-----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, OZylUgCnlTqdLGRzEISY5ZSBtXqHZ0zAedscElI2TNzp10zNEejMA6IgZw1TW8rY Li706SfkENH4liPagHQQxA== 0000716823-99-000004.txt : 19990330 0000716823-99-000004.hdr.sgml : 19990330 ACCESSION NUMBER: 0000716823-99-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILACRON INC CENTRAL INDEX KEY: 0000716823 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 311062125 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08485 FILM NUMBER: 99575979 BUSINESS ADDRESS: STREET 1: 4701 MARBURG AVE CITY: CINCINNATI STATE: OH ZIP: 45209 BUSINESS PHONE: 5138418100 MAIL ADDRESS: STREET 1: 4701 MARBURG AVE CITY: CINCINNATI STATE: OH ZIP: 45209 FORMER COMPANY: FORMER CONFORMED NAME: CINCINNATI MILACRON INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CINCINNATI MILACRON HOLDINGS INC DATE OF NAME CHANGE: 19830503 FORMER COMPANY: FORMER CONFORMED NAME: CINCINNATI MILLING MACHINE CO DATE OF NAME CHANGE: 19600201 10-K 1 ============================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 10-K [x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required). For the fiscal year ended December 31, 1998. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required). For the transition period from to ---------- ---------- Commission file number 1-8485 MILACRON INC. (Exact name of registrant as specified in its charter) Delaware 31-1062125 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4701 Marburg Avenue Cincinnati, Ohio 45209 (Address of principal executive offices) Registrant's telephone number including area code (513) 841-8100 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Shares - Par Value $1.00 New York Stock Exchange, Inc. 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of voting stock held by non- affiliates of the registrant is $679,968,999 at 3/12/99.* *Voting stock held by officers, directors and principal holders is not included in the computation. The Company, however, has not made a determination that such individuals are "affiliates" within the meaning of Rule 405 under the Securities Act of 1933. Number of shares of Common Stock, $1.00 par value, outstanding as of March 12, 1999: 37,292,033 Documents incorporated by reference: PART III - Proxy statement, dated March 26, 1999 ============================================================ MILACRON INC. 1998 FORM 10-K Table of Contents PAGE ---- PART I Item 1. Business 3 Executive Officers of the Registrant 18 Item 2. Properties 20 Item 3. Legal Proceedings 20 Item 4. Submission of Matters to a Vote of Security Holders 20 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 20 Item 6. Selected Financial Data 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Item 7A. Qualitative and Quantitative Disclosures About Market Risk 32 Item 8. Financial Statements and Supplementary Data 32 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 53 PART III Item 10. Directors and Executive Officers of the Registrant 53 Item 11. Executive Compensation 53 Item 12. Security Ownership of Certain Beneficial Owners and Management 53 Item 13. Certain Relationships and Related Transactions 53 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 54 Signatures 58 Index to Certain Exhibits and Financial Statement Schedules 59 Exhibit 11 - Computation of Per-Share Earnings 60 Exhibit 21 - Subsidiaries of the Registrant 61 Exhibit 23 - Consent of Experts and Counsel 63 Exhibit 27 - Financial Data Schedule 64 Schedule II - Valuation and Qualifying Accounts and Reserves 65 PART I - ------ Item 1. BUSINESS GENERAL - -------- Milacron is a leading global manufacturer of products and provider of services and technology used to help the world's leading companies manufacture many of the world's favorite products. Incorporated in Delaware in 1983, Milacron is a successor to a business established in 1884. Since our founding, we had been engaged in the machine tools business. In recent years, however, our other segments had grown rapidly, and by 1997 accounted for over 75% of consolidated sales. On October 2, 1998, we sold our machine tools segment, completing an important transformation from a machine tool company to a manufacturing technologies company and changed our name from Cincinnati Milacron Inc. to Milacron Inc. The sale allowed us to concentrate our resources on our two more profitable and stable business segments: plastics technologies and cutting process technologies (formerly industrial products). Unless noted otherwise in this "Business" section, amounts refer to continuing operations (i.e., excluding machine tools). Our plastics technologies business produces machines and systems, mold bases, tooling, parts and services for the three primary processing methods: injection molding, blow molding and extrusion. Virtually all of our machines are computer controlled and many of them are sold with advanced application software. Our cutting process technologies business includes metalcutting tools, metalworking fluids, precision grinding wheels, carbide wear parts and industrial magnets. From 1993 to 1998, our consolidated sales have grown at a compound annual rate of 18% from $675 million to $1.5 billion. We have grown our two businesses over the last five years through strategic acquisitions and internal growth fueled by accelerated new product and process development and expanded distribution. In 1998, 53% of sales came from the plastics technologies segment and 47% came from the cutting process technologies segment. With the sale of machine tools, we are less dependent upon the capital goods market. In 1998, 32% of our sales were generated through the sale of capital goods, with the remainder being made up of durable goods, consumables, components and services. Milacron sells products and provides services to industrial customers throughout the world. Sales to customers outside the U.S. increased from $206 million in 1993, representing 30% of total sales, to $672 million in 1998, representing 44% of total sales. Milacron has been successful in penetrating international markets through acquisitions, expanded distribution, increased exports, and license and joint venture agreements. We believe our current geographic sales balance helps compensate for varying economic cycles around the world and that our increased presence outside the U.S. reduces our dependence upon the U.S. economy. (See "Presence Outside the U.S." in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations.) STRATEGIC ACQUISITIONS AND DIVESTITURES - --------------------------------------- Milacron continually explores acquisition, divestiture and consolidation opportunities when we believe such actions can expand markets, enhance product synergies or improve earnings potential for the long term. Over the last six years, we have completed sixteen strategic acquisitions, which we believe will increase our potential for further growth. In our plastics technologies segment, we acquired FM Maschinenbau GmbH (Ferromatik), an injection molding machine business, from Kloeckner-Werke AG in 1993; The Fairchild Corporation's D-M-E business (D-M-E) in 1996; and the Uniloy plastics machinery division of Johnson Controls, Inc. in 1998. Ferromatik is one of Europe's leading manufacturers of plastics injection molding machines. Ferromatik's market coverage expanded our plastics processing technology base and product line and enabled us to achieve our objective of establishing a plastics machinery manufacturing and distribution base in Germany to serve Europe and other markets. D-M-E is the largest U.S. producer of mold bases, components and supplies for the plastic injection moldmaking industry. D-M-E serves customers throughout much of the world with ten major manufacturing facilities, plus several international joint-venture operations. We believe D-M-E will continue to enhance our plastics technologies business because it provides the mold bases, supplies and components used in the mold apparatus inside an injection molding machine. D-M-E is the U.S. market leader with a well-established reputation for high quality. On September 30, 1998, we acquired the assets of Uniloy for approximately $190 million, subject to post-closing adjustments. Uniloy, which is known for its Uniloy brand of equipment, as well as various other brands, had sales of over $190 million for its fiscal year ending September 30, 1998, and is one of the world's leading providers of blow molding machines, as well as structural foam systems, aftermarket parts, services and molds for blow molding. In 1998, Milacron made four smaller acquisitions in the plastics technologies segment. In February, we acquired Wear Technology, with annual sales of approximately $10 million, which serves the aftermarket for new and rebuilt screws for PVC (poly vinyl chloride) extrusion systems. Also in February, we acquired Northern Supply, with annual sales of approximately $5 million, a regional catalog distribution company offering supplies to plastics processors for injection molding, blow molding and extrusion. In May, we acquired Autojectors, Inc., a leading U.S. producer of vertical insert injection molding machinery widely used to make medical, electrical and automotive components. With annual sales of approximately $20 million, Autojectors operates through two manufacturing facilities near Fort Wayne, Indiana. Finally, in September, we acquired Master Unit Die Products, Inc., the leading North American manufacturer of quick-change mold bases for the plastics industry. Master Unit Die Products has annual sales in excess of $10 million. In the last six years, Milacron has also made various strategic acquisitions in its cutting process technologies segment: GTE Valenite Corporation (Valenite); Krupp Widia GmbH (Widia); Talbot Holdings, Ltd. (Talbot); Minnesota Twist Drill; Data Flute CNC, Inc.; and Werkzeugfabrik GmbH Konigsee (Werko), all of which have metalcutting and metalworking tools as their primary product lines. We believe that Milacron is now the second-largest North American and third-largest worldwide producer of carbide metalcutting tool systems. Valenite was acquired in February, 1993. With principal operations in the U.S. and Canada, it is a leading producer of consumable industrial metalcutting tools. Widia was acquired in February 1995. It is one of the world's leading producers of industrial metalcutting products. Widia's strong presence in Europe and India complements Valenite's strengths in the North American and Japanese markets. Widia also enhanced our technological base, diversified our product line and expanded our worldwide sales and distribution network. In 1995, Milacron implemented an integration plan to achieve certain synergies between Valenite and Widia worldwide. In 1998, we began managing the Valenite and Widia carbide insert and steel insert holder businesses on a global scale with a combined management structure and operating with a new brand name, WidiaValenite. The new organization reinforces our global strategy and strengthens our worldwide brand identities and customer focus. With common tooling brands we expect to benefit from reduced design, manufacturing and marketing costs, higher inventory turnover, improved capacity utilization, and simultaneous product introductions around the world. We acquired Talbot in July, 1995. Talbot is a major supplier of round high-speed steel and carbide metalcutting tools, such as mills and taps, and is the largest U.S. producer of end mills. These cutting tools, which are not produced by either Valenite or Widia, are sold through independent distributors and a direct sales force. The Talbot acquisition enabled us to increase our product coverage from approximately 40% to 65% of the types of cutting tools consumed by the world market. In September, 1997, we acquired Minnesota Twist Drill, Inc., a manufacturer of standard high-speed twist drills which are sold mainly through private branding. Also, in June, 1997, we acquired Data Flute CNC, Inc., a manufacturer of high- performance solid carbide end mills. Both businesses, with sales of approximately $10 million each, have been integrated with Talbot. On December 30, 1998, we acquired Werko, a manufacturer of high-speed steel drills. Located in eastern Germany, Werko has annual sales of approximately $25 million. We believe it is the third largest European producer of high-speed drills. In addition to our 1998 machine tool divestiture, in December, 1995 we sold our Electronic Systems Division (ESD). To maintain control system continuity and development, Milacron entered into an extensive seven-year supply contract with the purchaser for electronic controls used on our machinery. Milacron continues to develop and maintain our own applications software. The decision to sell ESD was made to redeploy assets to more strategic businesses. PRODUCT DEVELOPMENT AND CAPITAL EXPENDITURES - -------------------------------------------- As part of our objective to enhance Milacron's growth potential and global competitiveness, we continue to invest in research and development and in new capital equipment. Research and development investment in 1998 totaled $36.7 million, or 2.4% of sales. Research and development expense totaled $35.6 million in 1997 and $36.4 million in 1996. In 1998, we invested $71.0 million for capital additions in our continuing operations, primarily to install advanced technology and increase productive capacity throughout our operations worldwide. For 1999, we are budgeting an additional $80 million in capital expenditures. To enhance our research and development effort, we have maintained a major program for product development, process improvement and modernization. This program is named "Wolfpack" because of its emphasis on teamwork and fierce competitiveness. The objectives of Wolfpack are to design and produce new products at world-competitive levels of quality, performance, efficiency and cost. Substantially all of Milacron's current plastics technologies machine designs have been developed using the Wolfpack methodology. PLASTICS TECHNOLOGIES BUSINESS - ------------------------------ We believe Milacron is the largest and broadest-line U.S. producer of plastics machinery and one of the three largest in the world, as well as the largest U.S. producer of mold bases, standard components and supplies for the moldmaking industry. In 1998, Milacron's plastics technologies segment's sales were $796 million, which included only one quarter's sales for Uniloy. Our plastics technologies business sells plastics machinery and supplies for processing plastics to manufacturers in several key industries, including automotive, construction, electronics, consumer goods and packaging. We believe Milacron offers more varieties of machinery to process plastic than any other U.S. company. One of our strengths in the plastics machinery business is that we offer complete lines of machines for three major plastics processing technologies: injection molding and systems for extrusion and blow molding. Another strength is our presence in the durable goods market with the production of mold bases, standard components and supplies for the moldmaking industry. Milacron also sells specialty auxiliary equipment for plastics processing and rebuilds and retrofits older injection molding equipment manufactured by Milacron or others. We distribute all of our plastics machinery products through a combination of a direct sales force and independent agents who are geographically spread throughout our key markets. We sell our mold bases, supplies and components through a distribution network in the U.S. and Europe and through a large network of joint venture sales and service offices in Asia. Our plastics technologies businesses sell products primarily in North American and Europe. Approximately 17% of the group's 1998 sales were to customers located in the eleven European countries which are participating in a new common currency, the Euro. To date, the introduction of the Euro has not caused any material changes in our competitive position in the plastics industry or the operation of the business. While the future impact of the Euro is uncertain, management does not expect the introduction of the Euro to have a material effect on the business in the future. PLASTICS TECHNOLOGIES INDUSTRY The market for plastics machinery and supplies for processing plastics has grown steadily over the past four decades. Plastics have continued to replace traditional materials such as metal, wood, glass and paper in an increasing number of manufactured products, particularly in the transportation, construction, housewares, electrical, and medical industries. Advancements in both the development of materials, which make plastic products more functional, and the capabilities of plastics processing equipment have been major contributors to the steady growth in the plastics technologies market. In addition, consumer demand for safer, more convenient and recyclable products has increased the general demand for plastic products. Like other capital goods markets, machines within the plastics technologies market are subject to economic cycles, but historically to a lesser degree