affiliated service group (within the meaning of Section 414(m) of the Internal Revenue Code) as the Company or any of its Subsidiaries, any corporation described in clause (i) or any partnership, trade or business described in clause (ii). "EUROCURRENCY ADVANCE" means an Advance denominated in Dollars or in an Alternative Currency which bears interest as provided in SECTION 2.07(c). "EUROCURRENCY LENDING OFFICE" means, with respect to any Bank, the office of such Bank specified as its "Eurocurrency Lending Office" opposite its -6- name on SCHEDULE I hereto (or, if no such office is specified, its Domestic Lending Office), or such other office of such Bank as such Bank may from time to time specify to the Company and the Agent. A Bank may specify different offices for its A Advances denominated in Dollars and its A Advances denominated in Alternative Currencies, respectively, and the term "Eurocurrency Lending Office" shall refer to any or all such offices, collectively, as the context may require when used in respect of such Bank. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EUROCURRENCY RATE" means, for the Interest Period for each Eurocurrency Advance comprising part of the same A Borrowing, an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in Dollars or in the relevant Alternative Currency are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurocurrency Advance comprising part of such A Borrowing and for a period equal to such Interest Period. The Eurocurrency Rate for the Interest Period for each Eurocurrency Advance comprising part of the same A Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, SUBJECT, HOWEVER, to the provisions of SECTION 2.09. "EUROCURRENCY RATE RESERVE PERCENTAGE" of any Bank for the Interest Period for any Eurocurrency Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "EVENTS OF DEFAULT" has the meaning specified in SECTION 6.01. -7- "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "FIXED RATE AUCTION" has the meaning specified in SECTION 2.03(b)(i). "GAAP" means generally accepted accounting principles set forth in the opinions, statements and pronouncements of the Financial Accounting Standards Board, Accounting Principles Board and the American Institute of Certified Public Accountants or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination and in any event applied in a manner consistent with the application thereof used in the preparation of the financial statements referred to in SECTION 4.01(e). "INDEXED RATE AUCTION" has the meaning specified in SECTION 2.03(b)(i). "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, by which the present value of the vested benefits under such Plan exceeds the fair market value of the assets of such Plan allocable to such benefits. "INTEREST PERIOD" means, for each Adjusted CD Rate Advance comprising part of the same A Borrowing or each Eurocurrency Advance comprising part of the same A Borrowing, the period commencing on the date of such A Advance or the date of the Conversion or Redenomination, as applicable, of any Base Rate Advance into such an A Advance and ending on the last day of the period selected by the Company (on behalf of the respective Borrower) pursuant to the provisions below, and thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Company (on behalf of the respective Borrower) pursuant to the provisions of SECTION 2.10 and subject to the provisions below. The duration of each such Interest Period shall be 30, 60, 90, 120, 150 or 180 days in the case of an Adjusted CD Rate Advance, and one, two, three or six months, or nine or twelve months, if -8- available, in the case of a Eurocurrency Advance, in each case as the Company may select pursuant to the provisions of SECTION 2.02(a) or SECTION 2.10, as applicable; PROVIDED, HOWEVER, that: (i) Interest Periods commencing on the same date for A Advances comprising part of the same A Borrowing shall be of the same duration; and (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; PROVIDED, in the case of any Interest Period for a Eurocurrency Advance, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day. If, in accordance with SECTION 2.13 or otherwise, any A Borrowing shall include both Eurocurrency Advances and Base Rate Advances, each such Base Rate Advance shall be assigned an Interest Period that is coextensive with the Interest Period then assigned to such Eurocurrency Advances. "JOINT VENTURE" means the Joint Venture Entities, the equity in the income of which is reported on the consolidated income statements of the Company and its Consolidated Subsidiaries. "JOINT VENTURE AGREEMENT" means the Amended and Restated Umbrella Agreement dated as of June 26, 1991 between the Company and Henkel Kommanditgesellschaft auf Aktien. "JOINT VENTURE ENTITIES" means the joint venture entities and their subsidiaries collectively, from time to time established in accordance with the terms of the Joint Venture Agreement. "MAJORITY BANKS" means at any time Banks holding at least 51% of the then aggregate unpaid principal amount of the A Notes held by Banks, or, if no such principal amount is then outstanding, Banks having at least 51% of the Commitments. If at any time there shall be no principal amount outstanding under the A Notes and the Commitments shall have been terminated, "MAJORITY BANKS" shall mean the holders of 51% of the then aggregate unpaid principal amount of the B Notes. "MARGIN STOCK" has the meaning specified in Regulation U issued by the Board of Governors of the Federal Reserve System. "MOODY'S" means Moody's Investors Service, Inc. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Company or any of its ERISA -9- Affiliates is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "MULTIPLE EMPLOYER PLAN" means an employee benefit plan, other than a Multiemployer Plan, subject to Title IV of ERISA to which the Company or any of its ERISA Affiliates, and more than one employer other than the Company or any of its ERISA Affiliates, is making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which the Company or any of its ERISA Affiliates made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan. "NOTE" means an A Note or a B Note. "NOTICE OF A BORROWING" has the meaning specified in SECTION 2.02(a). "NOTICE OF B BORROWING" means (i) in the case of a B Borrowing proposed to be made pursuant to SECTION 2.03(b), a written request for such B Borrowing substantially in the form of EXHIBIT B-2 hereto and (ii) in the case of a B Borrowing proposed to be made pursuant to SECTION 2.03(c), a written request for such B Borrowing substantially in the form of EXHIBIT B-3 hereto. "PAYMENT OFFICE" means (i) for Dollars, the principal office of Citibank in New York City, located on the date hereof at 399 Park Avenue, New York, New York 10043 and (ii) for any Alternative Currency, the office of Citibank International Plc located at 335 Strand, London WC2R ILS England, or in either case such other office of the Agent or the Euro-Agent as shall be from time to time selected by it by written notice to the Company and the Banks. "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PBGC" means the Pension Benefit Guaranty Corporation. "PLAN" means an employee benefit plan, other than a Multiemployer Plan, which is (or, in the event that any such plan has been terminated within five years after a transaction described in Section 4069 of ERISA, was) maintained for employees of the Company or any of its ERISA Affiliates and subject to Title IV of ERISA. -10- "PRIMARY CURRENCY" means the lawful currency of each of the Federal Republic of Germany, France, Japan, Italy, the United Kingdom and Canada. "REDENOMINATE", "REDENOMINATION" and "REDENOMINATED" each refer to redenomination of Advances comprising all or part of the same A Borrowing from Dollars into an Alternative Currency or from an Alternative Currency into Dollars or another Alternative Currency, or the continuation of such Advances in the same Alternative Currency, in each case pursuant to SECTION 2.09, 2.10(b) or 2.13. "REFERENCE BANKS" means Citibank and Morgan Guaranty Trust Company of New York. "RESTATEMENT DATE" means September 30, 1996, the date that the amendment and restatement of this Agreement has become effective pursuant to SECTION 9.17. "S&P" means Standard & Poor's Ratings Group, a division of the McGraw-Hill Companies, Inc. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHAREHOLDERS' EQUITY" means at any date the consolidated shareholders' equity of the Company and its Consolidated Subsidiaries which would appear as such on a consolidated balance sheet as of such date of the Company and its Consolidated Subsidiaries, after deducting treasury stock and as determined in accordance with GAAP. "SIGNIFICANT SUBSIDIARY" shall have the meaning assigned to such term in Regulation S-X issued pursuant to the Securities Act and the Exchange Act. "STATED TERMINATION DATE" means September 30, 2001, or such later date as may be established pursuant to SECTION 2.19. "SUBSIDIARY" means any corporation or other entity of which securities having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly (through one or more Subsidiaries) owned or controlled by the Company. "TERMINATION DATE" means the Stated Termination Date or the earlier date of termination in whole of the Commitments pursuant to SECTION 2.05 or 6.01. "TERMINATION EVENT" means (i) a "reportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not -11- subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(f) of ERISA, or (ii) the withdrawal of the Company or any of its ERISA Affiliates from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Company or any of its ERISA Affiliates under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) the distribution of a notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "TOTAL COMMITMENT" means, at any time, the sum of all of the Commitments at such time. "TOTAL DEBT" means, as of any date, all Debt of the Company and its Consolidated Subsidiaries on a consolidated basis, other than, to the extent included in Debt, liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA. "TYPE", in respect of any A Advance, has the meaning assigned thereto in the definition herein of "A ADVANCE". "WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated Subsidiary in which all of the shares of capital stock or other equity interests are, at the time, directly or indirectly owned by the Company; PROVIDED that up to 10% of each class of such shares of capital stock or other equity interests may be directors' qualifying shares or shares or equity interests issued by such Subsidiary under employee compensation or incentive plans. "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." SECTION 1.03. ACCOUNTING TERMS AND CHANGE IN ACCOUNTING PRINCIPLES. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. If any changes in accounting principles from those used in the preparation of the financial statements referred to in SECTION 4.01(e) are hereafter required or permitted by the -12- rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) and are adopted by the Company with the agreement of its independent certified public accountants and such changes result in a change in the components of the calculation of any of the financial covenants, standards or terms found in ARTICLE V hereof, the Company and the Agent agree to enter into negotiations in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating the Company's financial condition shall be the same after such changes as if such changes had not been made, PROVIDED, HOWEVER, that no change in GAAP that would affect the components of the calculation of any of such financial covenants, standards or terms shall be given effect in such calculations until such provisions are amended, in a manner satisfactory to the Agent, to so reflect such change in accounting principles. Without limiting the generality of the foregoing, any sale of accounts receivable, chattel paper, instruments, general intangibles and related equipment or inventory or any other assets by the Company or any Subsidiary which constitutes a sale of such assets under GAAP as in effect from time to time shall not constitute Debt under this Agreement or the grant of a Lien on such assets for purposes of this Agreement. Notwithstanding anything in the second sentence of this Section to the contrary, whether any such sale constitutes a sale shall be determined by SFAS 77 until the effective date of SFAS 125, and shall be determined by SFAS 125 or any successor pronouncement from and after its respective effective date. SECTION 1.04. CURRENCY EQUIVALENTS GENERALLY. For all purposes of this Agreement, except as otherwise provided in ARTICLE II, the equivalent in any Alternative Currency of an amount in Dollars shall be determined at the rate of exchange quoted by Citibank, in London, at 9:00 A.M. (London time) on the date of determination, to prime banks in London for the spot purchase in the London foreign exchange market of such amount of Dollars with such Alternative Currency. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. THE A ADVANCES. (a) Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make A Advances to the Borrowers from time to time on any Business Day during the period from the date hereof until the Termination Date in an aggregate amount (determined in Dollars) not to exceed at any time outstanding the Dollar amount set opposite such Bank's name on the signature pages hereof (or of any Assignment and Acceptance or Assumption and Acceptance to which such Bank is a party), as such amount may be reduced or increased pursuant to SECTION 2.05 (such Bank's "COMMITMENT"), PROVIDED that the aggregate amount of the Commitments of the Banks shall be deemed used from time to time to the extent of the aggregate principal amount of the B Advances then outstanding and such deemed use of the aggregate amount of the Commitments -13- shall be applied to the Banks ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "B REDUCTION"). (b) Each A Borrowing shall consist of A Advances of the same Type made on the same day to the same Borrower by the Banks ratably according to their respective Commitments, and shall be in an aggregate amount: (i) in the case of an A Borrowing comprised of Base Rate Advances, not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof; (ii) in the case of an A Borrowing comprised of Eurocurrency Advances denominated in Dollars or Adjusted CD Rate Advances, not less than $9,000,000 or an integral multiple of $1,000,000 in excess thereof; and (iii) in the case of an A Borrowing comprised of Eurocurrency Advances denominated in a Primary Currency, not less than the equivalent in such Primary Currency of $9,000,000 or an integral multiple of the equivalent in such Primary Currency of $1,000,000; and (iv) in the case of an A Borrowing comprised of Eurocurrency Advances denominated in any Alternative Currency other than a Primary Currency, not less than any amount (and an integral multiple in excess thereof) advised to the Company by the Euro-Agent on the basis of then prevailing market conditions and conventions; PROVIDED, that in the case of any such A Borrowing comprised of Eurocurrency Advances denominated in an Alternative Currency, the proceeds of which shall be used to repay a then maturing A Borrowing comprised of Eurocurrency Advances denominated in such Alternative Currency, such new A Borrowing may, subject to the terms and conditions otherwise set forth herein, be in an aggregate principal amount equal to the aggregate principal amount of such maturing A Borrowing. (c) Within the limits of each Bank's Commitment, a Borrower may borrow, repay pursuant to SECTION 2.06 or prepay pursuant to SECTION 2.11, and reborrow under this SECTION 2.01. For purposes of this SECTION 2.01 and all other provisions of this ARTICLE II, the equivalent in Dollars of any Alternative Currency or the equivalent in any Alternative Currency of Dollars or of any other Alternative Currency shall be determined in accordance with SECTION 2.16. SECTION 2.02. MAKING THE A ADVANCES. (a) Each A Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) by the Company (on behalf of the applicable Borrower): -14- (w) in the case of a proposed A Borrowing comprised of Base Rate Advances, to the Agent on the date of such proposed Borrowing; (x) in the case of a proposed A Borrowing comprised of Adjusted CD Rate Advances, to the Agent two Business Days prior to the date of such proposed Borrowing; (y) in the case of a proposed A Borrowing comprised of Eurocurrency Advances denominated in Dollars, to the Agent two Business Days prior to the date of such proposed Borrowing; and (z) in the case of a proposed A Borrowing comprised of Eurocurrency Advances denominated in an Alternative Currency, to the Euro-Agent three Business Days prior to the date of such proposed Borrowing. The Agent or Euro-Agent, as applicable, shall give each Bank prompt notice thereof by telecopy, telex or cable. Each such notice of an A Borrowing (a "NOTICE OF A BORROWING") shall be by telecopy, telex or cable, confirmed immediately in writing, in substantially the form of EXHIBIT B-1 hereto, specifying therein the requested (i) Borrower, (ii) date of such A Borrowing, (iii) Type of A Advances comprising such A Borrowing, (iv) in the case of a proposed A Borrowing comprised of Eurocurrency Advances, currency of such A Advances, (v) in the case of a proposed A Borrowing comprised of Eurocurrency Advances or Adjusted CD Rate Advances, initial Interest Period for each such Advance and (vi) aggregate amount of such A Borrowing. The Company shall certify, in each Notice of A Borrowing, the Credit Ratings, if any, then in effect. In the case of an A Borrowing comprised of Eurocurrency Advances denominated in an Alternative Currency, the Company shall request, within one- half hour prior to the issuance of the applicable Notice of A Borrowing, the advice of the Euro-Agent as to the applicable exchange rate then in effect with respect to such Alternative Currency, and the Company shall specify in such Notice of A Borrowing the exchange rate so advised to it by the Euro-Agent. In the case of a proposed A Borrowing comprised of Eurocurrency Advances, the Agent or the Euro-Agent, as applicable, shall promptly notify each Bank and the Company of the applicable interest rate under SECTION 2.07(b). (b) Each Bank shall make available for the account of its Applicable Lending Office: (i) in the case of an A Borrowing comprised of Base Rate Advances, to the Agent before 12:00 noon (New York City time)(or, if the applicable Notice of A Borrowing shall have been given on the date of such A Borrowing, before 4:00 P.M. (New York City time)) on the date of such A Borrowing, at such account maintained at the Payment Office for Dollars as shall have been notified by the Agent to the Banks prior thereto and in same day funds, such Bank's ratable portion of such A Borrowing; -15- (ii) in the case of an A Borrowing comprised of Eurocurrency Advances denominated in Dollars or Adjusted CD Rate Advances, to the Agent before 12:00 noon (New York City time) on the date of such A Borrowing, at such account maintained at the Payment Office for Dollars as shall have been notified by the Agent