than the machine tools market. In particular, the market for injection molding machines is driven by resin prices and production, the consumer economy and the construction and automotive industries. Custom molders, which produce a wide variety of components for many industries, are the single largest group of plastics technologies buyers. Other customer categories include the automotive industry, the electrical and packaging industries, the construction industry, manufacturers of housewares and appliances, and producers of consumer goods, toys and medical supplies. Among the factors that affect the plastics technologies market are the health of the consumer economy, residential and commercial construction and automotive production. Because of intense competition from international plastics technologies producers, currency exchange rates also have a significant impact. Fluctuations in the prices of petrochemical feed stocks for resin and subsequent supply of resin may affect the businesses of our customers and, in turn, the market for our products. Environmental concerns about plastics could slow the growth of the plastics technologies market. However, some plastics raw materials suppliers, machinery makers and processors are developing methods of recycling to address environmental issues. We believe that environmental concerns have not had any discernible negative effect on the market to date. Nevertheless, Milacron, through its membership in The Society of Plastics Industry (an industry trade association) and this association's affiliate, The American Plastics Council, is working with other leading companies within the plastics industry to address the role of plastics in the environment. MILACRON'S PLASTICS TECHNOLOGIES BUSINESS Milacron's plastics technologies segment consists of five product lines: injection molding machines; extrusion systems; blow molding systems; standardized mold bases, components, supplies for the plastics injection moldmaking industry; and specialty equipment used in the processing of plastics. INJECTION MOLDING. We believe Milacron is the largest U.S. producer of injection molding machines. Injection molding is the most common and versatile method of processing plastic, and it is used to make a wide variety of parts and products ranging from housewares and consumer goods to medical supplies and industrial components. Milacron manufactures many types of injection molding machines, almost all of which were developed using Wolfpack principles. The injection molding machine line includes machines powered conventionally (with hydraulics) as well as ones that are driven by servo motors (fully electric). Product standardization (which facilitates part commonality) and the modernization of our manufacturing facilities and methods, as well as increased volumes, have enabled us to achieve significant economies of scale for the production of injection molding machines. We believe these factors have enabled Milacron to become the lowest-cost U.S. producer of these machines. In November, 1993, Milacron acquired Ferromatik, one of Europe's leading producers of injection molding machines. Ferromatik is recognized for its high-end technology, including multi-color machines, multi-component systems and other specialty applications. The acquisition included the Ferromatik lines of hydraulic and electric injection molding machines and a modern manufacturing facility in Malterdingen, Germany, as well as Ferromatik's marketing, sales and service network. The Ferromatik acquisition expanded our plastics processing technology base and product line and enabled us to achieve our objective of establishing a plastics machinery manufacturing and distribution base in Germany to serve Europe and other markets. Ferromatik has provided a complementary fit with Milacron's other injection molding machine businesses. Milacron has completed a restructuring of Ferromatik designed to derive synergies between Ferromatik and other Milacron operations and to improve Ferromatik operations through implementation of manufacturing techniques and methods used in our U.S. plastics technologies operations. The restructuring reduced overall marketing costs through the consolidation of Milacron's former European marketing organization into the Ferromatik marketing organization. We believe that this restructuring has helped, and will continue to help, us achieve our cost reduction goals in both marketing and manufacturing. In May, 1995, Milacron announced the formation of a joint venture, Cincinnati Milacron Pvt. Ltd. (CMPL), with a group of individuals experienced in the building of plastics machinery in Ahmedabad, India. This operation builds injection molding machines for domestic and world markets. In 1995, CMPL completed the implementation of its product introductions and opened sales offices in major cities of India. In 1998, CMPL completed construction of a new factory in Ahmedabad to support their operations. In 1997, Milacron formed a separate elektron technologies business unit to develop all-electric injection molding machines for world markets and to build and sell these machines in North America. Machine designs are transferred to Ferromatik for manufacture and sale in world markets. Milacron opened a new manufacturing area for elektron technologies early in 1998 at our facilities in Cincinnati, Ohio. This business is charged with promoting our leading- edge technology in all-electric injection molding, which, when compared to hydraulic machines, provides lower cost of operation, better repeatability, and elimination of environmental issues associated with use of hydraulic oils. We believe we are extremely well positioned to lead the industry-wide shift to all-electric technology, which we believe will take place over the next decade. In May, 1998, Milacron strengthened its market position in vertical insert injection molding machinery by acquiring Autojectors Inc. This Indiana-based operation is one of the largest producers of these machines used to make complex components for the medical, electrical and automotive industries, as well as multi-component items for the sports and leisure industry. Autojectors has excellent worldwide brand equity and offers customers a wide range of machines, a high percentage of which are customized for end users. Previously, Autojectors built vertical injection molding machines sold under the Milacron name. BLOW MOLDING SYSTEMS. Milacron is a major global player in blow molding, offering high-volume producers the widest range of plastic blow molding and structural foam and web solutions in the industry. Blow molding is the third-largest and fastest-growing segment of the plastics machinery market. Milacron manufactures and sells many types of blow molding machines and structural foam and web systems used to make a wide variety of products, including rigid consumer packaging, industrial components, outdoor furniture, appliance parts, refuse and shipping containers, and toys. In September, 1998, Milacron acquired Uniloy, which we believe is the largest worldwide producer of blow molding systems, from Johnson Controls, Inc. Uniloy serves three main blow molding markets: HDPE (high density polyethylene) packaging, PET (polyethylene terephthalate) packaging and industrial. Uniloy machines produce containers for milk, juice, water and household chemicals, as well as pharmaceutical and personal care products; industrial components ranging from plastic drums and fuel tanks to plastic pallets; and home items from shutters, screen doors and furniture to dog houses and camping and boating equipment. Also known for aftermarket parts, services, molds and related tooling for blow molding, Uniloy has manufacturing facilities in North America and Europe. Uniloy greatly expanded our product offerings with reciprocating, rotary, shuttle, USB and IBS series for blow molding containers of all sizes, shapes and tolerances, as well as structural foam and web series for producing large industrial, construction and leisure parts. Milacron also gained a stronger European presence with the acquisition. EXTRUSION SYSTEMS. Milacron's extrusion systems business consists of the manufacture, sale and distribution of individual extruders and systems comprised of multiple units which are tooled to extrude a specific product in quantity. Such systems take longer to manufacture than injection molding machines. Extrusion systems, which are manufactured in both the U.S. and Austria, include twin-screw extruders and single-screw extruders. We believe we have a strong competitive position in each of these lines, and that we are the largest worldwide maker of twin-screw extruders. Twin- screw extruders are used to produce continuous-flow products such as pipe, residential siding, sheet and window frames. As a result, the business is closely tied to construction market cycles. Single-screw extruders are used in a variety of applications and systems such as blow molding, blown-film and cast-film systems, pipe and profiles and wire and cable applications. In early 1998, Milacron acquired Wear Technology, which expands our replacement business for both new and rebuilt screws. MOLD BASES AND COMPONENTS. In January, 1996, Milacron completed the acquisition of D-M-E, which we believe is the largest U.S. producer of mold bases, standard components and supplies for the moldmaking industry. D-M-E serves customers throughout much of the world with ten major manufacturing facilities and several international joint venture operations. Like most of our plastics business, D-M-E serves the largest segment of the market, the injection molding process. D-M-E complements Milacron's other businesses because it provides the mold bases, supplies and components used in the mold apparatus inside injection molding machines. We believe we are achieving synergies in a number of areas, including manufacturing process, technology, marketing and distribution. In early 1998, Milacron acquired Northern Supply, a regional catalog distribution company. Northern Supply's business is complementary to the catalog business of D-M-E and is being managed by D-M-E. In October, 1998, Milacron acquired Master Unit Die Products, which we believe is the leading North American maker of quick-change insert mold bases for the plastics industry. These mold bases help OEM and custom molders achieve quicker production changeovers and lower labor and tooling costs for multiple mold programs. Master Unit Die has three frame and insert unit product lines, a quick- change adapter frame for standard mold bases, and a complete line of related components and accessories. SPECIALTY EQUIPMENT. Milacron sells a variety of specialty equipment used in the processing of plastics products, including peripheral auxiliary equipment such as material management systems, heat exchangers and product handling systems, all of which are manufactured by third parties to Milacron's specifications. We also rebuild and retrofit older types of injection molding equipment manufactured by Milacron and others, refitting them with new controls and software. PRODUCTION FACILITIES. For the plastics technologies segment, Milacron maintains the following principal production facilities: FACILITY PRODUCTS - -------- -------- Abbiategrasso, Italy Blow molding machines. Ahmedabad, India Injection molding machines. Batavia, Ohio Injection machines, blow molding machines and extrusion systems. Berlin, Germany (a) Blow molding machines. Charlevoix, Michigan Mold components. Cincinnati, Ohio All-electric injection molding machines. Florence, Italy Blow molding machines. Greenville, Michigan (a) Mold base manufacturing. Hillside, New Jersey Special mold base components. Lewistown, Pennsylvania Mold components. Madison Heights, Michigan Mold base components. Malterdingen, Germany Injection molding machines. Manchester, Michigan Blow molding machines. McPherson, Kansas (a) Extrusion screw coating. Mechelen, Belgium Mold base components. Melrose Park, Illinois Special mold base components. Monterey Park, California Special mold base components. Mt. Orab, Ohio Plastics machinery parts. Neuenstadt am Kocher, Special mold base components. Germany Shinoli, India Mold base components. Vienna, Austria Extrusion systems. Windsor, Ontario, Canada Special machinery for mold bases. Youngwood, Pennsylvania Steel processing and mold components. (a) The Berlin, Germany, Greenville, Michigan and McPherson, Kansas plants are leased from unrelated third parties. SALES, MARKETING AND CUSTOMER SERVICE Milacron maintains a large direct sales force in the U.S. for its plastics technologies segment, which it supplements with independent agents. Internationally, Milacron uses both a direct sales force and independent agents. In the U.S., the plastics technologies business uses our Cincinnati, Ohio, headquarters, as well as sales and service centers in Allentown, Pennsylvania; Charlotte, North Carolina; Chicago, Illinois; Dallas, Texas; Detroit, Michigan; Leominster, Massachusetts; and Los Angeles, California to market our products and provide customer support and training. Through our Austrian and Ferromatik subsidiaries, we have an extensive sales, marketing, service and distribution system throughout Europe. D-M-E operates through catalog and telemarketing sales, as well as distribution centers strategically located in industrial and manufacturing areas where most injection molding takes place. Distribution is through a broad network in the U.S. and Europe. In Asia, D-M- E sells through a large network of joint venture sales and service offices. In 1997, we formally dedicated a new sales and marketing office in Singapore and expect to continue to expand our presence in this region. COMPETITION The markets for plastics technologies in North America and worldwide are highly competitive and are made up of a number of U.S., European and Asian competitors. We believe Milacron has a significant share of the U.S. market for the types of products it produces, and that we are the broadest-line manufacturer of equipment, supplies and systems for plastics processing in the world. Our competitors vary in size and resources; some are larger than us, most are smaller, and only a few compete in more than one product category. Principal competitive factors in the plastics technologies industry are: product features, technology, quality, performance, reliability, speed of delivery, price and customer service. The Wolfpack program is designed to maintain and enhance our competitive position worldwide with respect to each of these competitive factors. In addition, we focus on new product development, the containment of costs, maintaining competitive market pricing and expanded marketing in order to maintain and grow our presence in the market. CUTTING PROCESS TECHNOLOGIES BUSINESS - ------------------------------------- Milacron produces five basic types of industrial products: metalcutting tools, metalworking fluids, precision grinding wheels, carbide wear parts and industrial magnets, in total representing over 150,000 different products. In 1998, sales for our cutting process technologies segment were $718 million. We believe Milacron is a leader in many new product technologies, including synthetic lubricants, use of synthetic ceramic abrasives, high-performance cutting tool coatings, and product designs using computer modeling. Over 75% of this segment's sales are of consumable products and components. Consumable products are depleted during the process for which they are used, offering us a continuous opportunity to sell replacement products to our customers. We believe that Milacron's cutting process technologies business complements our plastics machinery businesses, because the cutting process technologies business is exposed to less pronounced business cycles. Our cutting process technologies businesses sell products primarily in North America, Europe and Asia. Approximately 29% of the group's 1998 sales were to customers located in the eleven European countries which are participating in a new common currency, the Euro. To date, the introduction of the Euro has not caused any material changes in our competitive position in the industry or the operation of the business. Management recognizes that we, along with our competitors, could experience adverse price realization over the longer term as a result of price transparency associated with single currency pricing in those countries. While the future impact of the Euro is uncertain, we do not expect this to have a material adverse effect on Milacron. CUTTING PROCESS TECHNOLOGIES INDUSTRY Milacron's cutting process technologies business participates in a $35 billion world market, which has historically grown at a rate approximating the growth of the world GDP. Milacron's products address approximately $20 billion of this market. We have the heaviest market penetration in the U.S. and Europe, and in the case of metalcutting tools, India. We serve customers in the industrial components and machinery, automotive and electrical industries, as well as job shops. MILACRON'S CUTTING PROCESS TECHNOLOGIES BUSINESS METALCUTTING TOOLS (CARBIDE INSERTS AND ROUND TOOLS). Metalcutting tools are made of carbide, steel and other materials and include systems to hold metalcutting tools. They are used on machine tools for use in a wide variety of metalcutting operations. We believe that through our WidiaValenite and Talbot businesses, we are the second- largest producer of carbide metalcutting tool systems in the U.S. and the third-largest worldwide. In addition, we believe that we are also the third-largest producer of round tools in North America. Valenite manufactures over 38,000 products, including an extensive line of cutting tool inserts in a wide variety of materials and geometries for turning, boring, milling and drilling, and standard and special steel insert holders. Valenite has an excellent market position in the automotive, off-road vehicle and truck industries and has strong market positions in carbide wear parts for metalforming and in products requiring the wear and corrosion-resistant properties of tungsten carbide. In February, 1995, Milacron completed the acquisition of Widia, a major European metalcutting tool maker with key production facilities in Germany and other Western European countries. Widia also owns a 51% interest in Widia (India) Ltd., an Indian public company. Widia's product lines include tungsten carbide cutting tool inserts and steel insert holders needed for metalcutting operations, carbide wear parts used in forming and stamping metal, and both soft and permanent industrial magnets, used in automotive and other applications. In 1995, Milacron initiated a $28 million plan to integrate certain Valenite and Widia operations, primarily in Europe and Japan. This plan involved the closing of two manufacturing plants, the downsizing of another plant, as well as the consolidation of numerous sales, customer service and warehousing operations in Europe and Japan. In total, the execution of the plan has resulted in the elimination of over 370 production and administrative personnel. As a result, Milacron is achieving annual cost savings in excess of $20 million. In addition, a global management organization was announced in 1998, as described on page 4. In July, 1995, we completed the acquisition of Talbot, a major supplier of round high-speed steel and carbide metalcutting tools. Talbot is the largest U.S. producer of end mills, as well as a leading tap producer. With annual sales at that time of approximately $40 million, Talbot enabled us to enter the market for round tools, including high-speed steel and carbide end mills, taps, countersinks, counterbores and reamers. These products are highly complementary to the products made by WidiaValenite. We expect to expand Talbot products into non-U.S. markets. To further broaden our product coverage in the round metalworking tooling business, we made two smaller acquisitions in 1997: Minnesota Twist Drill, Inc., a manufacturer of standard high-speed twist drills in its Chisholm, Minnesota plant and Data Flute CNC, Inc., a manufacturer of high-performance solid carbide end mills located in Pittsfield, Massachusetts. These acquisitions are highly complementary to our Valenite and Talbot product lines and broaden our already extensive product offerings in the market place. In 1998, we initiated a $15 million expansion program, which includes a second plant for Data Flute, a doubling of production capacity at Minnesota Twist Drill and the expansion of a Talbot facility. In December 1998, we acquired Werko, the German high-speed steel drill and tap producer, in order to enter the European market for round tools. Werko also gives us a full line of high-speed steel drills in metric sizes and completes our inch-sized line. METALWORKING FLUIDS. Metalworking fluids are proprietary chemical compounds and emulsions used as lubricants, coolants and corrosion inhibitors in a wide variety of metalcutting and metalforming operations. Major customers are producers of precision metal components for many industries, including manufacturers of automotive power trains, aerospace engines and bearings, as well as general metalworking shops. Milacron is a full-line supplier, offering water-based fluids (synthetics), water-based oil- bearing fluids (semi-synthetics) and oil-based fluids. Over the last four years, Milacron expanded its lines of soluble oils, base oils and synthetic fluids. Milacron has marketed these products under the Cimcool brand since the mid-1940s. With the acquisitions of Valenite and Widia, we developed two additional brands of fluids. In 1994, we introduced the Valcool brand, which is designed to work with all metalcutting tools and is being marketed through Valenite's market channels. In 1996, we introduced the Widacool line of fluids in Europe, which we are selling through Widia's market channels. Milacron also is a leader in providing comprehensive chemicals management programs. This involves our engineers working full-time on site at the customer's plant to oversee and optimize all wet chemistry, including metalworking fluids, used in the plant. PRECISION GRINDING WHEELS. Grinding wheels are rotating tools made of granular abrasive materials bonded together with vitreous or resin materials. They are used by manufacturers in the metalworking industry. We believe that Milacron is now the second-largest U.S. producer of grinding wheels. Major customers are producers of precision metal components for many industries, including manufacturers of automotive power trains, aerospace engines and bearings, as well as general metalworking machine shops. Milacron designs and manufactures a wide variety of precision abrasive grinding wheels, including resin-bonded, vitrified, cubic boron nitride (CBN), diamond and synthetic ceramic abrasive types. We believe, based on tests in our laboratories, as well as in customer plants, that Milacron's proprietary formulae, our modern production equipment and our techniques for manufacturing precision grinding wheels give us advantages in terms of product quality, lower production costs and faster deliveries. We believe that Milacron has also benefited from technologies common to both grinding wheels and metalcutting fluids. We have lowered our production costs, in part, by finishing some of our wheels on CNC (computer numeric control) machines designed and built by our former machine tool business. CARBIDE WEAR PARTS. Carbide wear parts represent various components made from sintered tungsten carbide having physical properties of extreme hardness, wear resistance and resistance to chemical activity. Valenite and Widia manufacture three types of carbide wear parts: tooling components for metalforming, carbide rod for use in round tools, and metalforming and general wear parts to resist frictional wear and chemical activity. INDUSTRIAL MAGNETS. Widia is a leader in injection molded plastic bonded magnets. Widia manufactures permanent industrial magnets and magnetic circuits for automotive, electrical and other industrial applications, as well as soft magnets for the telecommunications and construction industries. PRODUCTION FACILITIES For its cutting process technologies segment, Milacron maintains the following principal production facilities: FACILITY PRODUCTS - -------- -------- Altenburg, Germany Taps. Andrezieux, France Carbide inserts. Bangalore, India Carbide inserts, steel insert holders, carbide wear parts and special machine tools. Carlisle, Pennsylvania Resin grinding wheels. Chisholm, Minnesota High-speed twist drills. Cincinnati, Ohio Metalworking fluids and precision grinding wheels. Detroit, Michigan (metro area) (6 plants)(a) Carbide inserts, special steel products and gauging systems. Essen, Germany (3 plants) Carbide inserts, magnets, metallurgical powders and carbide rods. Gainesville, Texas (a) Tool holding systems for turning, milling and boring. Hardenberg, The Netherlands Carbide wear parts. Konigsee, Germany (a) High-speed drills and taps. Lichtenau, Germany Steel insert holders. Millersburg, Pennsylvania (2 plants) End mills, taps and counterbores. Nogales, Mexico (a) Resin grinding wheels. Patancheru, India Rock tools. Pittsfield, Massachusetts Carbide end mills. (2 plants) Sinsheim, Germany (a) Special steel tooling products. Tokyo, Japan (a) Carbide inserts and steel tools. Valley View, Ohio (a) End mills. Vlaardingen, The Netherlands Metalworking fluids. West Branch, Michigan (2 plants) Metallurgical powders and carbide wear parts. Westminster and Seneca, South Carolina (6 plants) Carbide and diamond inserts. (a) The Gainesville, Texas plant; Konigsee, Germany plant; Nogales, Mexico plant; Tokyo, Japan plant; Sinsheim, Germany plant; Valley View, Ohio plant; and three plants in the Detroit, Michigan (metro area) are leased from unrelated third parties. SALES, MARKETING AND CUSTOMER SERVICE Our cutting process technologies business generally sells its products under multiple brands through parallel market channels, using direct sales, industrial distributors, agents and manufacturers' representatives, as well as industrial catalog sales. Most of our sales are of products that we manufacture and sell under company-owned brands. In addition, we sell our products under the brand names of other companies through their own market channels. We also use Milacron brand names to sell products that are made by other companies. At the beginning of 1999, we launched our "Milpro" initiative to reach a potentially large market: 117,000 small U.S. metalworking job shops. "Milpro" includes "MILPRO Mobile Tool Cribs," a planned nationwide network of truck routes to provide delivery of on-site sales and value-added services. We also introduced a business-to-business commercial web site for heavy industry. We believe that the "Milpro" initiatives could begin to make significant revenue contributions within three to five years. COMPETITION We have many competitors for metalcutting tools but only two have higher worldwide sales. Our main global competitors in our metalworking fluids business are large petrochemical companies and smaller companies specializing in similar fluids. There are a few large competitors in the U.S. grinding wheel market, one of which is significantly larger than Milacron. Principal competitive factors in these markets include market coverage, technology, performance, delivery, price and customer service. PATENTS - ------- Milacron holds a number of patents, none of which is material to any business segment. EMPLOYEES - --------- Excluding machine tools, Milacron employed an average of 10,993 people in 1998, of whom 5,576 were employed outside the U.S. As of year-end 1998, we employed 11,855 people. Backlog - ------- The backlog of unfilled orders was $247 million at the end of 1998 and $196 million at the end of 1997. The backlog at year-end 1998, substantially all of which is expected to be delivered in 1999, is believed to be firm. SEGMENT INFORMATION - ------------------- Financial data for the past three years for the company's business segments are shown in the following tables. (In millions) Fiscal Year ------------------------------- 1998 1997 1996 -------- -------- -------- Sales - ----- Plastics technologies $ 796.4 $ 735.7 $ 662.4 Cutting process technologies 718.3 703.0 695.5 -------- -------- -------- Total sales $1,514.7 $1,438.7 $1,357.9 ======== ======== ======== Backlog of unfilled orders - -------------------------- Plastics technologies $ 142.8 $ 89.5 $ 105.6 Cutting process technologies 103.6 106.2 107.0 -------- -------- -------- Total backlog $ 246.4 $ 195.7 $ 212.6 ======== ======== ======== Operating earnings - ------------------ Plastics technologies $ 80.3 $ 59.7 $ 59.2 Cutting process technologies 82.2 81.2 73.7 Corporate expenses (18.9) (17.2) (16.8) Other unallocated expenses (a) (5.7) (5.8) (5.7) -------- -------- -------- Operating earnings 137.9 117.9 110.4 Interest expense - net (30.7) (27.5) (30.9) -------- -------- -------- Earnings from continuing Operations before income taxes and minority shareholders'interests $ 107.2 $ 90.4 $ 79.5 ======== ======== ======== Assets - ------ Plastics technologies $ 882.8 $ 587.2 $ 591.8 Cutting process technologies 547.2 476.8 452.0 1,430.0 1,064.0 1,043.8 -------- -------- -------- Discontinued machine tools segment - 246.6 233.0 Cash and cash equivalents 48.9 25.7 27.8 Receivables sold (63.1) (75.0) (75.0) Deferred income taxes 55.0 54.4 35.1 Unallocated corporate and other 86.3 76.8 71.6 -------- -------- -------- Total assets $1,557.1 $1,392.5 $1,336.3 ======== ======== ======== Capital expenditures - -------------------- Plastics technologies $ 29.6 $ 26.0 $ 19.9 Cutting process technologies 38.8 33.9 27.9 Unallocated corporate 2.4 2.0 2.3 -------- -------- -------- 70.8 61.9 50.1 Discontinued machine tools segment 10.6 17.6 15.1 -------- -------- -------- Total capital expenditures $ 81.4 $ 79.5 $ 65.2 ======== ======== ======== Depreciation and amortization - ----------------------------- Plastics technologies $ 26.6 $ 21.9 $ 20.3 Cutting process technologies 23.3 23.0 23.0 Unallocated corporate 1.5 2.9 2.9 -------- -------- -------- 51.4 47.8 46.2 Discontinued machine tools segment 6.0 5.9 4.7 -------- -------- -------- Total depreciation and amortization $ 57.4 $ 53.7 $ 50.9 ======== ======== ========
(a) Includes financing costs related to the sale of accounts receivable. Geographic Information - ---------------------- The following table summarizes the company's U.S. and non- U.S. operations. Sales of U.S. operations include export sales of $180.5 million in 1998, $168.0 million in 1997, and $141.1 million in 1996. Total sales of the company's U.S. and non-U.S. operations to unaffiliated customers outside the U.S. were $672.3 million, $678.1 million, and $689.3 million in 1998, 1997 and 1996, respectively. Fiscal Year ---------------------------- (In millions) 1998 1997 1996 -------- -------- -------- Sales (a) - -------- United States $ 912.7 $ 845.3 $ 719.2 Non-U.S. operations Germany 235.6 219.5 249.3 Other western Europe 252.2 248.2 271.6 Asia 74.5 87.1 82.2 Other 39.7 38.6 35.6 -------- -------- -------- Total sales $1,514.7 $1,438.7 $1,357.9 ======== ======== ======== Noncurrent assets - ----------------- United States $ 542.3 $ 377.7 $ 347.8 Non-U.S. operations Germany 108.6 80.7 92.6 Other western Europe 117.9 78.9 82.7 Asia 18.4 17.8 15.1 Other 7.5 6.1 5.3 Discontinued operations - 64.4 55.5 -------- -------- -------- Total noncurrent assets $ 794.7 $ 625.6 $599.0 ======== ======== ========
(a) Sales are attributed to specific countries or geographic areas based on the origin of the shipment. EXECUTIVE OFFICERS OF THE REGISTRANT The following information is included in accordance with the provisions for Part III, Item 10: Positions Held During Name and Age Position Last Five Years - ------------ -------- -------------------- Daniel J. Meyer Chairman, President Elected Chairman and Chief (62) And Chief Executive Executive Officer in Officer, Director November, 1991. During 1997, was also elected President of the company. Has served as Director since 1985. Also, is a member of the Executive Committee. Ronald D. Brown Senior Vice President Elected Senior Vice President - (45) Finance and Finance and Administration Administration and and Chief Financial Officer Chief Financial in 1998. Prior thereto was Officer Vice President - Finance and Administration and Chief Financial Officer from 1997 and Vice President - Finance and Chief Financial Officer from 1993. Harold J. Faig Group Vice President- Elected Group Vice (50) Plastics Technologies President - Plastics Technologies in February, 1994. Prior thereto was Vice President - Injection Molding from 1990. Alan L. Shaffer (a) Group Vice President- Elected Group Vice (48) Industrial Products President - Industrial Products in 1986. James R. Christie (a) Vice President- Elected Vice President - (53) Industrial Products Industrial Products in 1997. Has served as President of Valenite since 1993. William J. Gruber Vice President - Elected Vice President - (45) U.S. Plastics U.S. Plastics Technologies Technologies in 1996. Prior thereto was Manager of U.S. Plastics Technologies from 1995 and General Manager, Products Division from 1984. Barbara G. Kasting Vice President- Elected Vice President - (46) Human Resources Human Resources in 1997. Prior thereto was Assistant Treasurer from 1995, Director of Treasury Operations from 1994, and Corporate Quality Manager from 1992. Richard L. Kegg (b) Vice President - Elected Vice President - (63) Technology and Technology and Manufacturing Manufacturing Development Development in 1993. Robert P. Lienesch (c) Vice President Elected Vice President and (53) and Treasurer Treasurer in 1998. Prior thereto was Controller from 1989. James M. Stergiopoulos Vice President- Elected Vice President - (60) Plastics Plastics Technologies Europe Technologies, Europe in 1995. Prior thereto was Director, Plastics Technologies Europe from 1994 and General Manager, Milacron Austria from 1987. Wayne F. Taylor (d) Vice President- Elected Vice President - (55) General Counsel and General Counsel and Secretary Secretary in 1990. Jerome L. Fedders (e) Controller Elected Controller in 1998. (55) Prior thereto was Group Controller, Plastics Technologies from 1994.