to the Banks prior thereto and in same day funds, such Bank's ratable portion of such A Borrowing in Dollars; and (iii) in the case of an A Borrowing comprised of Eurocurrency Advances denominated in an Alternative Currency, to the Euro-Agent before 12:00 noon (London time) on the date of such A Borrowing, at such account maintained at the Payment Office for such Alternative Currency as shall have been notified by the Euro-Agent to the Banks prior thereto and in same day funds, such Bank's ratable portion of such A Borrowing in such Alternative Currency. After the Agent's or the Euro-Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in ARTICLE III, the Agent or the Euro- Agent, as applicable, will make such funds available to the applicable Borrower at the aforesaid applicable Payment Office. (c) Each Notice of A Borrowing shall be irrevocable and binding on the Borrower on whose behalf it shall have been submitted. In the case of any A Borrowing which the related Notice of A Borrowing specifies is to be comprised of Eurocurrency Advances, the applicable Borrower shall indemnify each Bank against any loss, cost or expense reasonably incurred by such Bank as a result of any failure to fulfill on or before the date specified in such Notice of A Borrowing for such A Borrowing the applicable conditions set forth in ARTICLE III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund the A Advance to be made by such Bank as part of such A Borrowing when such A Advance, as a result of such failure, is not made on such date. (d) Unless the Agent or Euro-Agent, as applicable, shall have received notice from a Bank prior to the date of any A Borrowing that such Bank will not make available to the Agent or Euro-Agent such Bank's ratable portion of such A Borrowing, the Agent or Euro-Agent, as applicable, may assume that such Bank has made such portion available to it on the date of such A Borrowing in accordance with SUBSECTION (b) of this SECTION 2.02 and it may, in reliance upon such assumption, make (but shall not be required to make) available to the applicable Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such ratable portion available to the Agent or the Euro-Agent, as applicable, such Bank and such Borrower severally agree to repay to the Agent or Euro-Agent, as applicable, forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Agent or the Euro-Agent, as -16 applicable, at (i) in the case of such Borrower, the interest rate applicable at the time to A Advances comprising such A Borrowing and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent or Euro- Agent, as applicable, such corresponding amount, such amount so repaid shall constitute such Bank's A Advance as part of such A Borrowing for purposes of this Agreement. (e) The failure of any Bank to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Bank shall be responsible for the failure of any other Bank to make the A Advance to be made by such other Bank on the date of any A Borrowing. SECTION 2.03. THE B ADVANCES. (a) Each Bank severally agrees that the Company and any Borrowing Subsidiary may make B Borrowings under this SECTION 2.03 from time to time on any Business Day during the period from the date hereof until the date occurring 15 days prior to the Termination Date in the manner set forth below; PROVIDED that, following the making of each B Borrowing, the aggregate amount (determined in Dollars) of the Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Banks (computed without regard to any B Reduction). (b) The procedures for the solicitation and acceptance of B Advances to be denominated in Dollars are set forth below: (i) The Company (on behalf of itself or any Borrowing Subsidiary) may request a B Borrowing denominated in Dollars under this SECTION 2.03(b) by delivering to the Agent, by telecopier, telex or cable, confirmed immediately in writing, a Notice of B Borrowing, identifying the applicable Borrower and specifying the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 15 days after the date of such B Borrowing or later than the Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) one Business Day prior to the date of the proposed B Borrowing, if the Company shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Banks shall be fixed rates per annum (such type of solicitation being a "FIXED RATE AUCTION") and (B) three Business Days prior to the date of the proposed B Borrowing, if the Company shall instead specify in the Notice of B Borrowing an index or other basis to be used by the Banks in determining the rates of interest to be offered by them (such type of solicitation being an "INDEXED RATE AUCTION"). The Company shall, in addition, certify in each Notice of B Borrowing the Credit Ratings, if any, then in effect. The Agent shall, promptly following its receipt of a Notice of B Borrowing under -17- this SECTION 2.03(b), notify each Bank of such request by sending such Bank a copy of such Notice of B Borrowing. (ii) Each Bank may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more B Advances to the applicable Borrower as part of such proposed B Borrowing at a rate or rates of interest specified by such Bank in its sole discretion, by notifying the Agent (which shall give prompt notice thereof to the Company), before 10:00 A.M. (New York City time) (A) on the date of such proposed B Borrowing, in the case of a Fixed Rate Auction, and (B) two Business Days before the date of such proposed B Borrowing, in the case of an Indexed Rate Auction, of the minimum amount and maximum amount of each B Advance which such Bank would be willing to make as part of such proposed B Borrowing (which amounts may, subject to the proviso to the first sentence of SECTION 2.03(a), exceed such Bank's Commitment), the rate or rates of interest therefor and such Bank's Applicable Lending Office with respect to such B Advance; PROVIDED that if the Agent in its capacity as a Bank shall, in its sole discretion, elect to make any such offer, it shall notify the Company of such offer before 9:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Agent by the other Banks. (iii) The Company shall, in turn, before 11:00 A.M. (New York City time) (A) on the date of such proposed B Borrowing, in the case of a Fixed Rate Auction, and (B) two Business Days before the date of such proposed B Borrowing, in the case of an Indexed Rate Auction, either: (x) cancel such B Borrowing by giving the Agent notice to that effect, or (y) accept (on behalf of the applicable Borrower), subject to SECTION 2.03(e), one or more of the offers made by any Bank or Banks pursuant to PARAGRAPH (ii) above, in its sole discretion, by giving notice to the Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Company by the Agent on behalf of such Bank for such B Advance pursuant to PARAGRAPH (ii) above) to be made by each Bank as part of such B Borrowing, and reject any remaining offers made by Banks pursuant to PARAGRAPH (ii) above by giving the Agent notice to that effect. (iv) If the Company notifies the Agent that such B Borrowing is cancelled pursuant to PARAGRAPH (iii)(x) above, the Agent shall give prompt notice thereof to the Banks and such B Borrowing shall not be made. -18- (v) If the Company accepts (on behalf of the applicable Borrower) one or more of the offers made by any Bank or Banks pursuant to PARAGRAPH (iii)(y) above, the Agent shall in turn promptly notify (A) each Bank that has made an offer as described in paragraph (ii) above of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Bank pursuant to paragraph (ii) above have been accepted by the Company, (B) each Bank that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Bank as part of such B Borrowing, and (C) each Bank that is to make a B Advance as part of such B Borrowing, upon receipt, that the Agent has received forms of documents appearing to fulfill the applicable conditions set forth in ARTICLE III. Each Bank that is to make a B Advance as part of such B Borrowing shall, before 12:00 noon (New York City time) on the date of such B Borrowing specified in the notice received from the Agent pursuant to clause (A) of the preceding sentence or any later time when such Bank shall have received notice from the Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Agent at the Payment Office such Bank's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in ARTICLE III and after receipt by the Agent of such funds, the Agent will make such funds available to the applicable Borrower at the Agent's aforesaid address. Promptly after each B Borrowing the Agent will notify each Bank of the amount of the B Borrowing, the consequent B Reduction and the dates upon which such B Reduction commenced and will terminate. (c) The procedures for the solicitation and acceptance of B Advances to be denominated in an Alternative Currency are set forth below: (i) The Company (on behalf of itself or any Borrowing Subsidiary) may request a B Borrowing denominated in an Alternative Currency under this SECTION 2.03(c) by delivering to the Euro-Agent, by telecopier, telex or cable, confirmed immediately in writing, a Notice of a B Borrowing identifying the applicable Borrower and specifying the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 15 days after the date of such B Borrowing or later than the Termination Date), the interest payment date or dates relating thereto, the requested Alternative Currency and any other terms to be applicable to such B Borrowing, not later than 4:00 P.M. (London time) four Business Days prior to the date of the proposed B Borrowing. Each solicitation made under this SUBSECTION (c) shall contemplate an Indexed Rate Auction. The Company shall request, within one-half hour prior to the issuance of a Notice of B Borrowing under this SECTION 2.03(c), the advice of the Euro-Agent as to the exchange rate then in effect with respect to the applicable Alternative Currency, and the -19- Company shall specify in such Notice of B Borrowing the exchange rate so advised to it by the Euro-Agent. The Company shall, in addition, certify in each Notice of B Borrowing the Credit Ratings, if any, then in effect. The Euro-Agent shall, promptly following its receipt of a Notice of B Borrowing under this SECTION 2.03(c), notify each Bank of such request by sending such Bank a copy of such Notice of B Borrowing. (ii) Each Bank may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more B Advances to the applicable Borrower as part of such proposed B Borrowing in the requested Alternative Currency and at a rate or rates of interest specified by such Bank in its sole discretion, by notifying the Euro-Agent (which shall give prompt notice thereof to the Company), before Noon (London time) three Business Days before the date of such proposed B Borrowing, of the minimum amount and maximum amount of each B Advance which such Bank would be willing to make as part of such proposed B Borrowing (which amounts may, subject to the proviso to the first sentence of SECTION 2.03(a), exceed such Bank's Commitment), the rate or rates of interest therefor and such Bank's Applicable Lending Office with respect to such B Advance; PROVIDED that if the Euro-Agent in its capacity as a Bank shall, in its sole discretion, elect to make any such offer, it shall notify the Company of such offer before 11:30 A.M. (London time) on the date on which notice of such election is to be given to the Euro-Agent by the other Banks. (iii) The Company shall, in turn, before 4:00 P.M. (London time) three Business Days before the date of such proposed B Borrowing either: (x) cancel such B Borrowing by giving the Euro-Agent notice to that effect, or (y) accept (on behalf of the applicable Borrower), subject to SECTION 2.03(e), one or more of the offers made by any Bank or Banks pursuant to PARAGRAPH (ii) above, in its sole discretion, by giving notice to the Euro-Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Company by the Euro-Agent on behalf of such Bank for such B Advance pursuant to PARAGRAPH (ii) above) to be made by each Bank as part of such B Borrowing, and reject any remaining offers made by Banks pursuant to PARAGRAPH (ii) above by giving the Euro-Agent notice to that effect. (iv) If the Company notifies the Euro-Agent that such B Borrowing is cancelled pursuant to PARAGRAPH (iii)(x) above, the Euro- Agent shall give prompt notice thereof to the Banks and such B Borrowing shall not be made. -20- (v) If the Company accepts (on behalf of the applicable Borrower) one or more of the offers made by any Bank or Banks pursuant to PARAGRAPH (iii)(y) above, the Euro-Agent shall in turn promptly notify (A) each Bank that has made an offer as described in paragraph (ii) above of the Borrower, Alternative Currency, date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Bank pursuant to paragraph (ii) above have been accepted by the Company, (B) each Bank that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Bank as part of such B Borrowing, and (C) each Bank that is to make a B Advance as part of such B Borrowing, upon receipt, that the Euro-Agent has received forms of documents appearing to fulfill the applicable conditions set forth in ARTICLE III. Each Bank that is to make a B Advance as part of such B Borrowing shall, before 12:00 noon (London time) on the date of such B Borrowing specified in the notice received from the Euro-Agent pursuant to clause (A) of the preceding sentence or any later time when such Bank shall have received notice from the Euro-Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Euro-Agent at the Payment Office for the applicable Alternative Currency such Bank's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in ARTICLE III and after receipt by the Euro-Agent of such funds, the Euro-Agent will make such funds available to the applicable Borrower at the Euro- Agent's aforesaid address. Promptly after each B Borrowing the Euro- Agent will notify each Bank of the Borrower, Alternative Currency and amount of the B Borrowing, the consequent B Reduction and the dates upon which such B Reduction commenced and will terminate. (d) Each B Borrowing shall, (i) in the case of a B Borrowing to be denominated in Dollars, be in an aggregate amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof (ii) in the case of a B Borrowing to be denominated in an Alternative Currency, be in such minimum amount as shall be advised by the Euro-Agent as being appropriate in light of the prevailing market conditions and conventions at the time notice is given pursuant to SECTION 2.03(c)(i), and, following the making of each B Borrowing, the Borrowers shall be in compliance with the limitation set forth in the proviso to the first sentence of SUBSECTION (a) above. (e) Each acceptance by the Company pursuant to SECTION 2.03(b)(iii)(y) or SECTION 2.03(c)(iii)(y) of the offers made in response to a Notice of B Borrowing shall be treated as an acceptance of such offers in ascending order of the rates or margins, as applicable, at which the same were made but if, as a result thereof, two or more offers at the same such rate or margin would be partially accepted, then the amounts of the B Advances in respect of which such offers are accepted shall be treated as being the amounts which bear the same proportion to one another as the respective amounts of the B Advances so offered bear -21- to one another but, in each case, rounded as the Euro-Agent may consider necessary to ensure that the amount of each such B Advance is $500,000 (or, if the currency in which such B Advance is denominated is an Alternative Currency, such comparable and convenient multiple thereof as the Euro-Agent shall consider appropriate for the purpose) or an integral multiple thereof. (f) Within the limits and on the conditions set forth in this SECTION 2.03, each Borrower may from time to time borrow under this SECTION 2.03, repay pursuant to SUBSECTION (g) below, and reborrow under this SECTION 2.03. (g) Each Borrower shall repay to the Agent for the account of each Bank which has made a B Advance to it or (if different) for the account of the holder of the applicable B Note, on the maturity date of each B Advance (such maturity date being that specified by the Company for repayment of such B Advance in the related Notice of B Borrowing and provided in the B Note evidencing such B Advance), the then unpaid principal amount of such B Advance. No Borrower shall have any right to prepay any principal amount of any B Advance unless, and then only on the terms, specified by the Company for such B Advance in the related Notice of B Borrowing and set forth in the B Note evidencing such B Advance. (h) Each Borrower shall pay interest on the unpaid principal amount of each B Advance made to it, from the date of such B Advance to the date the principal amount of such B Advance is repaid in full, at the rate of interest for such B Advance specified by the Bank making such B Advance in the related notice submitted by such Bank pursuant to SECTION 2.03(b)(ii) or SECTION 2.03(c)(ii), as applicable, payable on the interest payment date or dates specified by the Company for such B Advance in such Notice of B Borrowing, in each case as provided in the B Note evidencing such B Advance. In the event the term of any B Advance shall be longer than three months, interest thereon shall be payable not less frequently than once each three-month period during such term. (i) The indebtedness of each Borrower resulting from each B Advance made to it shall be evidenced by a separate B Note of such Borrower payable to the order of the Bank making such B Advance. SECTION 2.04. FEES. (a) FACILITY FEE. The Company agrees to pay each Bank a facility fee at the respective rate per annum set forth below on such Bank's average daily Commitment (irrespective of usage and without giving effect to any B Reduction) from the date hereof until the Termination Date, payable on the last day of each March, June, September and December during the term of such Bank's Commitment, commencing December 31, 1996, and on the Termination Date. The facility fee payable under this Agreement for all periods prior to the Restatement Date shall be payable at the rates set forth in this Agreement prior to its amendment and restatement on such date. Commencing on the Restatement Date, the facility -22- fee in respect of any period shall be determined on the basis of the Credit Ratings in effect during such period, in accordance with the table set forth below. The rate per annum at which such facility fee is calculated shall change when and as any Credit Rating changes. Credit Rating Facility Fee ------------- ------------ (Rate per annum) A or better (S&P) OR 0.07% A2 or better (Moody's) Below A (S&P) and A2 (Moody's) but A- (S&P) OR 0.08% A3 (Moody's) Below A- (S&P) and A3 (Moody's) but 0.09% BBB+ (S&P) OR Baa1 (Moody's) Below BBB+ (S&P) and Baa1 (Moody's) but 0.11% BBB (S&P) OR Baa2 (Moody's) Below BBB (S&P) and Baa2 (Moody's) 0.15% but BBB- (S&P) AND Baa3 (Moody's) Below BBB- (S&P) or Baa3 (Moody's) 0.20% If, during any period, the Company shall not have Credit Ratings from both S&P and Moody's, the Credit Rating of the Company for purposes of this SECTION 2.04(a) shall be deemed to be below BBB- (S&P) and below Baa3 (Moody's) during such period. In addition, and