Notes: Parenthetical figure below name of individual indicates age at most recent birthday prior to December 31, 1998. There are no family relationships among the executive officers of the Registrant. Officers of the company are elected each year by the Board of Directors. (a) In March, 1999, the company changed the name of its industrial products segment to the cutting process technologies segment. In connection with this change, Alan L. Shaffer's title was changed to Group Vice President - Cutting Process Technologies and James R. Christie's title was changed to Vice President - Cutting Tools. (b) Richard L. Kegg has announced his intention to retire on April 30, 1999. (c) Robert P. Lienesch succeeds Kenneth W. Mueller who retired from the company as Treasurer and Assistant Secretary on April 30, 1998. (d) Wayne F. Taylor retired on February 28, 1999. Hugh C. O'Donnell was elected Vice President, General Counsel and Secretary effective March 1, 1999. (e) Jerome L. Fedders succeeds Robert P. Lienesch who was elected Vice President and Treasurer effective April 30, 1998. ITEM 2. PROPERTIES As part of the sale of the machine tools business, we sold our corporate headquarters building. We plan to move this summer into a new headquarters building which is currently under construction. The facility, which will be leased from a third party, is located approximately 2 miles north of downtown Cincinnati, Ohio. The remaining information required by Item 2 is included in Part I on pages 9 and 13 of this Form 10-K. ITEM 3. LEGAL PROCEEDINGS In the opinion of management and counsel, there are no material pending legal proceedings to which the company or any of its subsidiaries is a party or of which any of its property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of 1998. PART II - ------- ITEM. 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The company's common shares are listed on the New York Stock Exchange. Such shares are also traded on the Cincinnati Stock Exchange, Boston Stock Exchange, Pacific Stock Exchange, Philadelphia Stock Exchange and Midwest Stock Exchange, with options traded on the Philadelphia Stock Exchange. As of March 12, 1999, there were approximately 5,470 holders of record of the company's common shares. The company's preferred shares are not actively traded. The table below shows the price range of the common shares for 1997 and 1998, as reported by the New York Stock Exchange. Cash dividends of $.09 per common share were paid for the first two quarters of 1997. A cash dividend of $.12 per common share was paid for the third and fourth quarters of 1997 and for each quarter of 1998. In addition, cash dividends of $1.00 per preferred share were paid in each quarter of 1997 and 1998. COMMON STOCK PRICE RANGE --------- ------ FISCAL 1997, QUARTER ENDED HIGH LOW ------ ------ March 22 $23.63 $19.13 June 14 25.50 17.88 October 4 28.38 23.88 December 27 29.88 24.38 FISCAL 1998, QUARTER ENDED March 31 $32.06 $23.19 June 30 33.75 23.38 September 30 24.88 15.13 December 31 23.31 14.50
ITEM 6. SELECTED FINANCIAL DATA (Dollars in millions, except per-share amounts) 1998 1997 1996 1995 1994 -------- -------- -------- -------- ------ SUMMARY OF OPERATIONS - --------------------- Sales from continuing operations $1,514.7 $1,438.7 $1,357.9 $1,240.3 $858.6 Cost of products sold 1,092.3 1,051.5 994.5 909.2 642.3 -------- -------- -------- -------- ------ Manufacturing margins 422.4 387.2 363.4 331.1 216.3 Other costs and expenses Selling and Administrative 271.6 259.9 250.3 226.4 152.2 Integration charge - - - 9.8 (a) - Gain (loss) on disposition of business - - - (5.0)(b) - Other-net (c) 12.9 9.4 2.7 10.7 5.1 -------- -------- -------- -------- ------ Total other costs and expenses 284.5 269.3 253.0 241.9 157.3 -------- -------- -------- -------- ------ Operating earnings 137.9 117.9 110.4 89.2 59.0 Interest Income 2.5 2.4 4.8 3.2 2.6 Expense (c) (33.2) (29.9) (35.7) (29.4) (19.4) -------- -------- -------- -------- ------ Interest-net (30.7) (27.5) (30.9) (26.2) (16.8) -------- -------- -------- -------- ------ Earnings from continuing operations before income taxes and minority shareholders' interests 107.2 90.4 79.5 63.0 42.2 Provision for income taxes 28.1 17.0 22.6 15.3 11.0 -------- -------- -------- --------- ------- Earnings from continuing operations before minority shareholders' interests 79.1 73.4 56.9 47.7 31.2 Minority shareholders' interests in earnings of subsidiaries (c) 3.7 4.3 3.1 2.3 - -------- -------- -------- --------- ------- Earnings from continuing operations 75.4 69.1 53.8 45.4 31.2 Discontinued operations net of income taxes Earnings from operations 1.3 11.5 12.5 60.2 (d) 6.5 Loss on sale (35.2) - - - - -------- -------- --------- --------- ------- Total discontinued operations (33.9) 11.5 12.5 60.2 6.5 -------- -------- --------- --------- ------- Net earnings $ 41.5 $ 80.6 $ 66.3 105.6 37.7 ======== ======== ======== ========= ======= Earnings per common share Basic Continuing operations $ 1.93 $ 1.74 $ 1.42 $ 1.33 $ .93 Discontinued operations (.87) .29 -------- -------- -------- --------- ------- Net earnings $ 1.06 $ 2.03 $ 1.75 $ 3.11 $ 1.12 ======== ========= ======== ========= ======= Diluted Continuing operations $ 1.91 $ 1.72 $ 1.41 $ 1.32 $ .92 Discontinued operations (.86) .29 .33 $ 1.75 $ .19 -------- -------- -------- -------- ------- Net earnings $ 1.05 $ 2.01 $ 1.74 $ 3.07 $ 1.11 ======== ========= ======== ======== =======
Note: The amounts presented above for years 1994 through 1997 have been restated to reflect the presentation of the company's machine tools segment as a discontinued operation. The segment was sold on October 2, 1998. See notes (a) - (d) on page 22. (Dollars in millions, except employees and per-share amounts) 1998 1997 1996 1995 1994 -------- -------- -------- -------- ------ Financial Position at Year End - ------------------ Working capital $ 179.6 $ 325.7 $ 318.3 $ 392.7 $151.4 Property, plant and equipment-net 350.9 343.1 319.1 265.5 198.8 Total assets 1,557.1 1,392.5 1,336.3 1,173.7 787.6 Long-term debt 335.7 304.2 301.9 332.2 143.0 Total debt 520.9 371.7 372.8 355.8 226.9 Shareholders' equity 476.6 471.9 446.2 270.7 157.8 Per common share 12.45 11.77 11.06 7.72 4.50 Other Data - ---------- Dividends paid to common shareholders 18.8 16.8 13.4 12.3 12.2 Per common share .48 .42 Capital expenditures 81.4 79.5 65.2 52.3 43.0 Depreciation and amortization 57.4 53.7 50.9 43.6 28.6 Backlog of unfilled orders at year-end (e) 246.5 195.6 212.2 226.7 169.7 Employees (average) (e) 10,993 10,450 10,466 8,840 5,812
(a) Represents a charge of $9.8 million ($7.8 million after tax) for the integration of certain Widia and Valenite operations. (b) Represents a gain of $5.0 million ($4.0 million after tax) on the sale of the company's American Mine Tool business. (c) Beginning in 1998, expense for minority shareholders' interests in the earnings of subsidiaries, which was previously included as a component of operating earnings, is presented as a separate component of earnings from continuing operations after income taxes. Also beginning in 1998, amortization expense related to deferred debt issuance costs has been reclassified from other costs and expenses-net to interest expense. Amounts for prior years have been reclassified to conform to the 1998 presentation. (d) Earnings from discontinued operations includes a gain of $66.0 million ($52.4 million after tax) on the sale of the company's Electronic Systems Division. (e) Restated to exclude discontinued machine tools segment. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- Milacron operates in two business segments: plastics technologies and cutting process technologies (formerly industrial products). DISCONTINUED OPERATIONS On October 2, 1998, we completed the sale of our machine tools group (MTG) for proceeds of approximately $185 million, subject to post-closing adjustments. The after-tax loss on the sale of $35.2 million ($45.9 million before income taxes), or $.90 per share, was recorded in the third quarter of 1998. MTG consists largely of aerospace systems and stand-alone machinery for general metalworking. All comparisons of "results of operations" in this Management's Discussion and Analysis have been restated to exclude the historical operations of MTG. COMPARABILITY OF FINANCIAL STATEMENTS Beginning in the first quarter of 1998, Milacron changed its fiscal year from a 52-53 week year ending on the Saturday closest to December 31st to a calendar year ending on December 31st of each year. In 1998, the transition year, the company's fiscal year began December 28, 1997 and ended on December 31, 1998. The change did not have a material effect on financial condition, results of operations, or cash flows for the year 1998. RECLASSIFICATION OF FINANCIAL STATEMENT Beginning in 1998, expense for minority shareholders' interests in the earnings of subsidiaries, which was previously included as a component of operating earnings in the Consolidated Statement of Earnings, is presented as a separate component of earnings from continuing operations after income taxes. Also beginning in 1998, amortization expense related to deferred debt issuance costs has been reclassified from other costs and expenses-net to interest expense. Amounts for prior years have been reclassified to conform to the 1998 presentations. ACQUISITIONS In February, 1998, we acquired Wear Technology and Northern Supply. Wear Technology is a McPherson, Kansas company with annual sales of approximately $10 million which primarily serves the aftermarket for new and rebuilt twin screws for extrusion systems. Northern Supply, with annual sales of approximately $5 million, offers supplies to plastics processors for injection molding, blow molding and extrusion through distribution centers in Minneapolis, Minnesota and Charlotte, North Carolina. In May, 1998, Milacron acquired Autojectors, Inc., a leading U.S. producer of vertical insert injection molding machinery widely used to make medical, electrical and automotive components. With annual sales of approximately $20 million, Autojectors operates through two manufacturing facilities near Fort Wayne, Indiana. Effective September 30, 1998, Milacron acquired Master Unit Die Products, Inc., a leading North American manufacturer of quick-change mold bases for the plastics industry. Master Unit Die Products has annual sales in excess of $10 million. Also on September 30, 1998, Milacron acquired the assets of Uniloy, the plastics machinery division of Johnson Controls, Inc., for approximately $190 million, subject to post- closing adjustments. Uniloy, which is known for its Uniloy brand of equipment, as well as various other brands, had sales of more than $190 million for the fiscal year ending on September 30, 1998, and is one of the world's leading providers of blow molding machines, as well as structural foam systems, aftermarket parts, services and molds for blowmolding. On December 30, 1998, Milacron acquired Werkzeugfabrik GmbH Konigsee (Werko), a manufacturer of high-speed steel drills. Located in eastern Germany, Werko has annual sales of approximately $25 million. With the exception of Werko, all of the businesses purchased in 1998 are included in the plastics technologies segment from the respective dates of acquisition. In the aggregate, these acquisitions had the effect of increasing 1998 new orders and sales by $72 million and $73 million, respectively, in relation to 1997. Werko is included in the Consolidated Balance Sheet at December 31, 1998, and will be included in the operating results of the cutting process technologies segment beginning in 1999. In 1997, Milacron acquired two businesses: Data Flute CNC in June and Minnesota Twist Drill in September. Both businesses are included in the cutting process technologies segment. These acquisitions resulted in an increase in new orders and sales in 1997 of approximately $8 million in relation to 1996. In January, 1996, Milacron acquired D-M-E, which is included in the company's plastics technologies segment for eleven months of 1996. All of the acquisitions were financed by the use of available cash and bank borrowings and have been accounted for under the purchase method of accounting. PRESENCE OUTSIDE THE U.S. In recent years, Milacron's growth outside the U.S. has allowed it to become more globally balanced. In 1998, markets outside the U.S. represented the following percentages of consolidated sales: Europe 29%; Asia 7%; Canada and Mexico 6%; and the rest of the world 2%. As a result of this geographic mix, foreign currency exchange rate fluctuations affect the translation of sales and earnings, as well as consolidated shareholders' equity. In 1997 and early 1998, the British pound was somewhat stable in relation to the U.S. dollar while the German mark continued to weaken. However, during the second quarter of 1998, the German mark also stabilized and then strengthened slightly. As a result, Milacron experienced favorable currency translation effects on new orders and sales of about $5 million in 1998. The effect on earnings from continuing operations was not significant. There was a $4 million increase in shareholders' equity due to foreign currency translation effects in 1998. This amount excludes $17 million of unfavorable currency translation effects that are included in the loss on the sale of MTG. If non-U.S. currencies should weaken against the U.S. dollar in future periods, Milacron will experience a negative effect on translating non-U.S. new orders, sales and, possibly, net earnings in the future when compared with historical results. 1998 COMPARED TO 1997 NEW ORDERS AND BACKLOG New orders in 1998 were $1,512 million, which represented a $91 million, or 6%, increase from $1,421 million in 1997. Excluding the effect of acquisitions, new orders were $7 million higher in 1998. Orders for plastics technologies products increased by $78 million, or 11%; excluding the acquisitions, orders increased by approximately 1%. Orders for cutting process technologies products increased by $13 million, or 2%; excluding the effect of the 1997 acquisitions, new orders were flat, due principally to the General Motors strike. U.S. export orders were $178 million in 1998 representing a 14% increase from $156 million in 1997. Uniloy accounted for about one half of the increase. The company's backlog of unfilled orders totaled $247 million at December 31, 1998. This compares to $196 million at December 27, 1997, and $212 million at December 28, 1996. SALES Sales in 1998 were $1,515 million, which represented a $76 million, or 5%, increase from $1,439 million in 1997. Excluding the effect of acquisitions, consolidated sales decreased modestly in relation to 1997. Sales of plastics technologies products increased by $61 million, or 8%. The segment's sales include an incremental $73 million related to 1998 acquisitions. Sales of cutting process technologies products increased by $15 million, or 2%; excluding the effect of the 1997 acquisitions, sales in 1998 approximated the 1997 amount. Export sales were $181 million in 1998 compared to $168 million in 1997. The 1998 amount includes $13 million for Uniloy. Sales of both segments to non-U.S. markets, including exports, totaled $672 million, a decrease in 1998 of $6 million. In 1998 and 1997, products manufactured outside the U.S. approximated 40% and 41% of sales, respectively, while products sold outside the U.S. approximated 44 % and 47 % of sales, respectively. MARGINS, COSTS AND EXPENSES The manufacturing margin percent of 27.9% in 1998 increased from 26.9% in 1997. Margins for both segments showed improvement in both the U.S. and in Europe. In 1997, margins in the plastics technologies segment had been held back by pricing pressure on U.S.- built injection molding machines, which began to ease in the third quarter of that year. Total selling and administrative expense increased in amount in relation to 1997. However, these expenses decreased modestly in 1998 as a percentage of sales due to increased sales volume. Other expense-net, including amortization of goodwill, increased to $12.9 million in 1998 from $9.4 million in 1997. The 1998 amount includes severance expenses totaling approximately $6.7 million relating to approximately 185 employees at Widia, the company's European cutting tool company and at the company's extrusion machinery facility in Austria. As a result of these and other actions at Widia and in Austria, we expect to achieve annualized pretax savings of approximately $8.0 million, which began to phase-in during the fourth quarter of 1998 for Widia and which will phase-in during 1999 in Austria. The 1997 expense included severance expenses of approximately $2.0 million relating to Ferromatik, the company's German injection molding machine subsidiary. Annual cost savings from this and other cost reduction measures at Ferromatik were approximately $3.5 million. Interest expense-net, including amortization of debt issuance costs, increased in 1998 due primarily to higher average debt levels associated with acquisitions. EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY SHAREHOLDERS' INTERESTS Earnings before income taxes and minority shareholders' interests of $107.2 million in 1998 exceeded the $90.4 million earned in 1997 by $16.8 million, or 19%. As a percentage of sales, pretax earnings improved significantly from 6.3% to 7.1%, which is largely the result of improved manufacturing margins as discussed above. INCOME TAXES The provision for income taxes in 1998 and 1997 includes U.S. federal and state and local income taxes and income taxes in other jurisdictions outside the U.S. Milacron entered both years with sizeable net operating loss (NOL) carryforwards, along with valuation allowances in certain jurisdictions against the NOL carryforwards and other deferred tax assets. Valuation allowances are evaluated periodically and reversed when it is determined to be more likely than not that the related deferred tax assets will be realized. The reversal of these valuation allowances, as described more fully in the notes to the consolidated financial statements, serves to reduce the effective tax rate. Valuation allowances subject to future reversal were $28 million at year-end 1998, including $13 million related to Werko. We anticipate that these valuation allowances will be approximately $12 to $15 million at year- end 1999. The effective tax rate for 1999 is expected to increase to within a range of approximately 30-33%. However, the tax rate will ultimately be contingent on the mix of earnings between tax jurisdictions and other factors that cannot be predicted with certainty at this time. EARNINGS FROM CONTINUING OPERATIONS Earnings from continuing operations, net of minority shareholders' interests, were $75.4 million, or $1.91 per share (diluted), in 1998 compared with $69.1 million, or $1.72 per share (diluted), in 1997. The increase in earnings is caused by improved operating margins offset by higher interest cost and a higher effective tax rate. DISCONTINUED OPERATIONS In 1998, discontinued operations includes a provision for the loss on the sale of MTG of $35.2 million, or $.90 per share (diluted), and after-tax earnings from operations of $1.3 million, or $.04 per share (diluted). NET EARNINGS For 1998, net earnings were $41.5 million, or $1.05 per share (diluted), compared to $80.6 million, or $2.01 per share (diluted), for 1997. The most significant items affecting the net earnings comparison between years was the loss on the sale of MTG and its lower operating earnings in 1998 prior to the sale. 1997 COMPARED TO 1996 NEW ORDERS AND BACKLOG New orders in 1997 were $1,421 million, which represented an $82 million, or 6%, increase from $1,339 million in 1996. Orders for plastics technologies products increased by $65 million, or 10%, principally due to increased orders for U.S.-built injection molding machines. Orders for cutting process technologies products increased by $17 million, or 2%, of which $8 million resulted from the 1997 acquisitions. Excluding the effect of acquisitions and foreign currency translation effects, new orders increased for this segment by 9% as all major U.S. product lines showed improvement. U.S. export orders were $156 million in 1997 compared to $146 million in 1996. The company's backlog of unfilled orders totaled $196 million at December 27, 1997. This compares to $212 million at December 28, 1996. SALES Sales in 1997 were $1,439 million, which represented an $81 million, or 6%, increase over 1996. This increase was caused principally by internal growth in the plastics technologies segment. Sales in 1997 were adversely affected by $75 million of unfavorable currency translation effects. Excluding the acquisitions and currency translation effects, sales increased by 11%. Sales of plastics technologies increased by $73 million, or 11%, primarily due to increased sales of U.S.-built injection molding machines. Cutting process technologies sales increased by $8 million, or 1%. However, after excluding the acquisitions and currency translation effects, sales increased by $42 million, or 6%. Sales of both segments to non-U.S. markets totaled $678 million, a decrease in 1997 of $11 million. In 1997 and 1996, products manufactured outside the U.S. approximated 41% and 47% of sales, respectively, while products sold outside the U.S. approximated 47% and 51% of sales, respectively. MARGINS, COSTS AND EXPENSES Manufacturing margins as a percent of sales were 26.9% in 1997 and 26.8% in 1996. Margins for cutting process technologies products improved in 1997, while margins for plastics technologies products were depressed through the first three quarters of 1997 due to pricing pressures on U.S.-built injection molding machines. The segment's margins improved in the fourth quarter of 1997. Total selling and administrative expense increased in amount, as expected, due to increases in certain selling costs that vary with sales levels. Administrative expenses increased modestly. As a percent to sales, selling expense declined to approximately 16% of sales and administrative expenses remained at approximately 2% of sales. Other expense net increased to $9.4 million in 1997 from $2.7 million in 1996. The increase was caused primarily by the absence of favorable settlements of legal claims that are included in the 1996 amount and the inclusion of severance expense of approximately $2.0 million in the first quarter of 1997 relating to approximately 60 employees at Ferromatik, the company's German injection molding machine subsidiary. Interest expense net of interest income was $27.5 million in 1997 compared with $30.9 million in 1996. The decrease was due to lower average debt levels and lower borrowing rates as well as the effects of foreign currency translation. EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY SHAREHOLDERS' INTERESTS Earnings before income taxes and minority shareholders' interests were $90.4 million in 1997, which represented an increase of $10.9 million, or 14%, in relation to $79.5 million in 1996. As a percentage of sales, pretax earnings increased from 5.9% to 6.3% due principally to modestly higher manufacturing margins and reduced interest cost. INCOME TAXES The provision for income taxes in 1997 and 1996 includes U.S. federal and state and local income taxes, and income taxes in other jurisdictions outside the U.S. Milacron entered both years with sizeable net operating loss (NOL) carryforwards, along with valuation allowances in certain jurisdictions against the NOL carryforwards and other deferred tax assets. We periodically reevaluate the future realization of all deferred tax assets. During the period, we concluded that it was more likely than not that a portion of these assets would be offset against future taxable income. As a result, we reversed valuation allowances in certain jurisdictions which caused the provision for income taxes to be less than the statutory rate. EARNINGS FROM CONTINUING OPERATIONS Earnings from continuing operations were $69.1 million, or $1.72 per share (diluted), an increase of 28% over $53.8 million, or $1.41 per share (diluted) in 1996. The increase resulted principally from increased pretax earnings as discussed above and a lower effective tax rate. NET EARNINGS Net earnings, including the operating results of the discontinued machine tools segment, were $80.6 million, or $2.01 per share (diluted) in 1997, compared with $66.3 million, or $1.74 per share (diluted) in 1996. Net earnings increased 21%, while per-share earnings increased 16%, which also includes the effect of increased common shares outstanding throughout 1997. YEAR 2000 - --------- The term "Year 2000 problem" (Y2K) refers to processing difficulties that may occur in information technology (I.T.) systems, and other equipment with embedded microprocessors, that were designed without considering the distinction between dates in the 1900s and the 2000s. If not corrected, these systems could fail or miscalculate data when processing date-sensitive information that includes a date on or after January 1, 2000. Each of Milacron's business units, as well as our corporate headquarters, are responsible for developing and executing comprehensive plans to minimize, and to the extent possible, eliminate any major business interruptions that could be caused by the Y2K issue. We have established an executive level Y2K Compliance Committee, which is monitoring our progress toward Y2K preparedness. This monitoring process includes testing by our internal auditors and considering reports from limited reviews conducted by outside consultants to identify issues requiring attention by the Compliance Committee. Milacron's Y2K effort focuses primarily on three important elements: 1) I.T. systems; 2) non-I.T. equipment that includes embedded microprocessors; and 3) supplier preparedness. Most of our efforts to date have focused on our most critical I.T. business systems (e.g., financial; enterprise resource planning, or "ERP"). Each of our ten major manufacturing locations operate unique information technology systems which have been selected to best serve that business's needs. Four of these businesses operate systems that are licensed from independent third party software providers and require third party updates to be Y2K compliant. Milacron is cooperating with and relying on these third parties to replace or upgrade its software with Y2K compliant software on a timely basis. We are installing and testing the new software to provide assurance that the updated systems will properly process date-sensitive information. These systems have already been updated, except for one that is scheduled to be updated in the first half of 1999. Five other businesses are using the Y2K compliance process as an opportunity to modernize their systems by installing new ERP systems licensed from independent software providers. All of the ERP system installations were completed by January 11, 1999. Another business unit operates its own proprietary business systems, which are being reprogrammed to be Y2K compliant; over 95% of the applications have already been remediated with the balance expected to be remediated in the first half of 1999. In addition, Milacron is in the process of completing inventories, assessments and testing of non-I.T. systems (e.g., production equipment) which may contain embedded chips, which could malfunction with the approach of the year 2000. Wherever critical systems are identified as not being compliant, Milacron plans to remediate or replace these non- compliant systems. The remediation phase of this effort is expected to be substantially completed by June 30, 1999. All business units are in the process of contacting key vendors and service providers to obtain information about their plans and progress on Y2K issues and to obtain their assurances that they expect to be able to provide an uninterrupted flow of product or service approaching and into the year 2000. We are following up on significant concerns that are identified as a result of these communications and, in some cases, may be arranging alternative sources of that product or service. In 1998, we focused on preventing significant Y2K failures, rather than preparing formal, written contingency plans. However, in 1999 Milacron intends to prepare contingency plans, if any major systems or suppliers are identified as representing a significant risk of Y2K failure. Many of our machinery products rely upon computer controls and embedded microprocessors to achieve optimum performance. We are making information available publicly to our customers on the Y2K status of these products, substantially all of which are Y2K compliant. Milacron has estimated the cost of major system implementation and remediation efforts. However, other costs are being absorbed in departmental operating budgets. Based on currently available information, we estimate that the incremental cost of these major implementation and remediation projects will be approximately $13 million over 1997, 1998 and 1999, of which over 65% has been expended through December 31, 1998. These costs are not expected to have a material effect on Milacron's financial position, results of operations, or cash flows. Milacron recognizes that the Y2K issue could result in the interruption or failure of certain normal business operations which could materially and adversely affect our results of operations, liquidity and financial condition. We believe that the reasonable worst case scenario is that Milacron could encounter production and shipment delays caused in large part by vendors, service providers and other third parties. Due to the general uncertainty inherent in the Y2K problem, resulting in part from the uncertainty of the Y2K preparedness of third parties, we are unable to determine at this time whether the consequences of the Y2K issue will have a material impact on Milacron's results of operations, liquidity or financial condition. However, as a result of our past and future Y2K activities, we believe that the risk of significant interruption of normal operations should be reduced. MARKET RISK - ------------ FOREIGN CURRENCY EXCHANGE RATE RISK Milacron uses foreign currency forward exchange contracts to hedge its exposure to adverse changes in foreign currency exchange rates related to firm commitments arising from international transactions. The company does not hold or issue derivative instruments for trading purposes. The potential loss from a hypothetical 10% adverse change in foreign currency rates on Milacron's foreign exchange contracts at December 31, 1998, would not materially affect consolidated financial position, results of operations, or cash flows. INTEREST RATE RISK At December 31, 1998, Milacron had fixed interest rate debt of $228 million, including $100 million of 7 7/8% Notes due May 15, 2000, and $115 million of 8 3/8% Notes due March 15, 2004. Milacron also had floating rate debt totaling $293 million, with interest fluctuating based primarily on changes in LIBOR. Milacron also sells up to $75 million of accounts receivable under its receivables purchase agreement, which results in financing fees that fluctuate based on changes in commercial paper rates. As a result, annual interest expense and financing fees in 1999 will fluctuate based upon fluctuations in short-term borrowing rates. Liquidity and Sources of Capital - -------------------------------- At December 31, 1998, Milacron had cash and cash equivalents of $49 million, representing an increase of $23 million in 1998. Operating activities provided $85 million of cash in 1998, compared with $114 million provided in 1997. The decrease in cash provided resulted in part from higher inventory levels to support sales growth that did not materialize when expected and new product introductions. In 1998, investing activities resulted in a $133 million use of cash, due to capital expenditures of $81 million and acquisitions of $228 million, including $190 million for the Uniloy acquisition. Cash flows from investing activities benefited by $174 million from the sale of MTG. In 1997, investing activities used $100 million of cash, including capital expenditures of $80 million. Financing activities provided $72 million of cash in 1998, compared with a use of $16 million in 1997. The 1998 amount includes a $125 million net increase in debt to finance acquisitions