notwithstanding the foregoing chart, if the Credit Rating of the Company from S&P is more than one level higher or lower than the equivalent Credit Rating of the Company from Moody's at such time, then the facility fee rate shall be determined as if the applicable Credit Rating of the Company from each of S&P and Moody's were one level higher than the lower of the two Credit Ratings. (b) AGENCY FEE. The Company agrees to pay to the Agent and the Euro- Agent those fees as are described in that certain letter agreement dated August 23, 1996 (as -23- the same may from time to time be amended, supplemented, restated or otherwise modified), when and as the same shall become due and payable by the Company as provided therein. SECTION 2.05. REDUCTION OF THE COMMITMENTS; INCREASE OF THE COMMITMENTS. (a) The Company shall have the right, upon at least three Business Days' notice to the Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Banks; PROVIDED, that the aggregate amount of the Commitments of the Banks shall not be reduced to an amount which is less than the aggregate principal amount of the B Advances then outstanding; and PROVIDED, FURTHER, that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof. (b) If the Company's Credit Rating is better than or equal to Baa3 from Moody's and BBB- from S&P, and no Default or Event of Default is outstanding, the Company shall have the right, upon at least five (5) Business Days' notice to the Agent, to add one or more bank or banks as new Banks hereunder or to increase the Commitment of any existing Bank or Banks, with any such existing Bank's consent, pursuant to the terms hereof (any such addition of a new Bank or increase in the Commitment of an existing Bank upon the request of the Company pursuant to this SECTION 2.05(b) being referred to as a "BANK ADDITION"); PROVIDED that (i) each such proposed Bank, in the case of a bank not already a Bank hereunder, is acceptable to the Agent (the consent of the Agent not to be unreasonably withheld) and would have a Commitment equal to or exceeding $10,000,000; and (ii) after giving effect to the proposed Bank Addition, the Total Commitment would not exceed $275,000,000. Each notice of a proposed Bank Addition (a "NOTICE OF BANK ADDITION") shall be by telex or telecopy, confirmed immediately in writing, in substantially the form of EXHIBIT B-4 hereto, specifying therein (i) the name and address of the proposed Added Bank or Banks, (ii) the date on which the Company wishes such Bank Addition to become effective, and (iii) the amount of the Commitment each such Added Bank would have hereunder after giving effect to such Bank Addition. Each such Notice of Bank Addition shall be accompanied by a certified copy of resolutions of the Board of Directors of the Company approving the increase in the Total Commitment which would result from such Bank Addition, and a favorable opinion of the General Counsel of the Company with respect to the due authorization by the Company of such Bank Addition and the enforceability of the Agreement and any new or increased Notes resulting from such Bank Addition. If the conditions set forth in the proviso contained in the first sentence of this SECTION 2.05(b) have been satisfied, and the certificate and opinion referred to in the preceding sentence have been delivered, the Agent shall forward to each such Added Bank and the Company for execution by such Added Bank and the Company an Assumption and Acceptance. The Added Bank shall, upon such execution, return the executed Assumption and Acceptance to the Agent, for the Agent's acceptance thereof, together with a processing and recordation fee of $3,000. Upon such execution, delivery and acceptance, from and after the effective date specified in each Assumption and Acceptance, each Added Bank shall, in addition to the -24- rights and obligations hereunder held by it immediately prior to such effective date (if any), have the rights and obligations hereunder that have been assumed by it pursuant to such Assumption and Acceptance and, in the case of a bank not previously a Bank hereunder, shall become a Bank hereunder. By executing and delivering an Assumption and Acceptance, each Added Bank confirms to and agrees with each party hereto as follows: (i) neither the Agent nor any Bank makes any representation or warranty, nor assumes any responsibility with respect to, any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (ii) neither the Agent nor any Bank makes any representation or warranty, nor assumes any responsibility with respect to, the financial condition of the Company or any Borrowing Subsidiary or the performance or observance by the Company or any Borrowing Subsidiary of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto. The Agent shall maintain at its address referred to in SECTION 9.02 a copy of each Assumption and Acceptance delivered to and accepted by it. Such copies shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice. Upon its receipt of an Assumption and Acceptance executed by an Added Bank and the Borrowers the Agent shall, if such Assumption and Acceptance has been completed and is in substantially the form of EXHIBIT C-1 hereto, (i) accept such Assumption and Acceptance, and (ii) give prompt notice thereof to the Company. Within five (5) Business Days after receipt of such notice, the Company, at its own expense, shall execute and deliver to the Agent a new A Note to the order of such Added Bank. Such new A Note or Notes shall be dated the effective date of such Assumption and Acceptance and shall otherwise be in substantially the form of EXHIBIT A-1 hereto. (c) If there are any A Advances outstanding on the effective date of any Assumption and Acceptance, the Added Bank shall purchase from the other Banks such participations in such A Advances as shall be necessary to cause such Added Bank to share ratably (based on the proportion that such Added Bank's Commitment bears to the Total Commitment after giving effect to the Bank Addition) in each such A Advance. To purchase such participations, the Added Bank shall before 12:00 noon (New York City time) on the effective date of its Assumption and Acceptance, make available for the account of its Applicable Lending Office to the Agent at its address referred to in SECTION 9.02, in Dollars and in same day funds, such Added Bank's ratable portion (based on the proportion that such Added Bank's Commitment (or the increase in such Added Bank's Commitment, in the case of an Added Bank which is an existing Bank hereunder) bears to the Total Commitment after giving effect to the Bank Addition) of each A Borrowing then outstanding, together with an -25- amount equal to such ratable portion of the interest which has accrued to such date and remains unpaid on such A Borrowing. After the Agent's receipt of such funds, the Agent will promptly make such same day funds available to the account of each Bank in an amount to such Bank's ratable portion of such payment by the Added Bank. SECTION 2.06. REPAYMENT OF A ADVANCES. Except as otherwise provided in SECTION 2.13, each Borrower shall repay on the Termination Date the principal amount of each A Advance made to it. SECTION 2.07. INTEREST ON A ADVANCES. Each Borrower shall pay interest on the unpaid principal amount of each A Advance made by each Bank to such Borrower from the date of such A Advance until such principal amount shall be paid in full, at the following rates per annum: (a) BASE RATE ADVANCES. If such A Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, payable monthly on the tenth day of each month and on the date such Base Rate Advance shall be paid in full; PROVIDED, that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 2% per annum above the Base Rate in effect from time to time. The Agent shall provide telephonic notice to the Company (which in turn shall advise the applicable Borrower) of the amount of interest due and payable on Base Rate Advances by a date not later than the date such payment is due; PROVIDED, HOWEVER, that the Agent's failure to give such notice shall not discharge the applicable Borrower from the payment of interest but shall only delay the due date of such interest until such telephonic notice is given. (b) ADJUSTED CD RATE ADVANCES. If such A Advance is an Adjusted CD Rate Advance, a rate per annum equal at all times during the Interest Period for such A Advance to the sum of the Adjusted CD Rate for such Interest Period for such Advance plus the Applicable CD Rate Margin, payable on the last day of such Interest Period and, if such Interest Period has a duration of more than 90 days, on each day which occurs during such Interest Period every 90 days from the first day of such Interest Period; PROVIDED that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 2% per annum above (x) if the originally scheduled Interest Period shall then be in effect, the sum of the Adjusted CD Rate plus the Applicable CD Rate Margin then in effect with respect to such A Advance, and (y) in all other cases, the Base Rate in effect from time to time. -26- "APPLICABLE CD RATE MARGIN" means, in respect of any Adjusted CD Rate Advance, a rate per annum determined as of the first day of the Interest Period for such Adjusted CD Rate Advance in reference to the table set forth below on the basis of the Credit Ratings at such time. Applicable CD Rate Margin Credit Rating (Rate per annum) ------------- -------------- A or better (S&P) OR A2 or better (Moody's) 0.280% Below A (S&P) and A2 (Moody's) but A- (S&P) OR A3 (Moody's) 0.290% Below A- (S&P) and A3 (Moody's) but BBB+ (S&P) OR Baa1 (Moody's) 0.335% Below BBB+ (S&P) and Baa1 (Moody's) but BBB (S&P) OR Baa2 (Moody's) 0.390% Below BBB (S&P) and Baa2 (Moody's) but BBB- (S&P) AND Baa3 (Moody's) 0.475% Below BBB- (S&P) OR Baa3 (Moody's) 0.625% If, on the first day of the Interest Period for any Adjusted CD Rate Advance, the Company shall not have Credit Ratings from both S&P and Moody's, the Credit Ratings of the Company for purposes of this SECTION 2.07(b) shall be deemed to be below BBB- (S&P) and below Baa3 (Moody's) during such period. In addition, and notwithstanding the foregoing chart, if the Credit Rating of the Company from S&P is more than one level higher or lower than the equivalent Credit Rating from Moody's at such time, then the Applicable CD Rate Margin shall be determined as if the applicable Credit Rating of the Company from each of S&P and Moody's were one level higher than the lower of the two Credit Ratings. (c) EUROCURRENCY ADVANCES. If such A Advance is a Eurocurrency Advance, a rate per annum equal at all times during the Interest Period for such A Advance to the sum of the Eurocurrency Rate for such Interest Period plus -27- the Applicable Eurocurrency Margin, payable on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period; PROVIDED that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 2% per annum above (x) if the originally scheduled Interest Period shall then be in effect, the sum of the Eurocurrency Rate plus the Applicable Eurocurrency Margin then in effect with respect to such A Advance, and (y) in all other cases, the Base Rate in effect from time to time. "APPLICABLE EUROCURRENCY MARGIN" means, in respect of any Eurocurrency Advance, a rate per annum determined as of the first day of the Interest Period for such Eurocurrency Advance in reference to the table set forth below on the basis of the Credit Ratings at such time. Applicable Eurocurrency Margin Credit Rating (Rate per Annum) ------------- --------------- A or better (S&P) OR A2 or better (Moody's) 0.155% Below A (S&P) and A2 (Moody's) but A- (S&P) OR A3 (Moody's) 0.165% Below A- (S&P) and A3 (Moody's) but BBB+ (S&P) OR Baa1 (Moody's) 0.210% Below BBB+ (S&P) and Baa1 (Moody's) but BBB (S&P) OR Baa2 (Moody's) 0.265% Below BBB (S&P) and Baa2 (Moody's) but BBB- (S&P) AND Baa3 (Moody's) 0.350% -28- Below BBB- (S&P) OR Baa3 (Moody's) 0.500% If, on the first day of the Interest Period for any Eurocurrency Advance, the Company shall not have Credit Ratings from both S&P and Moody's, the Credit Ratings of the Company, for purposes of this SECTION 2.07(b), shall be deemed to be below BBB- (S&P) and below Baa3 (Moody's) during such period. In addition, and notwithstanding the foregoing chart, if the Credit Rating of the Company from S&P is more than one level higher or lower than the equivalent Credit Rating of the Company from Moody's at such time, then the Applicable Eurocurrency Margin shall be determined as if the Credit Rating of the Company from each of S&P and Moody's were one level higher than the lower of the two Credit Ratings. SECTION 2.08. ADDITIONAL INTEREST ON EUROCURRENCY ADVANCES. Each Borrower shall pay to each Bank, so long as such Bank shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each Eurocurrency Advance made by such Bank to such Borrower, from the date of such A Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurocurrency Rate for the Interest Period for such A Advance from (ii) the rate obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage of such Bank for such Interest Period, payable on each date on which interest is payable on such A Advance. Such additional interest so notified to the Company (which in turn shall advise the applicable Borrower) by any Bank shall be payable to the Agent (or, in the case of any Eurocurrency Advance denominated in an Alternative Currency, the Euro- Agent) for the account of such Bank on the dates specified for payment of interest for such Advance in SECTION 2.07. SECTION 2.09. INTEREST RATE DETERMINATION. (a) Each Reference Bank agrees to furnish to the Agent (in the case of Adjusted CD Rate Advances and Eurocurrency Advances denominated in Dollars) and the Euro-Agent (in the case of Eurocurrency Advances denominated in any Alternative Currency) timely information for the purpose of determining each Adjusted CD Rate or Eurocurrency Rate, as applicable. The Agent and Euro-Agent, as applicable, shall give prompt notice to the Company (which in turn shall advise the applicable Borrower) and the Banks of the applicable interest rate determined by the Agent for purposes of SECTION 2.07(a), (b) or (c), and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under SECTION 2.07(b) or (c), as applicable. (b) If the Agent or the Euro-Agent shall, at least one Business Day before the date of any requested A Borrowing or the Conversion, Redenomination or continuation of any A Borrowing, notify the Company and the Banks that either Reference Bank shall have failed -29- to furnish timely information to the Agent for determining the Adjusted CD Rate for any Adjusted CD Rate Advances, or the Eurocurrency Rate for any Eurocurrency Advances denominated in a particular currency, the Agent shall forthwith notify the Company and the Banks that the interest rate cannot be determined for such Adjusted CD Rate Advances or Eurocurrency Advances, as the case may be, whereupon (i) each such Advance will automatically, on the last day of the then outstanding Interest Period therefor, Convert into or be Redenominated as, and with respect to a requested A Advance as part of a requested A Borrowing, such Advance shall be, a Eurocurrency Advance denominated in Dollars, or, if the request was for Adjusted CD Rate Advances, or if the affected currency is Dollars, as applicable, a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (ii) the rights of the Borrowers to select, and the obligation of the Banks to make, or to Convert Advances into or Redenominate or continue Advances as, Adjusted CD Rate Advances or Eurocurrency Advances in such currency, as the case may be, shall be suspended until the Agent shall notify the Borrower and the Banks that the circumstances causing such suspension no longer exist. (c) If, with respect to any Eurocurrency Advances, the Majority Banks shall at least one Business Day before the requested date of, or the proposed Conversion, Redenomination or continuation of the Advances comprising all or part of, any A Borrowing, notify the Agent that the Eurocurrency Rate for any Interest Period for such Advances in a particular currency will not adequately reflect the cost to such Majority Banks of making, funding or maintaining their respective Eurocurrency Advances for such Interest Period, the Agent shall forthwith so notify the Company and the Banks, whereupon (i) each such outstanding Eurocurrency Advance will automatically, on the last day of the then existing Interest Period therefor, Convert or be Redenominated into or continued as, and with respect to a requested A Advance as part of a requested A Borrowing, such Advance shall be, a Eurocurrency Advance denominated in Dollars (or, if the affected currency is Dollars, a Base Rate Advance), and (ii) the rights of the Borrowers to select, and the obligation of the Banks to make, or to Convert Advances into, or Redenominate or continue Advances as, Eurocurrency Advances in such currency shall be suspended until the Majority Banks have notified the Agent and the Agent shall notify the Company and the Banks that the circumstances causing such suspension no longer exist. (d) If any Bank shall, not later than 10:00 A.M. (London time) two Business Days before the date of, or the proposed Conversion, Redenomination or continuation of, any requested Eurocurrency Advance, notify the Agent or the Euro-Agent that such Bank is not -30- satisfied that deposits in the relevant Alternative Currency will be freely available to it in the relevant amount and for the relevant Interest Period, the Agent shall forthwith so notify the Company and the Banks, whereupon (i) each such outstanding Eurocurrency Advance of such Bank will automatically, on the last day of the then existing Interest Period therefor, Convert or be Redenominated into or continued as, and with respect to a requested A Advance as part of a requested A Borrowing, such Advance shall be, a Eurocurrency Advance denominated in Dollars and having an Interest Period coextensive with the Interest Period in effect in respect of all other A Advances comprising a part of such A Borrowing; and (ii) the right of the Borrowers to request Eurocurrency Advances in such Alternative Currency from such Bank as part of such A Borrowing or any other A Borrowing shall be suspended until such Bank shall notify the Agent or the Euro-Agent that the circumstances causing such suspension no longer exist, and the Advance to be made by such Bank as part of such A Borrowing (and the Advance to be made by such Bank as part of any subsequent A Borrowing in respect of which such Alternative Currency shall have been requested during such period of suspension) shall be a Eurocurrency Advance denominated in Dollars and having an Interest Period coextensive with the Interest Period in effect in respect of all other Advances comprising a part of such A Borrowing. (e) If any Bank shall, not later than 10:00 A.M. (London time) two Business Days before the date of, or the proposed Conversion, Redenomination or continuation of, any requested Eurocurrency Advance in an Alternative Currency other than a Primary Currency, notify the Agent or the Euro-Agent that such Bank, in its sole discretion, does not wish to fund the requested Eurocurrency Advance in such Alternative Currency