and repurchase common shares (as described below), offset by proceeds from the MTG divestiture. In the fourth quarter of 1998, we announced a two million common share repurchase program, of which 1.2 million shares were purchased through December 31, 1998. Including shares purchased earlier in the year to partially meet the anticipated needs of management incentive, employee benefit and dividend reinvestment plans, Milacron used $41 million of cash for share repurchases in 1998. As of December 31, 1998, Milacron's current ratio was 1.3, as compared to 1.8 at December 27, 1997. The decrease in the current ratio is principally the result of the MTG sale and the Uniloy acquisition. As of December 31, 1998, Milacron had lines of credit with various U.S. and non-U.S. banks of approximately $633 million, including a $375 million committed revolving credit facility. Under the provisions of the facility, our additional borrowing capacity totaled approximately $262 million at December 31, 1998. Total debt was $521 million at December 31, 1998, representing an increase of $149 million from December 27, 1997. The increase was caused primarily by increased borrowings to finance acquisitions and the share repurchase program, offset in part by the proceeds from the MTG sale. Total shareholders' equity was $477 million at December 31, 1998, an increase of $5 million from December 27, 1997. The modest increase resulted principally from earnings from continuing operations and favorable foreign currency translation effects, offset by the loss from discontinued operations and the effect of the share repurchase program. The ratio of total debt to total capital (debt plus equity) was 52% at December 31, 1998, compared with 44% at December 27, 1997. We believe that Milacron's cash flow from operations and its currently available credit lines are sufficient to meet our operating and capital requirements in 1999. OUTLOOK - -------- While the Asian recession and softness in certain North American and European industrial sectors persist, business levels remain healthy in many other economic sectors. In addition, both of Milacron's business segments have established leadership positions in their respective markets and can be expected to benefit from the cost reduction measures taken in recent years. Therefore, unless there is unforeseen deterioration in major world markets, Milacron believes it can achieve continued growth in sales, earnings and cash flow. CAUTIONARY STATEMENT - -------------------- Milacron wishes to caution readers about all of the forward- looking statements in the "Outlook" section above and elsewhere. These include all statements that speak about the future or are based on our interpretation of factors that might affect our businesses. Milacron believes the following important factors, among others, could affect its actual results in 1999 and beyond and cause them to differ materially from those expressed in any of our forward- looking statements: * global and regional economic conditions, consumer spending and industrial production, particularly in segments related to the level of automotive production and spending in the construction industry; * fluctuations in currency exchange rates of U.S. and foreign countries, including countries in Europe and Asia where Milacron has several principal manufacturing facilities and where many of our competitors and suppliers are based; * fluctuations in domestic and non-U.S. interest rates which affect the cost of borrowing under Milacron's lines of credit and financing fees related to the sale of domestic accounts receivable; * production and pricing levels of important raw materials, including plastic resins, which are a key material used by purchasers of Milacron's plastics technologies products, and steel, cobalt, tungsten and industrial grains used in the production of metalworking products; * lower than anticipated levels of plant utilization resulting in production inefficiencies and higher costs, whether related to the delay of new product introductions, improved production processes or equipment, or labor relation issues; * any major disruption in production at key customer or supplier facilities; * alterations in trade conditions in and between the U.S. and non-U.S. countries where Milacron does business, including export duties, import controls, quotas and other trade barriers; * changes in tax, environmental and other laws and regulations in the U.S. and non-U.S. countries where Milacron does business; * unanticipated litigation, claims or assessments, including but not limited to claims or problems related to product liability, warranty, or environmental issues; * the failure of key vendors, software providers, public utilities, financial institutions or other critical suppliers to provide products or services that are Y2K compliant. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by Item 7A is included in Item 7 on page 30 of this Form 10-K. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Beginning on page 33 and continuing through page 51 are the consolidated financial statements with applicable notes and the related Report of Independent Auditors, and the supplementary financial information specified by Item 302 of Regulation S-K. CONSOLIDATED STATEMENT OF EARNINGS Milacron Inc. and Subsidiaries Fiscal years ended December 31, 1998, December 27, 1997 and December 28, 1996. In millions, except per-share amounts) 1998 1997 1996 -------- -------- -------- Sales $1,514.7 $1,438.7 $1,357.9 Cost of products sold 1,092.3 1,051.5 994.5 -------- -------- -------- Manufacturing margins 422.4 387.2 363.4 Other costs and expenses Selling and administrative 271.6 259.9 250.3 Other-net 12.9 9.4 2.7 -------- -------- -------- Total other costs and expenses 284.5 269.3 253.0 -------- -------- -------- Operating earnings 137.9 117.9 110.4 Interest Income 2.5 2.4 4.8 Expense (33.2) (29.9) (35.7) -------- -------- -------- Interest-net (30.7) (27.5) (30.9) -------- -------- -------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY SHAREHOLDERS' INTERESTS 107.2 90.4 79.5 Provision for income taxes 28.1 17.0 22.6 -------- -------- -------- EARNINGS FROM CONTINUING OPERATIONS BEFORE MINORITY SHAREHOLDERS' INTERESTS 79.1 73.4 56.9 Minority shareholders' interests in earnings of subsidiaries 3.7 4.3 3.1 -------- -------- -------- EARNINGS FROM CONTINUING OPERATIONS 75.4 69.1 53.8 Discontinued operations net of income taxes Earnings from operations 1.3 11.5 12.5 Loss on sale (35.2) - - -------- -------- -------- Total discontinued operations (33.9) 11.5 12.5 -------- -------- -------- NET EARNINGS $41.5 $80.6 $ 66.3 ======== ======== ======== Earnings per common share - ------------------------- Basic Continuing operations $1.93 $1.74 $1.42 Discontinued operations (.87) .29 .33 -------- -------- -------- Net earnings $1.06 $2.03 $1.75 ======== ======== ======== Diluted Continuing operations $1.91 $1.72 $1.41 Discontinued operations (.86) .29 .33 -------- -------- -------- Net earnings $1.05 $2.01 $1.74 ======== ======== ========
See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEET Milacron Inc. and Subsidiaries December 31, 1998 and December 27, 1997. (In millions, except par value) 1998 1997 -------- -------- ASSETS - ------ Current assets Cash and cash equivalents $ 48.9 $ 25.7 Notes and accounts receivable (less allowances of $12.1 in 1998 and $13.0 in 1997) 226.1 275.0 Inventories Raw materials 45.6 26.5 Work-in-process and finished parts 204.6 217.7 Finished products 150.8 146.2 ------- -------- Total inventories 401.0 390.4 Other current assets 54.5 60.0 ------- -------- Total current assets 730.5 751.1 Property, plant and equipment-net 350.9 343.1 Goodwill 397.6 231.1 Other noncurrent assets 78.1 67.2 -------- -------- Total assets $1,557.1 $1,392.5 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities Amounts payable to banks $ 177.4 $65.9 Long-term debt due within one year 7.8 1.6 Trade accounts payable 155.2 153.7 Advance billings and deposits 31.7 35.7 Accrued and other current liabilities 178.8 168.5 -------- -------- Total current liabilities 550.9 425.4 Long-term accrued liabilities 193.9 191.0 Long-term debt 335.7 304.2 -------- -------- Total liabilities 1,080.5 920.6 ======== ======== Commitments and contingencies - - Shareholders' equity 4% Cumulative Preferred shares 6.0 6.0 Common shares, $1 par value (outstanding: 37.8 in 1998 and 39.6 in 1997) 37.8 39.6 Capital in excess of par value 341.2 377.8 Reinvested earnings 106.0 83.5 Accumulated other comprehensive income (loss) (14.4) (35.0) -------- -------- Total shareholders' equity 476.6 471.9 -------- -------- Total liabilities and shareholders' equity $1,557.1 $1,392.5 ======== ========
See notes to consolidated financial statements. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY Milacron Inc. and Subsidiaries Fiscal years ended December 31, 1998, December 27, 1997 and December 28, 1996. (In millions, except share amounts) Other 4% Cumu- Common Total Compre- Compre- lative Shares, Capital in Reinvested Share- hensive hensive Preferred $1 Par Excess of Earnings holders' Income Income Shares Value Par Value (Deficit) Equity ------- ------- --------- ------ ---------- ---------- -------- Balance at year-end 1995 $(2.8) $6.0 $34.3 $266.0 $(32.8) $270.7 Issuance of 5,500,000 common shares in public offering 5.5 123.0 128.5 Stock options exercised and restricted stock awarded for 69,619 common shares 1.0 1.0 Issuance of 6,474 treasury shares .1 .1 Net earnings for the year $ 66.3 66.3 66.3 Foreign currency translation adjustments (6.8) (6.8) (6.8) ------ Total comprehensive income $ 59.5 ====== Cash dividends Preferred shares ($4.00 per share) (.2) (.2) Common shares ($.36 per share) (13.4) (13.4) - ------------------------------------------------------------------------------------------------------- Balance at year-end 1996 (9.6) 6.0 39.8 390.1 19.9 446.2 Stock options exercised and restricted stock awarded for 379,127 common shares .4 1.8 2.2 Purchase of 589,695 treasury and other common shares (.6) (14.1) (14.7) Net earnings for the year $ 80.6 80.6 80.6 Foreign currency translation adjustments (25.4) (25.4) (25.4) ------ Total comprehensive income $ 55.2 ====== Cash dividends Preferred shares ($4.00 per share) (.2) (.2) Common shares ($.42 per share) (16.8) (16.8) - ------------------------------------------------------------------------------------------------------- Balance at year-end 1997 (35.0) 6.0 39.6 377.8 83.5 471.9 Stock options exercised and restricted stock awarded for 340,251 common shares .3 5.7 6.0 Purchase of 2,129,930 treasury and other common shares (2.1) (42.3) (44.4) Net earnings for the year $41.5 41.5 41.5 Foreign currency translation adjustments 20.6 20.6 20.6 ------ Total comprehensive income $62.1 ====== Cash dividends Preferred shares ($4.00 per share) (.2) (.2) Common shares ($.48 per share) (18.8) (18.8) - ------------------------------------------------------------------------------------------------------- Balance at year-end 1998 $(14.4) $6.0 $37.8 $341.2 $106.0 $476.6 =======================================================================================================
See notes to consolidated financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS Milacron Inc. and Subsidiaries Fiscal years ended December 31, 1998, December 27, 1997 and December 28, 1996 (In millions) 1998 1997 1996 ------- ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS OPERATING ACTIVITIES CASH FLOWS Net earnings $ 41.5 $ 80.6 $ 66.3 Operating activities providing (using) cash Depreciation and amortization 57.4 53.7 50.9 Loss on sale of discontinued machine tools segment 35.2 - - Deferred income taxes (6.3) (14.5) (2.5) Working capital changes Notes and accounts receivable 10.4 (20.7) (5.6) Inventories (45.5) (16.3) (20.7) Other current assets .8 (6.1) 7.4 Trade accounts payable (.4) 21.8 16.8 Other current liabilities 1.0 6.8 (55.1) Decrease (increase) in other noncurrent assets (6.0) .1 (1.9) Increase (decrease) in long-term accrued liabilities (1.9) 13.2 8.8 Other-net (1.3) (4.7) (4.5) ------- ------- ------- Net cash provided by operating activities 84.9 113.9 59.9 ------- ------- ------- INVESTING ACTIVITIES CASH FLOWS Capital expenditures (81.4) (79.5) (65.2) Net disposals of property, plant and equipment 2.4 5.7 4.3 Acquisitions (228.0) (25.9) (246.8) Divestitures 173.7 - - Net cash used by investing activities (133.3) (99.7) (307.7) ------- ------- ------- FINANCING ACTIVITIES CASH FLOWS Dividends paid (19.0) (17.0) (13.6) Issuance of long-term debt 25.7 14.4 - Repayments of long-term debt (6.0) (4.9) (21.1) Increase in amounts payable to banks 105.5 3.7 47.6 Issuance of common shares 6.0 2.2 129.6 Purchase of treasury and other common shares (40.6) (14.7) - ------- ------- ------- Net cash (used) provided by financing activities 71.6 (16.3) 142.5 ------- ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 23.2 (2.1) (105.3) Cash and cash equivalents at beginning of year 25.7 27.8 133.1 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 48.9 $ 25.7 $ 27.8 ======= ======= =======
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CHANGE IN FISCAL YEAR END Effective in 1998, the company changed its fiscal year from a 52-53 week year ending on the Saturday closest to December 31 to a calendar year ending on December 31. Fiscal year ends are as follows: 1998: December 31, 1998 1997: December 27, 1997 1996: December 28, 1996 The change in fiscal year did not have a material effect on financial condition, results of operations or cash flows for the year 1998. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CONSOLIDATION The consolidated financial statements include the accounts of the company and its subsidiaries. All significant intercompany transactions are eliminated. FOREIGN CURRENCY TRANSLATION Assets and liabilities of the company's non-U.S. operations are translated into U.S. dollars at period-end exchange rates. Net exchange gains or losses resulting from such translation are excluded from net earnings and accumulated in a separate component of shareholders' equity. Income and expense accounts are translated at weighted-average exchange rates for the period. Gains and losses from foreign currency transactions are included in other costs and expenses-net in the Consolidated Statement of Earnings. Gains and losses on foreign exchange contracts that are designated as hedges of foreign currency commitments are recognized as part of the specific transactions hedged under the deferral method of accounting consistent with the requirement for a firm commitment. RECLASSIFICATION OF FINANCIAL STATEMENT Beginning in 1998, expense for minority shareholders' interests in the earnings of subsidiaries, which was previously included as a component of operating earnings in the Consolidated Statement of Earnings, is presented as a separate component of earnings from continuing operations after income taxes. Also beginning in 1998, amortization expense related to deferred debt issuance costs has been reclassified from other costs and expenses-net to interest expense. Amounts for prior years have been reclassified to conform to the 1998 presentations. REVENUE RECOGNITION The company's policy is to recognize sales when products are shipped to unaffiliated customers. CASH AND CASH EQUIVALENTS The company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. INVENTORY VALUATION Inventories are stated at the lower of cost or market, including provisions for obsolescence commensurate with known or estimated exposures. The principal methods of determining costs are last-in, first-out (LIFO) for certain U.S. inventories and average or standard cost, which approximates first-in, first- out (FIFO), for other inventories. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost or, for assets acquired through business combinations, at fair value at the dates of the respective acquisitions. For financial reporting purposes, depreciation is generally determined on the straight-line method using estimated useful lives of the assets. Depreciation expense was $49.4 million, $47.6 million and $45.1 million for 1998, 1997 and 1996, respectively, of which $6.0 million, $5.9 million and $4.7 million relates to discontinued operations. Property, plant and equipment that are idle and held for sale are valued at the lower of historical cost less accumulated depreciation or fair value less cost to sell. Carrying costs through the expected disposal dates of such assets are accrued at the time expected losses are recognized or, in the case of assets to be sold at a gain, charged to expense as incurred. GOODWILL Goodwill, which represents the excess of acquisition cost over the net assets acquired in business combinations, is amortized on the straight-line method over periods ranging from 25 to 40 years. The carrying amount of goodwill is reviewed annually using estimated undiscounted cash flows for the businesses acquired over the remaining amortization periods. Amortization expense charged to earnings, all of which relates to continuing operations, amounted to $8.0 million, $6.1 million and $5.8 million in 1998, 1997 and 1996, respectively. RETIREMENT BENEFIT PLANS The company maintains various defined benefit and defined contribution pension plans covering substantially all U.S. employees and certain non-U.S. employees. For defined benefit plans, pension benefits are based primarily on length of service and compensation. The company's policy is to fund the plans in accordance with applicable laws and regulations. STOCK-BASED COMPENSATION The company accounts for stock-based compensation under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and the related interpretations. INCOME TAXES The company provides deferred income taxes for cumulative temporary differences between the financial reporting basis and income tax basis of its assets and liabilities. Provisions are made for all currently payable federal and state and local income taxes at applicable tax rates. Provisions are also made for any additional taxes on anticipated distributions from subsidiaries. EARNINGS PER COMMON SHARE Basic earnings per common share data are based on the weighted-average number of common shares outstanding during the respective periods. Diluted earnings per common share data are based on the weighted-average number of common shares outstanding adjusted to include the effects of potentially dilutive stock options and certain restricted shares. RECENTLY ISSUED PRONOUNCEMENT During the second quarter of 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard is effective for the company beginning in 2000. It establishes comprehensive accounting and reporting requirements for the recognition and measurement of derivative financial instruments and hedging activities including a requirement that derivatives be measured at fair value and recognized in the statement of financial position. The company enters into forward contracts, which are a form of derivative financial instrument, to minimize the effect of foreign currency exchange rate fluctuations. The company is evaluating the effect of this standard on its financial position and results of operations. However, management currently believes that the effect will not be material. DISCONTINUED OPERATIONS On October 2, 1998, the company completed the sale of its machine tools group (MTG). The proceeds from the sale, which are subject to post-closing adjustments, are ultimately expected to be approximately $185 million, of which $180 million was received on the closing date and used to repay bank borrowings incurred for the acquisition of Uniloy (see Acquisitions). The after-tax loss on the sale of $35.2 million ($45.9 million before income taxes), or $.90 per share, was recorded in the third quarter of 1998. The Consolidated Statement of Earnings has been restated to present MTG's operating results through September 30, 1998, as a discontinued operation. MTG sales were $346.4 million in 1998, $458.0 million in 1997 and $371.8 million in 1996. ACQUISITIONS In January, 1996, the company acquired The Fairchild Corporation's D-M-E business (D-M-E) for approximately $246 million. D-M-E is the largest U.S. producer of mold bases, standard components and supplies for the plastics injection mold-making industry. The company financed the acquisition through the execution of promissory notes to the seller in the amount of $182 million and cash on hand of $64 million. The promissory notes were subsequently repaid using the proceeds from an equity offering, available cash and borrowings under the company's existing lines of credit. In the third quarter of 1997, the company acquired Minnesota Twist Drill, Inc., a maker of high-speed twist drills, and Data Flute CNC, Inc., a manufacturer of high-performance solid carbide end mills. Each business has annual sales of approximately $10 million. These acquisitions were financed by the use of available cash and bank borrowings. In February, 1998, the company made two additional acquisitions: Wear Technology, which has annual sales of approximately $10 million and serves the aftermarket for new and rebuilt twin screws for extrusion systems, and Northern Supply, a regional catalog distribution company offering supplies to plastics processors for injection molding, blow molding and extrusion with annual sales of approximately $5 million. In May, 1998, the company acquired Autojectors, Inc., a leading U.S. producer of vertical insert injection molding machinery widely used to make medical, electrical and automotive components. Autojectors has annual sales of approximately $20 million. In September, 1998, the company acquired Master Unit Die Products, Inc., a leading North American manufacturer of quick-change mold bases for the plastics industry. Master Unit Die Products has annual sales in excess of $10 million. Also, in September, 1998, the company acquired the assets of the plastics machinery division of Johnson Controls, Inc. (Uniloy) for approximately $190 million, subject to post-closing adjustments. Uniloy, which is known for its Uniloy brand of equipment, as well as various other brands, has annual sales of approximately $190 million and is one of the world's leading providers of blow molding machines, as well as structural foam systems, aftermarket parts, services and molds for blowmolding. On December 30, 1998, the company acquired Werkzeugfabrik GmbH Konigsee (Werko), a manufacturer of high-speed steel drills. Located in eastern Germany, Werko has annual sales of approximately $25 million. All of these acquisitions were accounted for under the purchase method. The aggregate cost of the acquisitions, including professional fees and other related costs, is expected to be approximately $244.4 million in 1998, and was $27.4 million in 1997 and $248.1 million in 1996. The following table presents the allocation of the aggregate acquisition cost to the assets acquired and liabilities assumed. ALLOCATION OF ACQUISITION COST (In millions) 1998 1997 1996 ------ ----- ------ Cash and cash equivalents $ 1.0 $ .6 $ 1.3 Accounts receivable 37.3 3.6 25.5 Inventories 71.3 4.0 29.6 Other current assets 3.2 .1 1.2 Property, plant and equipment 36.2 7.0 43.9 Goodwill 176.0 14.4 162.5 Other noncurrent assets 5.7 - 7.9 ------ ----- ------ Total assets 330.7 29.7 271.9 ------ ----- ------ Amounts payable to banks and long-term debt due within one year (7.0) - - Other current liabilities (67.0) (2.1) (18.9) Long-term accrued liabilities (1.5) (.2) (4.9) Long-term debt (10.8) - - ------ ----- ------ Total liabilities (86.3) (2.3) (23.8) ------ ----- ------ Total acquisition cost $244.4 $27.4 $248.1 ====== ===== ======
Unaudited pro forma sales and earnings information for 1998 and 1997 reflecting the Uniloy acquisition is presented in the following table. The amounts included therein assume that the acquisition had taken place at the beginning of the respective years. The inclusion of the other 1998 and 1997 acquisitions discussed above would not have a material effect on the amounts presented. The company expects to realize earnings improvements in future years resulting from synergies between Uniloy and the company's existing businesses. However, the pro forma amounts presented below do not give effect to these benefits because they have yet to be realized and cannot be precisely quantified. As a result, the company believes that these amounts are not necessarily indicative of Uniloy's contributions to consolidated operating results in future years. PRO FORMA INFORMATION (In millions, except per-share amounts) 1998 1997 -------- -------- Sales $1,669.2 $1.622.7 ======== ======== Earnings from continuing operations $ 75.0 $ 74.3 Per common share Basic 1.92 1.87 Diluted 1.90 1.85 -------- -------- Net earnings $ 41.1 $ 85.8 ======== ======== Per common share Basic $ 1.05 $ 2.16 Diluted $ 1.04 $ 2.14 ======== ========
RESEARCH AND DEVELOPMENT Charges to continuing operations for research and development activities are summarized below. The amounts include expenses related to the company's Wolfpack product development and process improvement program. RESEARCH AND DEVELOPMENT (In millions) 1998 1997 1996 ----- ----- ----- Research and development $36.7 $35.6 $36.4 ===== ===== =====
RETIREMENT BENEFIT PLANS Pension cost for all defined benefit plans is summarized in the following table. For all years presented, the table includes amounts for plans for certain employees in the U.S., the United Kingdom (U.K.) and Germany. PENSION COST (In millions) 1998 1997 1996 ------ ------ ------ Service cost (benefits earned during the period) $ 10.0 $ 9.6 $ 9.5 Interest cost on projected benefit obligation 38.8 38.9 37.5 Expected return on plan assets (43.8) (42.2) (39.8) Amortization of unrecognized transition asset (5.4) (5.3) (5.6) Amortization of unrecognized prior service cost 1.3 1.3 1.2 Amortization of unrecognized gains and losses .4 (.2) 2.0 ------ ------ ------ Pension cost $ 1.3 $ 2.1 $ 4.8 ====== ====== ======
The above amounts include income of $1.0 million in 1998, $1.7 million in 1997 and $1.2 million in 1996 related to the plan for U.K. employees. Such amounts are included in the operating results of the discontinued machine tools segment in the Consolidated Statement of Earnings. Amounts related to the plan for U.S. employees that are included in discontinued operations cannot be precisely quantified. The following table summarizes changes in the projected benefit obligation for all defined benefit plans. PROJECTED BENEFIT OBLIGATION (In millions) 1998 1997 ------- ------- Balance at beginning of year $(540.3) $(503.6) Service cost (10.0) (9.6) Interest cost (38.8) (38.9) Benefits paid 35.7 33.0 Actuarial gain (loss) (18.4) 8.8 Sale of machine tools segment 90.7 - Change in discount rate (41.9) (35.3) Foreign currency translation adjustments (2.1) 5.3 ------- ------- Balance at end of year $(525.1) $(540.3) ======= =======
The following table summarizes the changes in plan assets for the U.S. and U.K. plans. Consistent with customary practice in Germany, the plans for employees in that country have not been funded. PLAN ASSETS (In millions) 1998 1997 ------ ------ Balance at beginning of year $511.5 $464.4 Actual investment return 42.8 77.7 Benefits paid (32.8) (30.7) Sale of machine tools segment (71.9) - Foreign currency translation adjustments - .1 ------ ------ Balance at end of year $449.6 $511.5 ====== ======
The following table sets forth the funded status of the plan for U.S. employees at year-end 1998 and plans for U.S. and U.K. employees at year-end 1997. FUNDED STATUS AT YEAR-END (In millions) 1998 1997 ------- ------- Vested benefit obligation $(419.7) $(430.8) ======= ======= Accumulated benefit obligation $(435.4) $(451.8) ======= ======= Projected benefit obligation $(483.4) $(502.2) Plan assets at fair value 449.6 511.5 ------- ------- Excess (deficiency) of plan assets in relation to projected benefit obligation (33.8) 9.3 Unrecognized net (gain) loss 29.6 (9.6) Unrecognized prior service cost 3.7 11.9 Unamortized transition asset (1.4) (7.7) ------- ------- Prepaid (accrued) pension cost $ (1.9) $ 3.9 ======= =======
The plans' assets consist principally of stocks, debt securities and mutual funds. The U.S. plan also includes common shares of the company with a market value of $28.0 million in 1998 and $25.4 million in 1997. The following table sets forth the status of the company's defined benefit pension plans for certain employees in Germany. STATUS AT YEAR-END (In millions) 1998 1997 ------ ------ Vested benefit obligation $(35.6) $(32.1) ====== ====== Accumulated benefit obligation $(38.1) $(34.8) ====== ====== Projected benefit obligation $(41.7) $(38.1) Unrecognized net gain (1.3) (.9) ------ ------ Accrued pension cost $(43.0) $(39.0) ====== ======
The following table presents the weighted-average actuarial assumptions used for all defined benefit plans in 1998, 1997 and 1996. ACTUARIAL ASSUMPTIONS 1998 1997 1996 ---- ---- ---- Discount rate 6.8% 7.4% 8.0% Expected long-term rate of return on plan assets 9.5% 9.6% 9.6% Rate of increase in future compensation levels 5.0% 5.2% 5.1%
The company also maintains certain defined contribution and 401(k) plans. Participation in these plans is available to certain U.S. employees. Costs for these plans were $9.7 million, $8.5 million and $7.7 million in 1998, 1997 and 1996, respectively. In addition to pension benefits, the company also provides varying levels of postretirement health care benefits to certain U.S. employees. Substantially all such employees are covered by the company's principal plan, under which benefits are provided to employees who retire from active service after having attained age 55 and ten years of service. The plan is contributory in nature. For employees retiring prior to 1980, such contributions are based on varying percentages of the current per-contract cost of benefits, with the company funding any excess over these amounts. For employees retiring after 1979, the dollar amount of the company's current and future contributions is frozen. The following table presents the components of the company's postretirement health care cost under the principal U.S. plan. POSTRETIREMENT HEALTH CARE COST (In millions) 1998 1997 1996 ----- ----- ----- Service cost (benefits earned during the period) $ .3 $ .3 $ .3 Interest cost on accumulated post-retirement benefit obligation 2.7 3.0 3.2 ----- ----- ----- Postretirement health care cost $ 3.0 $ 3.3 $ 3.5 ===== ===== =====
The following table summarizes changes in the accumulated postretirement health care obligation for the principal U.S. plan. ACCUMULATED POSTRETIREMENT HEALTH CARE OBLIGATION (In millions) 1998 1997 ------ ------ Balance at beginning of year $(38.7) $(40.3) Service cost (.3) (.3) Interest cost (2.7) (3.0) Benefits paid net of contributions 3.4 4.4 Actuarial gain 3.9 2.0 Sale of machine tools segment 6.1 - Change in discount rate (1.0) (1.5) ------ ------ Balance at year-end $(29.3) $(38.7) ====== ======
The following table presents the components of the company's liability for postretirement health care benefits under the principal U.S. plan. Accrued Postretirement Health Care Benefits (In millions) 1998 1997 ------ ------ Accumulated postretirement benefit obligation Retirees $(22.9) $(26.6) Fully eligible active participants (2.3) (5.3) Other active participants (4.1) (6.8) ------ ------ (29.3) (38.7) Unrecognized net gain (8.3) (4.7) ------ ------ Accrued postretirement health care benefits $(37.6) $(43.4) ====== ======