for the relevant Interest Period, the Agent shall forthwith so notify the Company and the Banks, whereupon (i) each such outstanding Eurocurrency Advance of such Bank will automatically, on the last day of the then existing Interest Period therefor, Convert or be Redenominated into or continued as, and with respect to a requested A Advance as part of a requested A Borrowing, such Advance to be made by such Bank as part of such A Borrowing shall be, a Eurocurrency Advance denominated in Dollars and having an Interest Period coextensive with the Interest Period in effect in respect of all other A Advances comprising a part of such A Borrowing; and (ii) the right of the Borrowers to request Eurocurrency Advances in such Alternative Currency from such Bank as part of such A Borrowing shall be suspended as to such A Borrowing for such Interest Period. -31- (f) Each of the Agent and the Euro-Agent shall, upon becoming aware that the circumstances causing any such suspension referred to in SECTIONS 2.09 (b)-(e) or 2.13 no longer apply, promptly so notify the Company, PROVIDED that the failure of the Agent or the Euro-Agent to so notify the Company shall not impair the rights of the Banks under this SECTION 2.09 or SECTION 2.13, as applicable, or expose the Agent or the Euro-Agent to any liability. (g) If the applicable Borrower shall fail to select the duration of any Interest Period for any Adjusted CD Rate Advances or any Eurocurrency Advances in accordance with the provisions contained in the definition of "Interest Period" in SECTION 1.01 and the provisions of SECTION 2.10, or is not entitled to Convert, continue or Redenominate such Advances into or as Adjusted CD Rate Advances or Eurocurrency Advances pursuant to SECTION 2.10, the Agent will forthwith so notify the Company and the Banks and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (h) On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $9,000,000 (or its equivalent in any Alternative Currency), such A Advances shall, if they are A Advances of a Type other than Base Rate Advances, automatically Convert or be Redenominated into Base Rate Advances, and on and after such date the right of the applicable Borrower to Convert or Redenominate such A Advances into A Advances of a Type other than Base Rate Advances shall terminate; provided, however, that if and so long as each such A Advance shall be of the same Type and have the same Interest Period as A Advances comprising another Borrowing or other Borrowings of such Borrower, and the aggregate unpaid principal amount of all such A Advances shall equal or exceed $9,000,000 (or its equivalent in any Alternative Currency), the Borrower shall have the right to continue all such Advances as, or to Convert or Redenominate all such Advances into, Advances of such Type having such Interest Period. SECTION 2.10. VOLUNTARY CONVERSION OR CONTINUATION OF ADVANCES. (a) The applicable Borrower may on any Business Day, upon notice given to the Agent not later than 11:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Conversion or continuation, and subject to the provisions of SECTIONS 2.09 and 2.13 and the provisos in this SECTION 2.10(a), Convert all or any part of the A Advances of one Type denominated in Dollars comprising the same A Borrowing into Advances of another Type denominated in Dollars or continue all or any part of the A Advances of one Type denominated in Dollars comprising the same A Borrowing as A Advances of the same Type denominated in Dollars; PROVIDED, HOWEVER, that any such Conversion or continuation of any Adjusted CD Rate Advances or Eurocurrency Advances shall be made on, and only on, the last day of an Interest Period for such Adjusted CD Rate Advances or Eurocurrency Advances; PROVIDED FURTHER, that any such Conversion or continuation of A Advances shall be in the minimum amounts and increments specified in SECTION 2.01(b); and PROVIDED FURTHER, -32- that no Advance may be Converted into or continued as, an Adjusted CD Rate Advance or a Eurocurrency Advance, at any time that a Default or Event of Default has occurred and is continuing. Each such notice of a Conversion or continuation shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the A Advances to be Converted, and (iii) if such Conversion is into Adjusted CD Rate Advances or Eurocurrency Advances, the duration of the Interest Period for each such A Advance. (b) The Borrower may, upon notice given to the Agent not later than 11:00 a.m. (New York City time) on a Business Day at least three Business Days prior to the date of the proposed Redenomination, and subject to the provisions of SECTION 2.09 and 2.13 and the provisos in this SECTION 2.10(b), request that all or any part of the Advances comprising the same A Borrowing be Redenominated from Dollars into an Alternative Currency, from an Alternative Currency into Dollars or another Alternative Currency, or continued in the same Alternative Currency; PROVIDED, HOWEVER, that any Redenomination shall be made on, and only on, the last day of an Interest Period for such Advances; PROVIDED FURTHER, that any such Redenomination of A Advances shall be in the minimum amounts and increments specified in SECTION 2.01(b); and PROVIDED FURTHER, that no Advance may be Redenominated at any time that a Default or Event of Default has occurred and is continuing. Each such notice of request of a Redenomination (a "NOTICE OF REDENOMINATION") shall be by telecopier, telex or cable, confirmed immediately in writing, specifying (i) the Advances comprising the A Borrowing to be Redenominated, (ii) the date of the proposed Redenomination, (iii) the currency into which such Advances are to be Redenominated, and (iv) the duration of the Interest Period for such Advances upon being so Redenominated. Subject to the provisions of SECTIONS 2.09 and 2.13 and of the second proviso in SECTION 2.10(b), each Advance so requested to be Redenominated will be Redenominated, on the date specified therefor in such Notice of Redenomination, into an equivalent amount thereof in the currency requested in such Notice of Redenomination, such equivalent amount to be determined on such date in accordance with SECTION 2.16, and, upon being so Redenominated, will have an initial Interest Period as requested in such Notice of Redenomination. SECTION 2.11. PREPAYMENTS. Subject to SECTION 9.04(b) hereof, a Borrower may (i) following notice given to the Agent by the Company (on behalf of such Borrower) not later than 11:00 A.M. (New York City time) on the proposed date of prepayment, such notice specifying the applicable Borrower, the proposed date and aggregate principal amount of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding principal amounts of the Base Rate Advances comprising part of the same A Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid and (ii) following notice given to the Agent (or, in the case of Eurocurrency Advances denominated in any Alternative Currency, the Euro-Agent) by the Company (on behalf of such Borrower) not later than 11:00 A.M. (London time) three Business Days prior to the proposed date of prepayment, such notice specifying the applicable Borrower, the proposed date of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding principal amounts of the Adjusted CD Rate Advances or the -33- Eurocurrency Advances comprising an A Borrowing in whole (and not in part), together with accrued interest to the date of such prepayment on the principal amount prepaid. In the case of an A Borrowing comprised of Base Rate Advances, each partial prepayment shall be in an aggregate principal amount not less than $1,000,000. SECTION 2.12. INCREASED COSTS AND REDUCED RETURN. (a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements, in the case of Adjusted CD Rate Advances, included in the Adjusted CD Rate Reserve Percentage or the Assessment Rate, or, in the case of Eurocurrency Advances, included in the Eurocurrency Rate Reserve Percentage) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) adopted after the Restatement Date, or reasonably determined by a Bank only after the Restatement Date to be applicable to it or to its Eurocurrency Advances or Adjusted CD Rate Advances, there shall be any increase after the date hereof in the cost to any Bank of agreeing to make or making, funding or maintaining Adjusted CD Rate Advances or Eurocurrency Advances, by an amount deemed by such Bank to be material, then the Company shall from time to time, within 15 days after demand by such Bank, accompanied by the certificate required therefor under SECTION 2.12(c) (with a copy of such demand and such certificate to the Agent), pay to the Agent for the account of such Bank additional amounts sufficient to compensate such Bank for such increased cost. (b) If any Bank shall have determined that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office or any corporation controlling such Bank) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, which adoption, change, request or directive is effected, made or promulgated after the Restatement Date, or if effective, made or promulgated prior to such date, is reasonably determined by a Bank only after the Restatement Date to be applicable to it or its obligations hereunder, has or would have the effect after the date hereof of reducing the rate of return on such Bank's capital or the capital of any corporation controlling such Bank as a consequence of such Bank's obligation hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance by an amount deemed by such Bank to be material, then the Company shall, from time to time, within 15 days after demand by such Bank, accompanied by the certificate required therefor under SECTION 2.12(c) (with a copy of such demand and such certificate to the Agent), pay to the Agent for the account of such Bank such additional amount or amounts as will compensate such Bank or such controlling corporation for such reduction. -34- (c) Each Bank will promptly notify the Company and the 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 reasonable judgment of such Bank, be otherwise disadvantageous to such Bank. In determining such amount, such Bank may use any reasonable averaging and attribution methods. A certificate of any Bank claiming compensation under this Section and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder and the basis for the calculation thereof shall be conclusive in the absence of manifest error. The Company shall not be obligated to pay any additional amounts with respect to a demand under SECTION 2.12(a) or 2.12(b) that are attributable to the period (the "EXCLUDED PERIOD") ending 120 days prior to the Company's receipt of the certificate with respect to such demand required under SECTION 2.12(c); PROVIDED, HOWEVER, that to the extent such additional amounts accrue during the Excluded Period because of the retroactive effect of the applicable law, rule, regulation, guideline or request promulgated during the 120 day period prior to the Company's receipt of such certificate, the limitation set forth in this SECTION 2.11(d) shall not apply. SECTION 2.13. ILLEGALITY. (a) In the event that any Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) at any time that the making or continuance of any of its Eurocurrency Advances in Dollars or in any Alternative Currency has become unlawful because of the introduction of or any change in or in the interpretation of any law or regulation or because of the assertion of unlawfulness by any central bank or other governmental authority, then, in any such event, such Bank shall give prompt notice (by telephone confirmed in writing) to the Company and to the Agent of such determination (which notice the Agent shall promptly transmit to the other Banks). (b) Upon the giving of the notice to the Company referred to in SUBSECTION (a) above, then (i) the obligation of the Banks to make, or to Convert A Advances into or to continue A Advances as such Eurocurrency Advances shall be suspended until the applicable Bank notifies the Agent and the Agent shall notify the Company and the Banks that the circumstances causing such suspension no longer exist, and (ii) if any affected Eurocurrency Advances are then outstanding, the Company shall (or shall cause the affected Borrower), upon at least one Business Day's written notice to the Agent (and, if the affected Eurocurrency Advances are denominated in any Alternative Currency, the Euro- Agent) and the affected Bank, or if permitted by applicable law no later than the date permitted thereby, in the Company's sole discretion, either (i) prepay the principal amount of all outstanding Eurocurrency Advances of such Bank to which such notice related, together with accrued interest thereon to the date of payment or (ii) Convert or Redenominate each such Eurocurrency Advance into a Base Rate Advance, and, in each case be obligated to reimburse -35- the Banks in respect thereof pursuant to SECTION 9.04(b) hereof. If more than one Bank gives notice pursuant to SECTION 2.13(a) at any time, then all outstanding Eurocurrency Advances of such Banks must be treated the same by the applicable Borrower pursuant to this SECTION 2.13(b). Any Base Rate Advance arising by reason of this SECTION 2.13(b) shall have an Interest Period assigned to it that ends on the date that the Eurocurrency Advance for which it shall have been substituted would have expired, and the principal thereof and interest thereon shall be payable on the date that principal and interest would otherwise have been payable on such Eurocurrency Advance. Such Base Rate Advance may not be prepaid at any time prior to the date that the Eurocurrency Advances comprising a part of such A Borrowing shall be prepaid. SECTION 2.14. PAYMENTS AND COMPUTATIONS. (a) The Borrowers shall make each payment hereunder and under the Notes (except with respect to principal of, interest on, and other amounts relating to Advances denominated in an Alternative Currency) not later than 11:00 A.M. (New York City time) on the day when due in Dollars to the Agent in same day funds by deposit of such funds to the Agent's account maintained at the Payment Office for Dollars in New York City. The Borrowers shall make each payment hereunder and under the Notes with respect to principal of, interest on, and other amounts relating to Advances denominated in an Alternative Currency not later than 11:00 A.M. (London time) on the day when due in such Alternative Currency to the Euro-Agent in same day funds by deposit of such funds to the Euro-Agent's account maintained at the Payment Office for such Alternative Currency. The Agent or the Euro-Agent will give the Company prior notice of the due date of the principal of any A Advance and of the due date and amount of any fees payable hereunder; PROVIDED that the failure to give any such prior notice shall not limit the Company's or the applicable Borrower's liability for such payment, but shall delay the due date of such payment for purposes of SECTIONS 6.01(a) or (b), as applicable, by the number of days after such due date that such notice is given. The Agent or Euro-Agent, as applicable, will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees ratably (other than amounts payable pursuant to SECTION 2.03, 2.08, 2.12 or 2.17) to the Banks for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Bank to such Bank for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. (b) Each Borrower hereby authorizes each Bank, if and to the extent payment owed to such Bank by such Borrower is not made when due hereunder or under the Note held by such Bank, to charge from time to time against any or all of such Borrower's accounts with such Bank any amount so due. Each Bank agrees promptly to notify the Company after any such charge, provided that the failure to give such notice shall not affect the validity of such charge. (c) All computations of interest based on the Base Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations -36- of interest based on the Adjusted CD Rate, the Eurocurrency Rate or the Federal Funds Rate and of fees shall be made by the Agent or Euro-Agent, as applicable, and all computations of interest pursuant to SECTION 2.08 shall be made by a Bank, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or commitment fees are payable. Each determination by the Agent or Euro-Agent (or, in the case of SECTION 2.08, by a Bank) of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such cases be included in the computation of payment of interest or commitment fee, as the case may be; PROVIDED, HOWEVER, if such extension would cause payment of interest on or principal of Eurocurrency Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Agent or Euro-Agent shall have received notice from a Borrower prior to the date on which any payment is due from such Borrower to the Banks hereunder that such Borrower will not make such payment in full, the Agent or Euro-Agent, as applicable, may assume that such Borrower has made such payment in full to it on such date and it may, in reliance upon such assumption, cause (but shall not be required to 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 such Borrower shall not have so made such payment in full to the Agent or Euro-Agent, as applicable, each Bank shall repay to the Agent or Euro-Agent, as applicable, 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 Agent or Euro- Agent, as applicable, at the Federal Funds Rate. SECTION 2.15. SHARING OF PAYMENTS, ETC. If any Bank shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances made by it (other than pursuant to SECTION 2.08, 2.12 or 2.17) in excess of its ratable share of payments on account of the A Advances obtained by all the Banks, such Bank shall forthwith purchase from the other Banks such participations in the A Advances made by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them, PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each Bank shall be rescinded and such Bank shall repay to the purchasing Bank the purchase price to the extent of such recovery together with an amount equal to such Bank's ratable share (according to the proportion of (i) the amount of such Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. Each Borrower agrees that any Bank so purchasing a participation from another -37- Bank pursuant to this SECTION 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Bank were the direct creditor of such Borrower in the amount of such participation. SECTION 2.16. CURRENCY EQUIVALENTS. For purposes of determining compliance with the provisions of this ARTICLE II at any time, the equivalent in Dollars in respect of any Advance denominated (or proposed to be denominated) in an Alternative Currency shall be determined in accordance with SECTION 2.02(a), SECTION 2.03(c)(i), SECTION 2.09, SECTION 2.10 or SECTION 2.13 by the Euro- Agent, in consultation with the Company, immediately prior to the issuance by the Company of the Notice of Borrowing requesting such Advances or any notice of Conversion or continuation or Notice of Redenomination with respect to such Advances. Any equivalent determined in accordance with SECTION 2.02(a), SECTION 2.03(c)(i), SECTION 2.09, SECTION 2.10, SECTION 2.13 or this SECTION 2.16 shall be deemed to remain in effect at all times during (and until the last day of) the applicable Interest Period in respect of the Advances comprising the applicable Borrowing, notwithstanding any fluctuation in exchange rates occurring prior to the last day of such Interest Period. SECTION 2.17. TAXES. (a) Subject to SECTION 2.17(f), any and all payments by each Borrower hereunder or under the Notes shall be made, in accordance with SECTION 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, in the case of each Bank, the Agent and the Euro-Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Bank, the Agent or the Euro-Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). Subject to SECTION 2.17(f), if any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank, the Agent or the Euro-Agent, (i) the sum payable by such Borrower shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this SECTION 2.17(a)) such Bank, the Agent or the Euro-Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrowers jointly and severally agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the -38- Notes (hereinafter referred to as "OTHER TAXES"). The Agent and Euro-Agent may demand payment of, and seek recourse on, any Other Taxes from any Borrower, without any requirement that the Agent or the Euro-Agent allocate the reimbursement obligation for such Other Taxes among the Borrowers. (c) Each Borrower will indemnify each Bank, the Agent and the Euro- Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this SECTION 2.17) paid by such Bank, the Agent or the Euro-Agent (as the case may be) and any liability (including penalties, interest and expenses reasonably incurred) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Bank, the Agent or the Euro-Agent (as the case may be) makes written demand therefor. (d) The Agent and Euro-Agent may, from time to time, request that the Company furnish (and the Company shall, promptly following any such request, furnish) to the Agent and the Euro-Agent the originals or certified copies of receipts evidencing the payment of Taxes by and on behalf of the Borrowers or, if no Taxes are payable in respect of any payment hereunder or under the Notes, a certificate from each appropriate taxing authority, or an opinion of counsel acceptable to the Agent, in either case stating that such payment is exempt from or not subject to Taxes. (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrowers contained in this SECTION 2.17 shall survive the payment in full of principal and interest hereunder and under the Notes. (f) On or prior to the Restatement Date (or, in the case of any assignee party to an Assignment and Acceptance or any new Bank added pursuant to an Assumption and Acceptance, on the effective date of its becoming a "Bank" hereunder), each Bank organized under the laws of a jurisdiction outside the United States shall provide the Agent with the forms prescribed by the Internal Revenue Service of the United States certifying such Bank's exemption from United States withholding taxes with respect to all payments to be made to such Bank hereunder and under any of the Notes, and each such Bank shall thereafter provide the Agent with such supplements and amendments thereto and such additional forms as may from time to time be required by applicable law. If a Bank that is organized under the laws of a jurisdiction outside the United States shall fail to deliver, or improperly delivers, the forms described in this SECTION 2.17(f), SECTION 2.17(a) shall not apply with respect to any payments made to such Bank under this Agreement during the period that such failure or deficiency shall continue, and the Borrowers, the Agent or the Euro- Agent shall be permitted to withhold United States federal, state and local income taxes from any payments made under this Agreement at the applicable statutory rate. -39- (g) If any Bank determines, in its sole discretion, that it has actually and finally realized, by reason of a refund, deduction or credit of any Taxes or Other Taxes paid or reimbursed by a Borrower pursuant to this SECTION 2.17 in respect of payments under the Credit Agreement or the Notes, a current monetary benefit that it would otherwise not have obtained but for such refund, deduction or credit, and that would result in the total payments under this SECTION 2.17 exceeding the amount needed to make such Bank whole, such Bank shall pay to such Borrower, with reasonable promptness following the date on which it actually realizes such benefit, an amount equal to the lesser of the amount of such benefit or the amount of such excess, in each case net of all reasonable out-of-pocket expenses in securing such refund, deduction or credit. SECTION 2.18. SUBSTITUTION OF BANKS. In the event that (x) any one or more Banks, pursuant to SECTION 2.12 hereof, incurs any increased costs, receives a reduced payment or is required to make any payment for which any such Bank demands compensation pursuant to such Section, or makes a claim for indemnity or compensation under SECTION 2.17 hereof with respect to a payment when no other Bank makes a claim for indemnity or compensation under SECTION 2.17 with respect to such payment, in any such case which compensation or indemnity increases the effective lending rate of such Bank with respect to its share of the A Advances in excess of the effective lending rate of the other Banks, and such Bank has not mitigated such increased costs, reduced payment or additional payment within 30 days after receipt by such Bank from the Company of a written notice that such Bank's effective lending rate has so exceeded the effective lending rate of the other Banks, (y) any one or more Banks have determined pursuant to SECTION 2.09(d) or 2.13(a) hereof that it may not make or maintain all or certain of its Eurocurrency Advances at such time (and the other Banks shall continue to be able to make or maintain their corresponding Eurocurrency Advances at such time) and the inability of such Bank to make or maintain such Eurocurrency Advances continues for 30 or more days after the receipt by such Bank from the Company of written notice of such inability and that the Company's request that such Bank alleviate such inability, or (z) any Bank shall decline (or be deemed to have declined) to extend its Commitment hereunder after a request for extension of Commitments pursuant to SECTION 2.19 and Banks holding Commitments equalling or exceeding 51% of the Total Commitment have agreed to extend their Commitments pursuant to such request, then and in any such event, the Company may substitute for such Bank an existing Bank, or another financial institution which is acceptable to the Agent, to assume the Commitment of such Bank and to purchase the A Note of such Bank hereunder, without recourse to or warranty (other than as to unencumbered ownership) by, or expense to, such Bank for a purchase price equal to the outstanding principal amount of the A Advances then payable to such Bank plus any accrued but unpaid interest and accrued but unpaid fees with respect thereto. Such purchase shall be effected by execution and delivery by such Bank and its replacement of an Assignment and Acceptance, and shall otherwise be made in the manner described in SECTION 9.08. Upon such purchase, such Bank shall no longer be a party hereto or have any rights or benefits hereunder (except for rights or benefits that such Bank would retain hereunder upon termination of this -40- Agreement) and the replacement Bank shall succeed to the rights and benefits, and shall assume the obligations, of such Bank hereunder and under such A Note. SECTION 2.19 EXTENSION OF COMMITMENTS. (a) One time during each period from the date that is 90 days prior to each Anniversary Date to the date that is 30 days prior to each such Anniversary Date, the Borrowers may, by written notice (an "EXTENSION REQUEST") given to the Agent, request that the Stated Termination Date be extended. Each such Extension Request shall contemplate an extension of the Stated Termination Date to a date that is one year after the Stated Termination Date then in effect. (b) The Agent shall promptly advise each Bank of its receipt of any Extension Request. Each Bank may, in its sole discretion, consent to a requested extension by giving written notice thereof to the Agent by not later than the date (the "EXTENSION CONFIRMATION DATE") that is 15 days after the date of the Extension Request, which consent shall be irrevocable when given. Failure on the part of any Bank to respond to an Extension Request by the applicable Extension Confirmation Date shall be deemed to be a denial of such request by such Bank. If all of the Banks shall consent in writing to the requested extension, such request shall be granted with respect to each consenting Bank. Promptly following the opening of business on the first Business Day following the applicable Extension Confirmation Date, the Agent shall notify the Company in writing as to whether the requested extension has been granted (such written notice being an "EXTENSION CONFIRMATION NOTICE") and, if granted, such extension shall become effective upon the issuance of such Extension Confirmation Notice. The Agent shall promptly thereafter provide a copy of such Extension Confirmation Notice to each Bank. If such extension is not granted, the Agent shall give the Company notice of the identity of any non- consenting Banks. If the Company replaces one or more non-consenting Banks pursuant to the provisions of SECTION 2.18, and any such replacement Bank becomes a Bank on or before the earlier of (i) 30 days after the Extension Confirmation Date and (b) 5 days before the applicable Anniversary Date, and consents to the Extension Request at the time it becomes a Bank, such consent shall be effective retroactively as of the Extension Confirmation Date. ARTICLE III CONDITIONS OF LENDING SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES. The obligation of each Bank to make its initial Advance on the occasion of the initial Borrowing by each Borrower (including each Borrowing Subsidiary) on or after the Restatement Date is subject to the conditions precedent that (i) all commitment, facility, agency and administrative fees provided for under the terms of this Agreement, accrued to the date of such initial Advance, shall have been paid by the Company and (ii) the Agent shall have received on or before the day of such initial Borrowing the following, each dated such day, or dated as of the 41- Restatement Date in the case of (1) the items specified in (c)(i), (e), and (f)(i), and (2) with respect to the Company, the items specified in items (a), (d)(i) and (g), in form and substance satisfactory to the Agent and (except for the Notes) in sufficient copies for each Bank: (a) The A Notes of such Borrower payable to the order of the Banks, respectively. (b) For the initial Borrowing by each Borrowing Subsidiary, an Election to Participate executed by such Borrowing Subsidiary and by the Company. (c) Certified copies of (i) for the initial Borrowing by the Company, the resolutions of the Board of Directors of the Company approving this Agreement and the Notes of the Company; (ii) for the initial Borrowing by each Borrowing Subsidiary, the resolutions or other authorizing action of the Board of Directors or other governing body of such Borrowing Subsidiary approving its Election to Participate, this Agreement and the Notes of such Borrowing Subsidiary, and the resolutions of the Board of Directors of the Company approving this Agreement and the addition of a Borrowing Subsidiary pursuant to the terms of this Agreement; and (iii) for the initial Borrowing by each Borrower, all documents evidencing other necessary corporate or other authorizing action and governmental approvals, if any, with respect to this Agreement and the Notes of such Borrower. (d) Signed copies of (i) a certificate of the Secretary or an Assistant Secretary or other appropriate officer or representative of such Borrower certifying the names and true signatures of the officers or other representatives of such Borrower authorized to sign this Agreement (if the Borrower is the Company), such Borrower's Election to Participate (if the Borrower is a Borrowing Subsidiary) and the Notes of such Borrower and the other documents or certificates to be delivered by such Borrower pursuant to this Agreement and (ii) for the initial Borrowing by each Borrower other than the Company, a certificate of the Secretary or an Assistant Secretary or other appropriate officer of the Company certifying the names and true signatures of the officers of the Company authorized to sign this Agreement and such Borrower's Election to Participate. The Agent may conclusively rely on each such certificate of such Borrower or of the Company until the Agent shall receive a further certificate of the Secretary or an Assistant Secretary or other representative of such Borrower or of the Company, as the case may be, cancelling or amending the prior certificate of such Borrower or of the Company, as the case may be, and submitting the signatures of the officers or other representatives named in such further certificate. -42- (e) A certificate executed by the Treasurer of the Company on behalf of the Company certifying that as of the Restatement Date, since December 31, 1995 there has been no material adverse change in the business, financial condition, operations, properties or performance of the Company and its Subsidiaries, taken as a whole, or in the ability of the Company to perform its obligations under this Agreement or any Note. (f) Favorable opinions of (i) for the initial Borrowing by the Company, the General Counsel of the Company in substantially the form of EXHIBIT E hereto and special counsel for the Company in substantially the form of EXHIBIT F hereto, (ii) for the initial Borrowing by each Borrowing Subsidiary, counsel for such Borrowing Subsidiary in substantially the form of EXHIBIT G hereto, the General Counsel of the Company in substantially the form of EXHIBIT H hereto and special counsel for the Company in substantially the form of EXHIBIT I hereto, and (iii) for any initial Borrowing, counsel for the Company or the applicable Borrowing Subsidiary as to such other matters as any Bank through the Agent may reasonably request. Such counsel shall be satisfactory to the Agent. (g) A favorable opinion of Sidley & Austin, counsel for the Agent and the Euro-Agent, in substantially the form of EXHIBIT J hereto. SECTION 3.02. CONDITIONS PRECEDENT TO EACH A BORROWING. The obligation of each Bank to make an A Advance on the occasion of each A Borrowing (including the initial A Borrowing) by each Borrower (including each Borrowing Subsidiary) shall be subject to the further conditions precedent that on the date of such A Borrowing (a) the following statements shall be true and the Agent shall have received for the account of such Bank a certificate signed by a duly authorized officer of the Company as follows: (i) The representations and warranties contained in subsections (a), (b), (c) and (d) of SECTION 4.01 and, if such A Borrowing is by a Borrowing Subsidiary, SECTION 4.02 (as to such Borrowing Subsidiary) are correct in all material respects on and as of the date of such A Borrowing, before and after giving effect to such A Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and (ii) No event has occurred and is continuing, or would result from such A Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default; and (b) if the Agent shall have reasonably requested prior to the delivery of the Notice of Borrowing for such A Borrowing, approvals, opinions or, pursuant to SECTION 5.01(b)(xiii), documents for the purpose of verifying compliance by the Company or any Borrower with the 43- terms of this Agreement or with applicable law, the Agent shall have received such approvals, opinions or documents. SECTION 3.03. CONDITIONS PRECEDENT TO CERTAIN BORROWINGS. The obligation of each Bank to make that portion of an A Advance on the occasion of any A Borrowing which would increase the aggregate outstanding amount in any currency of A Advances owing to such Bank from all Borrowers over the aggregate amount of A Advances owing to such Bank in such currency outstanding immediately prior to the making of such A Advance shall be subject to the further conditions precedent that on the date of such A Borrowing (i) the representations and warranties contained in subsections (e), (f), (g), (h), (i), (k), (l), (m) and (n) of SECTION 4.01 are correct in all material respects on and as of the date of such A Borrowing, before and after giving effect to such A Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; (ii) no event has occurred and is continuing, or would result from such A Borrowing or from the application of the proceeds therefrom, which would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (iii) the certificate furnished pursuant to SECTION 3.02 shall include statements to the effect of clauses (i) and (ii) above. SECTION 3.04. CONDITIONS PRECEDENT TO EACH B BORROWING. The obligation of each Bank which is to make a B Advance on the occasion of a B Borrowing (including the initial B Borrowing) to make such B Advance as part of such B Borrowing is subject to the conditions precedent that (i) at or before the applicable time and date before the date of such B Borrowing set forth in SECTION 2.03(b)(i) or 2.03(c)(i), as applicable, the Agent shall have received the Notice of B Borrowing with respect thereto, (ii) at or before the applicable time and date before the date of such B Borrowing set forth in SECTION 2.03(b)(iii) or 2.03(c)(iii), as applicable, the Agent shall have received the written confirmatory notice of such B Borrowing to be given by the Company pursuant to SECTION 2.03(b)(iii) or SECTION 2.03(c)(iii), as applicable, (iii) on or before the date of such B Borrowing but prior to such B Borrowing, the Agent shall have received a B Note signed by the applicable Borrower payable to the order of such Bank for each of the one or more B Advances to be made by such Bank as part of such B Borrowing, in a principal amount equal to the principal amount of the B Advance to be evidenced thereby and otherwise on such terms as were agreed to for such B Advance in accordance with SECTION 2.03, and (iv) on the date of such B Borrowing the following statements shall be 5true (and each of the giving of the applicable Notice of B Borrowing and the acceptance by such Borrower of the proceeds of such B Borrowing shall constitute a representation and warranty by the Company that on the date of such B Borrowing such statements are true): -44- (a) the representations and warranties contained in SECTION 4.01 (other than SUBSECTIONS (j) and (o) thereof) and, if such B Borrowing is by a Borrowing Subsidiary, SECTION 4.02 (as to such Borrowing Subsidiary) are correct in all material respects on and as of the date of such B Borrowing, before and after giving effect to such B Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and (b) No event has occurred and is continuing, or would result from such B Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default, or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. ARTICLE IV REPRESENTATION AND WARRANTIES SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Banks and the Agent as follows: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. (b) The execution, delivery and performance by the Company of this Agreement and its Notes are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Company's restated certificate of incorporation or by- laws or (ii) law or any contractual restriction binding on or affecting the Company. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of this Agreement or the Notes, except any such approvals, notices, actions or filings which have already been made, obtained or given. (d) This Agreement is, and the Company's Notes when delivered hereunder will be, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and to general principles of equity. (e) The consolidated balance sheets of the Company and its Consolidated Subsidiaries as of December 31, 1995, and the related statements of income, cash flows and shareholders' equity of the Company and its Consolidated Subsidiaries for -45- the fiscal year then ended, copies of which have been furnished to each Bank, fairly present the financial condition of the Company and its Consolidated Subsidiaries as at such date and the consolidated results of the operations of the Company and its Consolidated Subsidiaries for the period ended on such date, all in accordance with GAAP consistently applied. (f) There are no pending actions, suits or proceedings against the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is (in the best judgment of the Company) a reasonable possibility of an adverse decision which would affect (i) the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, to the extent that there is (in the best judgment of the Company) a reasonable possibility that such decision would prevent the Company from repaying its obligations in accordance with the terms of this Agreement or, (ii) the legality, validity or enforceability of this Agreement or any Note. (g) United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the year ended December 31, 1990. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any of its Subsidiaries, except such taxes or assessments, if any, as are being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes are, in the opinion of the Company, adequate. (h) Each of the Company's Significant Subsidiaries is a corporation duly incorporated, validly existing and in good standing (or the equivalent under applicable local law) under the laws of its jurisdiction of incorporation, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except in each case where the failure to do so could not reasonably be expected to affect (i) the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries to the extent that there is a reasonable possibility that such failure would prevent any of the Borrowers from repaying its obligations in accordance with the terms of this Agreement, or (ii) the legality, validity or enforceability of this Agreement. (i) The sum of the Insufficiencies of any and all Plans with respect to which a Termination Event has occurred and is still in existence (or, in the case of a Plan with respect to which a Termination Event described in clause (ii) of the definition of Termination Event has occurred, the liability related thereto) does not exceed $25,000,000. -46- (j) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) with respect to each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Agent, was complete and accurate and fairly presented the funding status and financial condition of such Plan as of the date of such Schedule B, and since such date there has been no material adverse change in such funding status or financial condition, considered in the aggregate, except for a decline, if any, in the funded ratio of the Ecolab Pension Plan primarily attributable to a decrease in the interest rate which must be used to measure pension plan liabilities. (k) Neither the Company nor any of its ERISA Affiliates has been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), is greater than $25,000,000. (l) Neither the Company nor any of its ERISA Affiliates has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Company and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years most recently ended by an amount exceeding $7,500,000 per annum. (m) The Company and its Subsidiaries are in compliance in all material respects with all environmental and hazardous waste laws, rules and regulations, and neither the Company nor any of its Subsidiaries has been cited as being in violation of such law, rule or regulation by any Federal, state or local governmental agency or other authority responsible for or having jurisdiction over hazardous waste disposal, where the failure to so comply or being so cited would (in the best judgment of the Company) affect the business, consolidated financial position or consolidated results of operations of the Company and its Subsidiaries, to the extent that there is (in the best judgment of the Company) a reasonable possibility that such non-compliance or being so cited or listed would prevent the Company from repaying its obligations under this Agreement in accordance with the terms hereof. (n) There are no pending or, to the knowledge of the Company, threatened actions, suits or proceedings against the Company or any of its Subsidiaries before any court or arbitrator or other governmental agency or authority arising out of or relating to hazardous waste disposal or environmental compliance or asserting a claim for damages based upon the use or other application of any products of the Company or any of its Subsidiaries, in which there is (in the best judgment of the Company) a reasonable possibility of an adverse decision which would affect the business, -47- consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries to the extent that there is (in the best judgment of the Company) a reasonable possibility that such decision would prevent the Company from repaying its obligations under this Agreement in accordance with the terms hereof. (o) As of the Restatement Date, since December 31, 1995 there has been no material adverse change in the business, financial condition, operations, properties or performance of the Company and its Subsidiaries, taken as a whole, or in the ability of the Company to perform its obligations under this Agreement or any Note. SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF BORROWING SUBSIDIARIES. Each Borrowing Subsidiary shall be deemed by the execution and delivery of its Election to Participate to have represented and warranted as of the date thereof that: (a) It is duly organized, validly existing and in good standing (or its equivalent under local law) under the laws of the jurisdiction of its organization. (b) The execution and delivery by it of its Election to Participate and in its Notes and the performance by it of this Agreement and its Notes are within its powers, have been duly authorized by all necessary action, and do not contravene (i) its constituent documents or (ii) law or any contractual restriction binding on or affecting such Borrowing Subsidiary. (c) This Agreement constitutes a legal, valid and binding agreement of such Borrowing Subsidiary, and its Notes, when executed and delivered in accordance with this Agreement, will constitute legal, valid and binding obligations of such Borrowing Subsidiary, enforceable against such Borrowing Subsidiary in accordance with their respective terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and to general principles of equity. ARTICLE V COVENANTS OF THE COMPANY SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Note shall remain unpaid or any Bank shall have any Commitment hereunder, the Company will, unless the Majority Banks shall otherwise consent in writing: (a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, (i) paying before the same become delinquent all taxes, assessments and governmental charges imposed -48- upon it or upon its property except to the extent contested in good faith, and (ii) required capitalization of each Borrowing Subsidiary, except in each case where the failure to do so could not reasonably be expected to affect (i) the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries to the extent that there is a reasonable possibility that such failure would prevent any of the Borrowers from repaying its obligations in accordance with the terms of this Agreement, or (ii) the legality, validity or enforceability of this Agreement. (b) REPORTING REQUIREMENTS. Furnish to the Banks: (i) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company, the consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the consolidated statement of income and shareholders' equity and the consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by a designated financial officer of the Company; (ii) as soon as available and in any event within 120 days after the end of each fiscal year of the Company, a copy of the annual report for such year for the Company and its Consolidated Subsidiaries, containing financial statements for such year certified in a manner acceptable to the Majority Banks by Coopers & Lybrand or other independent public accountants acceptable to the Majority Banks; (iii) simultaneously with the delivery of each set of financial statements referred to in clauses (i) and (ii) above, a certificate of a designated financial officer of the Company (A) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of SECTIONS 5.02(a), and 5.03 on the date of such financial statements and (B) stating whether there exists on the date of such certificate any Event of Default or condition or event which with notice or lapse of time or both would become an Event of Default and, if any Event of Default or any such condition or event then exists, setting forth the details thereof and the action which the Company is taking with respect thereto; (iv) promptly after the sending or filing thereof, copies of all reports which the Company sends generally to its security holders, and copies of all periodic reports (including reports on Form 8-K) and all -49- registration statements which the Company or any Subsidiary files with the Securities and Exchange Commission (other than registration statements on Form S-8 or Form 11-K, or registration statements on Form S-3 relating solely to the registration of securities for resale by the holders thereof); (v) as soon as possible and, in any event, within 14 Business Days after the Company (in its best judgment) has made a determination pursuant to any notice or claim received by the Company or any of its Subsidiaries to the effect that the Company or any of its Subsidiaries is a potentially responsible party for response costs incurred or to be incurred at any facility, other than a facility owned or operated by the Company or any of its Subsidiaries under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or any state equivalent, that the potential liability (taking into account the probability that other Persons will provide contributions or otherwise share in the response costs to be incurred at the facility) of the Company or any of its Subsidiaries could reasonably be expected to exceed $25,000,000, a copy of such notice or claim and a statement of an officer of the Company explaining the Company's understanding of the basis for such notice or claim; (vi) as soon as possible and, in any event, within 14 Business Days from the date the Company (in its best judgment) makes a determination, pursuant to any notice given with respect to property owned or operated by the Company or any of its Subsidiaries, to Federal or state environmental agencies under any applicable environmental requirement of law, reporting the release of a hazardous or toxic waste, substance, pollutant or contaminant, including petroleum-based substances or wastes, into the environment, that the potential liability (taking into account the probability that other Persons will provide contributions or otherwise share in the response costs to be incurred at the facility) of the Company or any of its Subsidiaries could reasonably be expected to exceed $25,000,000, a copy of such notice and a statement of an officer of the Company explaining the Company's understanding of the basis for such notice; (vii) as soon as possible and, in any event, within 14 Business Days after the Company acquires actual knowledge that the operations or facilities of the Company or any of its Subsidiaries has become the subject of any state or federal investigation evaluating whether any remedial action pursuant to the National Contingency Plan, or any state equivalent, is needed to respond to a release or threatened release of a -50- hazardous or toxic waste, substance, pollutant or contaminant, including petroleum-based substances or wastes, into the environment, if it could reasonably be expected that the cost to the Company and its Subsidiaries of the anticipated remedial action would exceed $25,000,000 a statement by an officer of the Company informing the Banks of such investigation and explaining the Company's understanding of the basis for such investigation; (viii) as soon as possible and, in any event, within 14 Business Days after the Company acquires actual knowledge that any of the operations or facilities of the Company or any of its Subsidiaries becomes listed or is proposed for listing on the National Priorities List in accordance with 40 C.F.R. Part 300, Appendix B, or any state equivalent, and it could reasonably be expected that the cost to the Company and its Subsidiaries of response costs related thereto would equal or exceed $12,500,000, or receives any written notice or claim to the effect that it is a potentially responsible party for response costs involving an aggregate cost to the Company or its Subsidiaries of $25,000,000 or more incurred or to be incurred under CERCLA or any state equivalent, at any facility owned or operated by the Company or any of its Subsidiaries, a statement by an officer of the Company so informing the Banks and explaining the Company's understanding of the basis for such listing or notice; (ix) as soon as possible and in any event (A) within 45 days after the Company or any of its ERISA Affiliates acquires actual knowledge that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred, and (B) within 14 days after the Company or any of its ERISA Affiliates acquires actual knowledge that any other Termination Event with respect to any Plan has occurred, (PROVIDED, HOWEVER, that the statement referred to below would not be required if (1) such Termination Event is described in clause (ii) of the definition of Termination Event, unless the occurrence of such Termination Event could reasonably be expected to or does result in aggregate liability of the Company and all ERISA Affiliates of the Company to any Multiple Employer Plan or to the PBGC of more than $25,000,000, (2) such Termination Event is described in clause (iii) of the definition of Termination Event, unless such Termination Event is not a "standard termination" as defined in Section 4041 of ERISA, or (3) it could not reasonably be expected that the aggregate cost to the Company and its Subsidiaries of any event set forth in clause (A) or (B) of this SECTION -51- 5.01(b)(ix) and not otherwise excluded from the reporting requirements of this Section would exceed $5,000,000) a statement of an officer of the Company describing such Termination Event and the action, if any, which the Company or any of its ERISA Affiliates proposes to take with respect thereto; (x) promptly and in any event within 5 Business Days after receipt thereof by the Company or any of its ERISA Affiliates, copies of each notice received by the Company or any such ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (xi) promptly and in any event within 14 Business Days after receipt thereof by the Company or any of its ERISA Affiliates from the sponsor of a Multiemployer Plan, if the amount of liability incurred or expected to be incurred pursuant to such notice exceeds $10,000,000, a copy of each such notice received by the Company or such ERISA Affiliate concerning (A) the imposition of Withdrawal Liability by such Multiemployer Plan, (B) the determination that such Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of such Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or expected to be incurred, by the Company or any such ERISA Affiliate, as the case may be, in connection with any event described in clause (A), (B) or (C) above; (xii) as soon as possible and, in any event, within 5 Business Days after the Company acquires actual knowledge that either of its Credit Ratings has changed, written notice informing the Agent of such change; and (xiii) promptly, and in any event as soon as reasonably practicable, such other information with respect to the condition or operations, financial or otherwise, of the Company or any of its Subsidiaries or ERISA Affiliates as any Bank through the Agent may from time to time reasonably request, including, without limitation, Schedule B (Actuarial Information) to the annual reports (Form 5500 Series) filed with the Internal Revenue Service for each Plan. (c) CORPORATE EXISTENCE. Subject to SECTION 5.02(b), preserve and keep, and will cause each of its Subsidiaries to preserve and keep, its corporate existence, rights, franchises and licenses in full force and effect, PROVIDED, HOWEVER, that the Company may terminate the corporate existence of any Subsidiary, or permit the termination or -52- abandonment of any Subsidiary, or permit the termination or abandonment of any right, franchise or license if, in the good faith judgment of the appropriate officer or officers of the Company, such termination or abandonment is not materially disadvantageous to the Company and is not materially disadvantageous to the Banks or the holders of the Notes. (d) INSURANCE. Maintain, and cause each of its Subsidiaries to maintain, insurance with sound and reputable insurers covering all such properties and risks as are customarily insured by, and in amounts not less than those customarily carried by, corporations engaged in similar businesses and similarly situated. (e) PROPERTIES. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, in all material respects its properties which are deemed by the Company or such Subsidiary to be necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted. (f) BUSINESS. Without prohibiting the Company from making acquisitions or divestitures permitted under SECTION 5.02(b), remain in the same businesses, similar businesses or other manufacturing or service businesses reasonably related thereto, taken as a whole, as are carried on at the date of this Agreement. (g) USE OF PROCEEDS. Use the proceeds of the Advances made under this Agreement only for general corporate purposes, including, without limitation, the repurchase of shares of capital stock of the Company (as duly approved by the Company's board of directors from time to time), the repayment of other indebtedness and acquisitions. SECTION 5.02. NEGATIVE COVENANTS. So long as any Note shall remain unpaid or any Bank shall have any Commitment hereunder, the Company will not, without the written consent of the Majority Banks: (a) LIENS, ETC. Create or suffer to exist, or permit any of its Consolidated Subsidiaries to create or suffer to exist, any lien, security interest or other charge or encumbrance ("LIEN") upon or with respect to any of its properties (other than Margin Stock), whether now owned or hereafter acquired, or assign, or permit any of its Consolidated Subsidiaries to assign, any right to receive income, in each case to secure any Debt of any Person or entity, other than (i) Liens securing Debt which in the aggregate does not exceed $50,000,000 or (ii) Liens granted by any Consolidated Subsidiary as security for any Debt owing to the Company or to a Wholly-Owned Consolidated Subsidiary. (b) CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. Consolidate with or merge with or into any other Person or sell, lease or otherwise transfer all or a -53- majority of its assets (other than Margin Stock) to any other Person or permit any Significant Subsidiary to consolidate with, merge into or sell, lease or otherwise transfer all or a majority of its assets to any Person other than the Company or a Wholly-Owned Consolidated Subsidiary except: (i) the Company may merge or consolidate with any other corporation so long as the Company is the surviving corporation in such transaction and immediately after consummation of such transaction no event has occurred and is continuing which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; (ii) the Company may merge into any corporation solely for the purpose of redomiciling so long as the surviving corporation in such transaction expressly assumes all of the obligations of the Company under this Agreement, under its Notes and under the letter agreement referred to in SECTION 2.04(b) and immediately after consummation of such transaction no event has occurred and is continuing which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (iii) any Significant Subsidiary may consolidate or merge with or sell, lease or otherwise transfer all or more than a majority of its assets to any other Person so long as immediately after consummation of such transaction no event has occurred and is continuing which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. (c) USE OF PROCEEDS FOR SECURITIES PURCHASES. Use any proceeds of any Advance to acquire any security in any transaction which is subject to Section 13(d), 13(g) or 14(d) of the Exchange Act except to the extent such transaction complies with such Act and the rules and regulations thereunder. SECTION 5.03. FINANCIAL COVENANT. So long as any Note shall remain unpaid or any Bank shall have any Commitment hereunder, the Company will not, without the written consent of the Majority Banks, create or suffer to exist, or permit any of its Consolidated Subsidiaries to create or suffer to exist, any Debt, if, immediately after giving effect to such Debt and the receipt and application of any proceeds thereof, the ratio of Total Debt to Capitalization exceeds 0.55 to 1.00. -54- ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. EVENTS OF DEFAULT. If any of the following events ("Events of Default") shall occur and be continuing: (a) Any Borrower shall fail to pay any principal of any Note when due; or (b) Any Borrower shall fail to pay any fee under this Agreement or any interest on any Note within ten days after the due date thereof; or (c) Any written representation or warranty made by any Borrower herein or in connection with this Agreement shall prove to have been incorrect in any material respect when made; provided that if any such representation or warranty shall have been incorrect through inadvertence or oversight, no Event of Default shall occur if such representation or warranty shall be made correct within 30 days after any Borrower shall have discovered the error; or (d) The Company shall fail to perform or observe any of the covenants contained in SECTION 5.02 (other than with respect to any involuntary Lien for purposes of SECTION 5.02(a)) or SECTION 5.03 (with respect to a Total Debt to Capitalization ratio equal to or greater than 0.60 to 1.00); or the Company shall fail to perform or observe any other term, covenant (including SECTION 5.02(a) with respect to any involuntary Lien and SECTION 5.03 with respect to a Total Debt to Capitalization Ratio less than 0.60 to 1.00) or agreement contained in this Agreement, other than in (a) or (b) above, on its part to be performed or observed and such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Company by the Agent or any Bank; or (e) The Company or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Debt which is outstanding in a principal amount of at least $20,000,000 (or its equivalent in any other currency) in the aggregate (but excluding Debt evidenced by the Notes) of the Company or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of -55- such event or condition is to accelerate the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment or a prepayment required due to a voluntary sale or condemnation of collateral securing such Debt, or in the case of Debt which was Debt of an entity acquired by the Company or any of its Subsidiaries and which Debt was assumed by the Company or such Subsidiary as part of such acquisition, a prepayment required due to a sale or other transfer or condemnation of assets), prior to the stated maturity thereof; or (f) The Company or any of its Significant Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Company or any of its Significant Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property, and in the event of any such proceeding instituted against the Company or any of its Significant Subsidiaries, such proceeding shall remain undismissed or unstayed for a period of 60 days or shall result in the entry of an order for relief, the appointment of a trustee or receiver, or other result adverse to the Company or such Significant Subsidiary; or the Company or any of its Significant Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or (g) Any judgment or order for the payment of money (to the extent not covered by insurance under which the insurer has admitted its liability in writing) in excess of $10,000,000 (or its equivalent in any other currency) shall be rendered against the Company or any of its Subsidiaries and (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order and there shall be any time at which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect or (ii) enforcement proceedings shall not have been commenced by any creditor upon such judgment or order and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Majority Banks, by notice to the Company, declare the obligation of each Bank to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the -56- request, or may with the consent, of the Majority Banks, by notice to the Company, declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company; PROVIDED, HOWEVER, that in the event of an Event of Default described in SECTION 6.01(f), (A) the obligation of each Bank to make Advances shall automatically be terminated and (B) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Company. ARTICLE VII THE AGENT AND THE EURO-AGENT SECTION 7.01. AUTHORIZATION AND ACTION. Each Bank hereby appoints and authorizes each of the Agent and the Euro-Agent to take such action as agent on its behalf and to exercise powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), neither the Agent nor the Euro-Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks, and such instructions shall be binding upon all Banks and all holders of Notes; PROVIDED, HOWEVER, that neither the Agent nor the Euro-Agent shall be required to take any action which exposes the Agent or the Euro-Agent to personal liability or which is contrary to this Agreement or applicable law. Each of the Agent and the Euro-Agent agrees to give to each Bank prompt notice of each written notice given to it by the Company pursuant to the terms of this Agreement. SECTION 7.02. AGENT'S RELIANCE, ETC. Neither the Agent, the Euro- Agent, or any Affiliate of either of them, nor any of their respective Directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each of the Agent and the Euro- Agent: (i) may treat the Bank that made any Advance as the holder of the Debt resulting therefrom until the Agent receives and accepts an Assignment and Acceptance entered into by such Bank, as assignor, and an Eligible Assignee, as assignee, as provided in SECTION 9.08; (ii) may consult with legal counsel (including counsel for any of the Borrowers), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations (whether -57- written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of any of the Borrowers or to inspect the property (including the books and records) of any of the Borrowers; (v) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. CITIBANK AND AFFILIATES. With respect to its Commitment the Advances made by it and the notes issued to it, Citibank shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Company, any of its Subsidiaries (including, without limitation, any Borrowing Subsidiary) and any Person who may do business with or own securities of the Company or any of its Subsidiaries all as if Citibank were not the Agent and Citibank International Plc were not the Euro-Agent and without any duty to account therefor to the Banks. SECTION 7.04. BANK CREDIT DECISION. Each Bank acknowledges that it has, independently and without reliance upon the Agent, the Euro-Agent or any other Bank and based on the financial statements referred to in SECTION 4.01 and such other 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 the Agent, the Euro-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 action under this Agreement. SECTION 7.05. INDEMNIFICATION. The Banks agree to indemnify the Agent and the Euro-Agent (to the extent not reimbursed by the Borrowers), ratably according to the respective principal accounts of the A Notes then held by each of them (or if no A Notes are at the time outstanding or if any A Notes are held by Persons which are not Banks, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent or the Euro-Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent or the Euro-Agent under this Agreement, PROVIDED that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's or the Euro-Agent's gross negligence or wilful -58- misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Agent or the Euro-Agent, as applicable, promptly on demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent and the Euro-Agent are not reimbursed for such expenses by the Borrowers. SECTION 7.06. SUCCESSOR AGENTS. Either of the Agents may resign at any time by giving written notice thereof to the Banks and the Company and may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint one of the Banks as the successor Agent and such Bank or an affiliate of such Bank as the successor Euro-Agent. If no successor Agent or Euro-Agent, as applicable, shall have been so appointed by the Majority Banks, and shall have accepted such appointment, within 30 days after the retiring Agent's or retiring Euro-Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Agent or retiring Euro-Agent, then the retiring Agent or retiring Euro-Agent may, on behalf of the Banks, appoint one of the Banks (or an affiliate of one of the Banks, in the case of a successor Euro-Agent) as its successor. If none of the Banks will accept such an appointment, the retiring Agent or Euro-Agent, as applicable, may, on behalf of the Banks, appoint a successor Agent or Euro-Agent, as applicable, which, in the case of a successor Agent, shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000, and in the case of a successor Euro-Agent, shall be a commercial bank organized under the laws of any country which is a member of the OECD, or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000 or the local currency equivalent thereof, PROVIDED that such bank is located in, or acting through a branch or agency located in, London, England. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, or as Euro-Agent hereunder by a successor Euro-Agent, such successor shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent or the retiring Euro-Agent, as applicable, and the retiring Agent or the retiring Euro-Agent, as applicable, shall be discharged from its duties and obligations under this Agreement. The successor Agent or the successor Euro-Agent, as applicable, shall immediately notify the Company of such appointment. After any retiring Agent's or retiring Euro-Agent's resignation or removal hereunder as Agent or Euro-Agent, as applicable, the provisions of this ARTICLE VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent or Euro-Agent, as applicable, under this Agreement. -59- ARTICLE VIII GUARANTY SECTION 8.01. THE GUARANTY. The Company hereby unconditionally and irrevocably guarantees the due and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by any Borrowing Subsidiary pursuant to this Agreement, and the due and punctual payment of all other amounts payable by any Borrowing Subsidiary under this Agreement. Upon failure by any Borrowing Subsidiary to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid in the currency, at the place, in the manner and with the effect otherwise specified in ARTICLE II of this Agreement. SECTION 8.02. GUARANTY UNCONDITIONAL. The obligations of the Company hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any Borrowing Subsidiary under this Agreement or any Note or the exchange, release or non-perfection of any collateral security therefor; (ii) any modification or amendment of or supplement to this Agreement or any Note: (iii) any change in the corporate existence, structure or ownership of any Borrowing Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Borrowing Subsidiary or its assets; (iv) the existence of any claim, set-off or other rights which the Company may have at any time against any Borrowing Subsidiary, the Agent, the Euro-Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, PROVIDED that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (v) any invalidity or unenforceability relating to or against any Borrowing Subsidiary for any reason of any provision or all of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by any Borrowing Subsidiary of the principal of or interest on any Note or any other amount payable by it under this Agreement; or -60- (vi) any other act or omission to act or delay of any kind by any Borrowing Subsidiary, the Agent, the Euro-Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Company's obligations hereunder. SECTION 8.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full force and effect until the principal of and interest on the Notes and all other amounts payable by the Company and each Borrowing Subsidiary under this Agreement shall have been paid in full and shall survive the Termination Date. If at any time any payment of the principal of or interest on any Note or any other amount payable by any Borrowing Subsidiary under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Borrowing Subsidiary or otherwise, the Company's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. SECTION 8.04. WAIVER BY THE COMPANY. The Company irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any right be exhausted or any action be taken by the Agent, the Euro-Agent, any Bank or any other Person against any Borrowing Subsidiary or any other Person or any collateral security. SECTION 8.05. SUBROGATION. Upon making any payment hereunder, the Company shall be subrogated to the rights of the Banks against any such Borrowing Subsidiary with respect to such payment; PROVIDED that the Company shall not enforce any right or demand or receive any payment by way of subrogation until all amounts of principal of and interest on the Notes of such Borrowing Subsidiary and all other amounts payable by such Borrowing Subsidiary under this Agreement have been paid in full. SECTION 8.06. STAY OF ACCELERATION. In the event that acceleration of the time for payment of any amount payable by any Borrowing Subsidiary under this Agreement or any of its Notes is stayed upon the insolvency, bankruptcy or reorganization of such Borrowing Subsidiary, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Agent for the account of the Banks. ARTICLE IX MISCELLANEOUS SECTION 9.01. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or the A Notes, nor consent to any departure by any Borrower therefrom, -61- shall in any event be effective unless the same shall be in writing and signed by the Majority Banks, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; PROVIDED, HOWEVER, that (a) no amendment, waiver or consent shall, unless in writing and signed by all the Banks, do any of the following: (i) waive any of the conditions specified in SECTION 3.01, 3.02, 3.03 (if and to the extent that the A Borrowing which is the subject of such waiver would involve an increase in the aggregate outstanding amount of A Advances over the aggregate amount of A Advances outstanding immediately prior to such A Borrowing) or 3.04; PROVIDED that the conditions set forth in SECTIONS 3.04(iii) and 3.04(iv) with respect to any B Borrowing may be waived by the Banks making B Advances as part of such B Borrowing; (ii) increase the Commitments of the Banks (other than pursuant to the terms of SECTION 2.05(b)) or subject the Banks to any additional obligations, (iii) reduce the principal of, or interest on, the A Notes or any fees or other amounts payable hereunder, (iv) postpone any date fixed for any payment of principal of, or interest on, the A Notes or any fees or other amounts payable hereunder, (v) release the Company's guaranty obligations pursuant to ARTICLE VIII, (vi) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes which shall be required for the Banks or any of the Banks to take any action hereunder or (vii) amend this SECTION 9.01; (b) after a Change of Control has occurred, no amendment, waiver or consent shall be effective with respect to SECTION 5.03 unless the same shall be in writing and signed by Banks holding at least 65% of the then aggregate unpaid principal amount of the A Notes held by Banks, or, if no such principal amount is then outstanding, Banks having at least 65% of the Commitments; and (c) no amendment, waiver or consent shall, unless in writing and signed by the Agent and/or the Euro-Agent in addition to the Banks required above to take such action, affect the rights or duties of the Agent and/or the Euro-Agent, as applicable, under this Agreement. SECTION 9.02. NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic, telex or cable communication) and mailed, telecopied, telegraphed, telexed, cabled or delivered, (i) if to the Company, at its address at Ecolab Center, St. Paul, Minnesota 55102, Attention: Treasurer, Telecopier No. 612-293-2401, with a copy to the Company at the same address, Attention: General Counsel; (ii) if to any Borrowing Subsidiary, at its address specified in its Election to Participate; (iii) if to any Bank, at its Domestic Lending Office specified opposite its name on SCHEDULE I hereto or specified in the Assignment and Acceptance or Assumption and Acceptance pursuant to which it became a party hereto; (iv) if to the Agent, at its address at Bank Loan Syndications, One Court Square, 7th Floor, Long Island City, New York 11120, Attention: Kim Coley, -62- Telecopier No. 718-248-4844, with a copy to Citicorp Securities, Inc., 200 South Wacker Drive, Chicago, Illinois 60606, Attention: Lesley Noer, Telecopier No. 312-993-1050; and (v) if to the Euro-Agent, at its address at Riverdale House, 68 Molesworth Street, Lewisham SE13 7EU, England, Attention: ANDREW BENNETT, Loans Agency, Telecopier No. 0171-500-4482, Telex No. 299831 CIBLA; or, as to the Company, the Agent or the Euro-Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Company, the Agent and the Euro-Agent. All such notices and communications shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective when deposited in the mails, telecopied, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to the Agent or the Euro-Agent pursuant to ARTICLE II or VII shall not be effective until received by the Agent or the Euro-Agent, as applicable. SECTION 9.03. NO WAIVER; REMEDIES. No failure on the part of any Bank or the Agent or Euro-Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.04. COSTS AND EXPENSES. (a) The Company agrees to pay on demand all reasonable, out-of-pocket costs and expenses of the Agent and the Euro-Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, the notes and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent and the Euro-Agent with respect thereto and with respect to advising the Agent and the Euro-Agent as to rights and responsibilities under this Agreement, and all costs and expenses, if any, of the Agent, the Euro-Agent and the Banks (including, without limitation, reasonable counsel fees and expenses, which may be allocated costs of counsel who are employees of any Bank) in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, reasonable counsel fees and expenses in connection with the enforcement of rights under this SECTION 9.04(a). (b) If any payment of principal of any Adjusted CD Rate Advance or Eurocurrency Advance is made other than on the last day of the Interest Period for such Advance, as a result of acceleration of the maturity of the Notes pursuant to SECTION 6.01 or for any other reason, including the purchase of a participation pursuant to SECTION 2.05(c), the applicable Borrower shall, upon demand by any Bank (with a copy of such demand to the -63- Agent), pay to the Agent for the account of such Bank any amounts required to compensate such Bank for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss, cost or expense reasonably incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Bank to fund or maintain such Advance. Such Bank's demand shall set forth the reasonable basis for calculation of such loss, cost or expense. SECTION 9.05. RIGHT OF SET-OFF. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making by the Majority Banks of the request or the granting of the consent specified by SECTION 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of SECTION 6.01, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank to or for the credit or the account of the Company or the applicable Borrowing Subsidiary against any and all of the obligations of the Company or the applicable Borrowing Subsidiary now or hereafter existing under this Agreement and the Note held by such Bank irrespective of whether or not such Bank shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Bank agrees promptly to notify the Company after any such set-off and application made by such Bank, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Bank may have. SECTION 9.06. JUDGMENT. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder or under the Notes in any currency (the "ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY") the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Euro-Agent could purchase the Original Currency with the Other Currency at London, England on the third Business Day preceding that on which final judgment is given. (b) The obligation of the applicable Borrower in respect of any sum due in the Original Currency from it to any Bank or the Agent or Euro-Agent hereunder or under the Note held by such Bank shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by such Bank or the Agent or Euro-Agent (as the case may be) of any sum adjudged to be so due in such Other Currency such Bank or the Agent or Euro-Agent (as the case may be) may in accordance with normal banking procedures purchase the Original Currency with such Other Currency; if the amount of the Original Currency so purchased is less than the sum originally due to such Bank or the Agent or Euro-Agent (as the case may be) in the Original Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Agent or Euro-Agent (as the case may be) against such loss, and -64- if the amount of the Original Currency so purchased exceeds the sum originally due to any Bank or the Agent or Euro-Agent (as the case may be) in the Original Currency, such Bank or the Agent or Euro-Agent (as the case may be) agrees to remit to such Borrower such excess. SECTION 9.07. BINDING EFFECT. This Agreement shall become effective when it shall have been executed by the Company and the Agent and Euro-Agent and when the Agent shall have been notified by each Bank that such Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Borrowers, the Agent, the Euro-Agent and each Bank and their respective successors and assigns, except that the Borrowers shall not have the right to assign their respective rights hereunder or any interest herein without the prior written consent of the Banks. SECTION 9.08. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Bank may, upon obtaining the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed), assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) each such assignment shall be of a constant, and not a varying, percentage of all of the assigning Bank's rights and obligations so assigned, (ii) the amount of the Commitment of the assigning Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) may be in the amount of such Bank's entire Commitment but otherwise shall not be less than $15,000,000 and shall be an integral multiple of $500,000, (iii) each such assignment shall be to an Eligible Assignee and (iv) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,000; and PROVIDED, FURTHER, that, notwithstanding the foregoing, each Bank may, without the consent of the Company and without the payment of the processing and recordation fee, assign to one or more affiliates of such Bank all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least two Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and (y) the Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such Bank shall cease to be a party hereto). -65- (b) By executing and delivering an Assignment and Acceptance, the Bank assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or any Borrowing Subsidiary or the performance or observance by the Company or any Borrowing Subsidiary of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in SECTION 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Bank 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 action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each of the Agent and the Euro-Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent and the Euro- Agent, as applicable, by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (c) The Agent shall maintain at its address referred to in SECTION 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Advances owing to, each Bank from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agent, the Euro-Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Bank at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an assignee representing that it is an Eligible Assignee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of EXHIBIT C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrowers. -66- (e) Each Bank may sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the Advances owing to it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) such Bank's obligations under this Agreement (including, without limitation, its Commitment to the Borrowers hereunder) shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Bank shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrowers, the Agent, the Euro-Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, and (v) any agreement between such Bank and any participant in connection with such participating interest shall not restrict such Bank's right to agree to any amendment or waiver of any provision of this Agreement, or any consent to any departure by any Borrower therefrom, except (to the extent such participant would be affected thereby) a reduction of the principal of, or interest on, any Note or postponement of any date fixed for payment thereof or a release of the Company's guaranty obligations pursuant to ARTICLE VIII. (f) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this SECTION 9.08, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrowers furnished to such Bank by or on behalf of the Borrowers; PROVIDED that, prior to any such disclosure of non-public information, such Bank shall have obtained the Company's consent (which consent shall not be unreasonably withheld or delayed) and, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to the Borrowers received by it from such Bank. (g) Notwithstanding any other provisions set forth in this Agreement, any Bank at any time may assign, as collateral or otherwise, any of its rights (including, without limitation, rights to payments of principal of and/or interest on the Advances) under this Agreement to any Federal Reserve Bank without notice to or consent of the Company, any Borrowing Subsidiary, any other Bank, the Agent or the Euro-Agent. SECTION 9.09. CONSENT TO JURISDICTION. (a) Each Borrowing Subsidiary hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding arising out of or relating to this Agreement and hereby irrevocably agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or in such Federal court. Each Borrowing Subsidiary hereby irrevocably waives, to the fullest extent that it may effectively do so, the defense of an inconvenient forum to the maintenance of any such action or proceeding. Each Borrowing Subsidiary hereby irrevocably appoints CT Corporation System (the "PROCESS AGENT"), with an office on the date hereof at 1633 Broadway, New York, New York 10019, United States, as its agent to receive on behalf of such Borrowing Subsidiary and its property service of copies of the summons -67- and complaint and any other process which may be served in any such action or proceeding. Such service may be made by mailing or delivering a copy of such process to such Borrowing Subsidiary in care of the Process Agent at the Process Agent's above address with a copy to such Borrowing Subsidiary at its address specified in its Election to Participate, and such Borrowing Subsidiary hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. As an alternative method of service, each Borrowing Subsidiary also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such Borrowing Subsidiary at its address specified in its Election to Participate. Each Borrowing Subsidiary agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this SECTION 9.09 shall affect the right of the Agent, the Euro-Agent or any Bank to serve legal process in any other manner permitted by law or affect the right of the Agent or any Bank to bring any action or proceeding against any Borrowing Subsidiary or its property in the courts of any other jurisdictions. SECTION 9.10. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 9.11. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 9.12. INDEMNIFICATION. The Company agrees to indemnify and hold harmless the Agent, the Euro-Agent, each Bank and each of their affiliates and their respective directors, officers, employees and agents (each, an "INDEMNIFIED PARTY") from and against any and all claims, damages, liabilities and expenses (including, without limitation, fees and disbursements of counsel) which may be incurred by or asserted against any Indemnified Party in connection with or arising out of any investigation, litigation or proceeding related to the Notes, this Agreement, any of the transactions contemplated hereby, or the use of the proceeds of the Borrowings by the Borrowers, whether or not such Indemnified Party is a party thereto, PROVIDED, HOWEVER, that the Company shall not be liable for any portion of such claims, damages, liabilities and expenses of an Indemnified Party resulting from such Indemnified Party's gross negligence or willful misconduct or for such claims and liabilities settled without the consent of the Company. Each Bank agrees to give the Company prompt written notice of any investigation, litigation or proceeding which may lead to a claim for indemnification under this Section, PROVIDED that the failure to give such notice shall not affect the validity or enforceability of the indemnification hereunder. SECTION 9.13. CONFIDENTIALITY. Each Bank hereby agrees that it will use reasonable efforts to keep confidential any information from time to time supplied to it by the -68- Company under SECTION 5.01(b) or otherwise in connection with this Agreement, which the Company designates in writing at the time of its delivery to the Bank is to be treated confidentially; PROVIDED, HOWEVER, that nothing herein shall affect the disclosure of any such information to: (i) the extent required by statute, rule, regulation or judicial process; (ii) counsel for any Bank or the Agent or the Euro-Agent or to their respective accountants; (iii) bank examiners and auditors; (iv) the Agent, the Euro-Agent, any other Bank, or, subject to the provisions of SECTION 9.08(f), any transferee or prospective transferee of any Note; or (v) any other Person in connection with any litigation to which any one or more of the Banks is a party; PROVIDED FURTHER, HOWEVER, that each Bank hereby agrees that it will use reasonable efforts to promptly notify the Company of any request for information under this subpart (v) or with respect to any request for information not enumerated in this SECTION 9.13. SECTION 9.14. NON-RELIANCE BY THE BANKS. Each Bank by its signature to this Agreement represents and warrants that (i) it has not relied in the extension of the credit contemplated by this Agreement, nor will it rely in the maintenance thereof, upon any assets of the Company or its Subsidiaries consisting of Margin Stock as collateral and (ii) after reviewing the financial statements of the Company and its Subsidiaries referred to in SECTION 4.01(e), such Bank has concluded therefrom that the consolidated cash flow of the Company and its Subsidiaries is sufficient to support the credit extended to the Company pursuant to this Agreement. SECTION 9.15. NO INDIRECT SECURITY. Notwithstanding any Section or provision of this Agreement to the contrary, nothing in this Agreement shall (i) restrict or limit the right or ability of the Company or any of its Subsidiaries to pledge, mortgage, sell, assign, or otherwise encumber or dispose of any Margin Stock, or (ii) create an Event of Default arising out of or relating to any such pledge, mortgage, sale, assignment or other encumbrance or disposition. SECTION 9.16. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE BORROWING SUBSIDIARIES, THE AGENT, THE EURO-AGENT AND THE BANKS IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG ANY OF THE PARTIES HERETO ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY NOTE. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY. SECTION 9.17. EFFECTIVENESS OF AMENDMENT AND RESTATEMENT. The amendment and restatement of this Agreement dated as of September 30, 1996, shall be effective as of such date when, and only when, the Agent shall have received counterparts of this Agreement (as so amended and restated) executed by the Borrower and all of the Banks -69- and a counterpart of the letter agreement dated as of August 23, 1996, referred to in SECTION 2.04(b) executed by the Borrower. -70- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. ECOLAB INC. By: /s/ Steve L. Fritze ------------------------------ Vice President and Treasurer CITIBANK, N.A., as Administrative Agent By: /s/ Carolyn Kee ------------------------------ CITIBANK INTERNATIONAL PLC, as Euro-Agent By: /s/ Stewart Holmes ------------------------------ Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co-Agent By: /s/ Douglas A. Cruikshank ------------------------------ Vice President SIGNATURE PAGE 1 -71- BANKS COMMITMENT $45,000,000 CITIBANK, N.A. By /s/ Carolyn Kee ------------------------------ As Attorney-in-Fact $36,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Douglas A. Cruikshank ------------------------------ Title: Vice President $24,000,000 COMMERZBANK AKTIENGESELLSCHAFT, CHICAGO BRANCH By /s/ William Brent Peterson ------------------------------ Title: Assistant Vice President By /s/ Dr. Helmut R. Tollner ------------------------------ Title: Executive Vice President $24,000,000 CREDIT SUISSE By /s/ William P. Murray ------------------------------ Title: Member of Senior Management By /s/ Kristinn R. Kristinsson ------------------------------ Title: Associate SIGNATURE PAGE 2 -72- $24,000,000 THE FIRST NATIONAL BANK OF CHICAGO By /s/ Michael W. McCorkle ------------------------------ Title: Authorized Agent $24,000,000 NATIONSBANK, N.A. By /s/ Valerie Mills ------------------------------ Title: Sr. Vice President $24,000,000 SOCIETE GENERALE By /s/ Susan Hummel ------------------------------ Title: Assistant Vice President By /s/ Eric Siebert ------------------------------ Title: CBM $24,000,000 WACHOVIA BANK OF GEORGIA, N.A. By /s/ Elizabeth Cort ------------------------------ Title: Vice President $225,000,000 Total of the Commitments SIGNATURE PAGE 3 -73- EX-15 3 EXHIBIT 15 Exhibit (15) Securities and Exchange Commission 450 Fifth Street N.W. Washington, DC 10549 RE: Ecolab Inc. Registration Statements on Form S-8 (Registration Nos. 2-60010; 2-74944; 33-1664; 33-41828; 2-90702; 33-18202; 33-55986; 33-56101 33-26241; 33-34000; 33-56151; 33-39228; 33-56125 33-55984; 33-60266; 33-65364; and 33-59431) and Ecolab Inc. Registration Statements on Form S-3 (Registration Nos. 33-57197 and 333-14771) We are aware that our report dated October 22, 1996 on our reviews of interim financial information of Ecolab Inc. for the periods ended September 30, 1996 and 1995, and included in the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1996, is incorporated by reference in these registration statements. Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Saint Paul, Minnesota November 12, 1996 EX-27 4 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND RELATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE NINE-MONTH PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000031462 ECOLAB INC. 1,000 9-MOS DEC-31-1996 SEP-30-1996 51,681 0 212,755 9,294 114,738 403,136 672,901 350,095 1,181,318 310,602 163,814 0 0 70,268 425,210 1,181,318 1,098,981 1,098,981 498,677 498,677 464,858 0 14,604 123,830 50,780 82,771 0 0 0 82,771 1.28 0 The amount of "Loss Provision" is not significant and has been included in "Other Expenses"
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