The discount rates used in calculating the accumulated postretirement benefit obligation were 6.75% for 1998 and 7.5% for 1997. For 1999, the assumed rate of increase in health care costs used to calculate the accumulated postretirement benefit obligation is 8.8%. This rate is assumed to decrease to varying degrees annually to 5.0% for years 2005 and thereafter. Because the dollar amount of the company's contributions for most employees is frozen, a one percent change in each year in relation to the above assumptions would not significantly change the accumulated postretirement benefit obligation or the total cost of the plan. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the company's deferred tax assets and liabilities as of year-end 1998 and 1997 are as follows: COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES (In millions) 1998 1997 ------ ------ Deferred tax assets Net operating loss and tax credit carryforwards $ 58.9 $ 48.5 Accrued postretirement health care benefits 12.6 14.6 Inventories, principally due to obsolescence reserves and additional costs inventoried for tax purposes 6.4 8.7 Accrued employee benefits other than pensions and retiree health care benefits 12.3 11.4 Accrued pension costs 9.6 6.7 Accrued warranty costs 1.0 3.3 Accrued taxes 4.3 4.9 Accounts receivable, principally due to allowances for doubtful accounts 3.0 3.5 Accrued liabilities and other 30.8 19.8 ------ ------ Total deferred tax assets 138.9 121.4 Less valuation allowances (28.2) (25.5) ------ ------ Deferred tax assets net of valuation allowances $110.7 $ 95.9 ====== ====== Deferred tax liabilities Property, plant and equipment, principally due to differences in depreciation methods $ 23.0 $ 21.3 Accounts receivable and inventories 13.9 2.4 Goodwill 6.7 4.4 Prepaid pension costs 3.5 6.6 Undistributed earnings of non-U.S. subsidiaries 1.2 1.2 Other 14.4 11.7 ------ ------ Total deferred tax liabilities $ 62.7 $ 47.6 ====== ====== Net deferred tax assets $ 48.0 $ 48.3 ====== ======
Valuation allowances related to Widia's preacquisition net operating loss carryforwards are being applied to reduce goodwill arising from the acquisition as the related tax benefits are realized. During 1998 and 1997, reversals of valuation allowances applied to reduce goodwill totaled $3.1 million and $5.7 million, respectively. Additional reductions of goodwill in years subsequent to 1998 will not be material. Summarized in the following tables are the company's earnings before income taxes, its provision for income taxes, the components of the provision for deferred income taxes and a reconciliation of the U.S. statutory rate to the tax provision rate. EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (In millions) 1998 1997 1996 ----- ----- ----- United States $ 65.3 $54.1 $43.0 Non-U.S. 41.9 36.3 36.5 ------ ----- ----- $107.2 $90.4 $79.5 ====== ===== =====
PROVISION FOR INCOME TAXES (In millions) 1998 1997 1996 ------ ------ ------ Current provision United States $ 18.2 $ 12.0 $ 9.4 State and local 4.3 4.7 3.3 Non-U.S. 11.9 14.8 12.4 ------ ------ ------ 34.4 31.5 25.1 ------ ------ ------ Deferred provision United States .8 (13.7) (2.9) Non-U.S. (7.1) (.8) .4 ------ ------ ------ (6.3) (14.5) (2.5) ------ ------ ------ $ 28.1 $ 17.0 $ 22.6 ====== ====== ======
COMPONENTS OF THE PROVISION FOR DEFERRED INCOME TAXES (In millions) 1998 1997 1996 ----- ------ ----- Change in valuation allowances $(7.1) $(26.7) $ 1.8 Change in deferred taxes related to operating loss carryforwards (1.3) 10.5 (.1) Depreciation and amortization 6.7 2.0 (3.9) Inventories and accounts receivable 3.3 (1.3) (2.0) Accrued pension and other employee costs (3.6) .9 2.4 Other (4.3) .1 (.7) ----- ------ ----- $(6.3) $(14.5) $(2.5) ===== ====== =====
RECONCILIATION OF THE U.S. STATUTORY RATE TO THE TAX PROVISION RATE 1998 1997 1996 ----- ----- ----- U.S. statutory tax rate 35.0% 35.0% 35.0% Increase (decrease) resulting from Tax benefits from net reversal of valuation allowances (10.1) (24.1) - Losses without current tax benefits 2.3 9.9 4.1 Tax benefits from net reversal of U.S. temporary differences - (.2) (4.7) U.S. federal income tax credits (2.6) (3.2) (6.0) Effect of operations outside the U.S. (1.3) (4.0) (4.1) State and local income taxes, net of federal benefit 2.6 3.2 2.9 Other .3 2.2 1.2 ----- ----- ----- 26.2% 18.8% 28.4% ===== ===== =====
At year-end 1998, certain of the company's non-U.S. subsidiaries had net operating loss carryforwards aggregating approximately $120 million, including approximately $39 million related to Werko. Substantially all of these carryforwards have no expiration dates. Undistributed earnings of foreign subsidiaries which are intended to be indefinitely reinvested aggregated $149 million at the end of 1998. Income taxes of $32.2 million, $25.2 million and $33.8 million were paid in 1998, 1997 and 1996, respectively. EARNINGS PER COMMON SHARE The following tables present the calculation of earnings available to common shareholders and a reconciliation of the shares used to calculate basic and diluted earnings per common share. EARNINGS AVAILABLE TO COMMON SHAREHOLDERS (In millions) 1998 1997 1996 ----- ----- ----- Net earnings $41.5 $80.6 $66.3 Less dividends on Preferred shares (.2) (.2) (.2) ----- ----- ----- Net earnings available to common shareholders $41.3 $80.4 $66.1 ===== ===== =====
RECONCILIATION OF SHARES 1998 1997 1996 ------ ------ ------ Weighted-average common shares outstanding 38,875 39,583 37,667 Effect of dilutive stock options and restricted shares 366 373 276 ------ ------ ------ Weighted-average common shares assuming dilution 39,241 39,956 37,943 ====== ====== ======
Weighted-average shares assuming dilution excludes restricted shares subject to contingent vesting based on the attainment of specified earnings objectives that have not yet been achieved. Such shares totaled 216,840 at year-end 1998 and 205,075 at year-end 1997. RECEIVABLES Under the terms of the company's receivables purchase agreement, the company sells on an ongoing basis and without recourse an undivided percentage ownership interest in designated pools of accounts receivable. To maintain the balance in the designated pools of accounts receivable sold, the company is obligated to sell undivided percentage interests in new receivables as existing receivables are collected. The agreement permits the sale of up to $75.0 million of undivided interests in accounts receivable through January, 1999. Subsequent to December 31, 1998, the term of the agreement was extended to August, 2001. At December 31, 1998, December 27, 1997, and December 28, 1996, the undivided interests in the company's gross accounts receivable that had been sold to the purchasers aggregated $63.1 million, $75.0 million and $75.0 million, respectively. Increases and decreases in the amount sold are reported as operating cash flows in the Consolidated Statement of Cash Flows. Costs related to the sales are included in other costs and expenses-net in the Consolidated Statement of Earnings. INVENTORIES Inventories amounting to $89.6 million in 1998 and $130.1 million in 1997 are stated at LIFO cost. If stated at FIFO cost, such inventories would be greater by approximately $17.0 million in 1998 and $66.4 million in 1997. As presented in the Consolidated Balance Sheet, inventories are net of reserves for obsolescence of $37.3 million and $41.6 million in 1998 and 1997, respectively. PROPERTY, PLANT AND EQUIPMENT The components of property, plant and equipment are shown in the following table. PROPERTY, PLANT AND EQUIPMENT-NET (In millions) 1998 1997 ------- ------- Land $ 16.3 $ 14.9 Buildings 153.9 179.4 Machinery and equipment 435.0 459.0 ------- ------- 605.2 653.3 Less accumulated depreciation (254.3) (310.2) ------- ------- $ 350.9 $ 343.1 ======= =======
LIABILITIES The components of accrued and other current liabilities and long-term accrued liabilities are shown in the following tables. ACCRUED AND OTHER CURRENT LIABILITIES (In millions) 1998 1997 ------ ------ Accrued salaries, wages and other compensation $ 49.1 $ 50.4 Other accrued expenses 129.7 118.1 ------ ------ $178.8 $168.5 ====== ======
LONG-TERM ACCRUED LIABILITIES (In millions) 1998 1997 ------ ------ Accrued pension and other compensation $ 74.9 $ 73.2 Accrued postretirement health care benefits 40.6 46.4 Accrued and deferred income taxes 26.6 31.5 Minority shareholders' interests 19.9 16.7 Other 31.9 23.2 ------ ------ $193.9 $191.0 ====== ======
LONG-TERM DEBT The components of long-term debt are shown in the following table. LONG-TERM DEBT (In millions) 1998 1997 ------ ------ 7 7/8 % Notes due 2000 $100.0 $100.0 8 3/8 % Notes due 2004 115.0 115.0 Revolving credit facility 84.8 80.3 Other 43.7 10.5 ------ ------ 343.5 305.8 Less current maturities (7.8) (1.6) ------ ------ $335.7 $304.2 ====== ======
Except for the 7 7/8% Notes due 2000 and the 8 3/8% Notes due 2004, the carrying amount of the company's long-term debt approximates fair value, which is determined using discounted cash flow analysis based on the company's incremental borrowing rate for similar types of financing arrangements. At year-end 1998, the fair value of the 7 7/8% Notes due 2000 was $102.2 million and the fair value of the 8 3/8% Notes due 2004 was $117.6 million. Such amounts are based on recent trade prices through registered securities brokers. Certain of the above long-term debt obligations contain various restrictions and financial covenants relating principally to additional secured indebtedness. Outstanding borrowings under the company's revolving credit facility of $10.0 million and DM 125 million ($74.8 million at December 31, 1998 and $70.3 million at December 27, 1997) are included in long-term debt based on the expectation that these borrowings will remain outstanding for more than one year. These borrowings are at variable interest rates which had a weighted- average of 4.8% at year-end 1998. Interest paid was $31.9 million in 1998, $29.1 million in 1997 and $35.1 million in 1996. Maturities of long-term debt for the five years after 1998 are: MATURITIES OF LONG-TERM DEBT (In millions) 1999 $ 7.8 2000 111.3 2001 12.9 2002 85.8 2003 1.1
The company leases certain equipment and facilities under operating leases, some of which include varying renewal and purchase options. Future minimum rental payments applicable to noncancelable operating leases during the next five years and in the aggregate thereafter are: RENTAL PAYMENTS (In millions) 1999 $17.3 2000 11.6 2001 9.2 2002 7.7 2003 6.3 After 2003 35.1
Rent expense for continuing operations was $17.8 million, $19.6 million and $19.6 million in 1998, 1997 and 1996, respectively. LINES OF CREDIT At year-end 1998, the company had lines of credit with various U.S. and non- U.S. banks of approximately $633 million, including a $375 million committed revolving credit facility. These credit facilities support letters of credit and leases in addition to providing borrowings under varying terms. The size of the revolving credit facility was increased in January, 1998, to $250 million, and increased again in December, 1998, to $375 million. This facility requires a facility fee on the total loan commitment at a variable rate which was .25% per annum as of December 31, 1998, and limits the company's debt to a multiple of earnings before interest, income taxes, depreciation and amortization. At December 31, 1998, the company's additional borrowing capacity totaled approximately $262 million. The weighted-average interest rate on short-term borrowings outstanding as of year-end was 6.4% and 6.6% for 1998 and 1997, respectively. SHAREHOLDERS' EQUITY In October, 1998, the company announced its intention to repurchase up to two million of its common shares on the open market, of which 1,239,700 had been purchased through December 31, 1998. Including shares repurchased earlier in the year to partially meet current and future needs of management incentive, employee benefit and dividend reinvestment plans, the company purchased a total of 2,079,600 treasury shares at a cost of $43.1 million during 1998. A total of 499,600 treasury shares were purchased in 1997 at a cost of $12.2 million. Additional shares totaling 50,330 million in 1998 and 90,095 in 1997 were purchased with respect to current exercises of stock options and restricted stock grants in lieu of the issuance of authorized but unissued shares or treasury shares. SHAREHOLDERS' EQUITY - PREFERRED AND COMMON SHARES (In millions, except share and per-share amounts) 1998 1997 ----- ----- 4% Cumulative Preferred shares authorized, issued and outstanding, 60,000 shares at $100 par value, redeemable at $105 a share $ 6.0 $ 6.0 Common shares, $1 par value, authorized 50,000,000 shares, issued and outstanding, 1998: 37,806,374 shares, 1997: 39,635,829 shares 37.8 39.6
As presented above, common shares outstanding are net of treasury shares of 2,075,835 in 1998 and 286,671 in 1997. The company has authorized ten million serial preference shares with $1 par value. None of these shares has been issued. In February, 1999, the company's Board of Directors approved a stockholder rights plan that provides for the issuance to shareholders of one right per common share owned to acquire, under certain circumstances, 1/1000 of a share of Series A Participating Cumulative Preferred Stock (See Subsequent Event). Holders of company common stock have one vote per share until they have held their shares for at least 36 consecutive months, after which they are entitled to ten votes per share. COMPREHENSIVE INCOME Effective at the beginning of 1998, the company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The statement establishes standards for the reporting and display of total comprehensive income and its components in financial statements. The adoption of this statement has no effect on the company's net earnings or total shareholders' equity. Total comprehensive income represents the net change in shareholders' equity during a period from sources other than transactions with shareholders and as such, includes net earnings. For the company, the only other component of total comprehensive income is the change in the cumulative foreign currency translation adjustments recorded in shareholders' equity. Changes in cumulative foreign currency translation adjustments are as follows: CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (In millions) 1998 1997 1996 ------ ------ ------ Balance at beginning of year $(35.0) $ (9.6) $ (2.8) Effect of exchange rate fluctuations 3.5 (25.4) (6.8) Reclassification to loss on sale of discontinued machine tools segment 17.1 - - ------ ------ ------ $(14.4) $(35.0) $ (9.6) ====== ====== ======
CONTINGENCIES The company is involved in remedial investigations and actions at various locations, including former plant facilities, and EPA Superfund sites where the company and other companies have been designated as potentially responsible parties. The company accrues remediation costs, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than the completion of a remediation feasibility study. The accruals are adjusted as further information becomes available or circumstances change. Environmental costs have not been material in the past. Various lawsuits arising during the normal course of business are pending against the company and its consolidated subsidiaries. In the opinion of management, the ultimate liability, if any, resulting from these matters will have no significant effect on the company's consolidated financial position or results of operations. FOREIGN EXCHANGE CONTRACTS The company enters into forward contracts to hedge foreign currency commitments on an ongoing basis for periods commensurate with known exposures. The purpose of this practice is to minimize the effect of foreign currency exchange rate fluctuations on the company's operating results. The company does not engage in speculation. The company's exposure to credit-related losses from these transactions is considered to be minimal due to the high credit ratings of the parties involved. At December 31, 1998, the company had outstanding forward contracts totaling $19.1 million, which generally mature in periods of six months or less. These contracts require the company and its subsidiaries to exchange currencies at the maturity dates at exchange rates agreed upon at inception. Due to the short-term nature of these contracts, their fair values approximate their contract values as of December 31, 1998. STOCK-BASED COMPENSATION The 1997 Long-Term Incentive Plan (1997 Plan) permits the company to grant its common shares in the form of non-qualified stock options, incentive stock options, restricted stock and performance awards. Non-qualified and incentive stock options outstanding under the 1997 Plan are granted at market value, vest in increments over a five year period, and expire ten years subsequent to the award. Of the 3,409,403 options outstanding at year-end 1998, 235,000 are incentive stock options. Summaries of stock options granted under the 1997 Plan and prior plans are presented in the following tables. STOCK OPTION ACTIVITY Weighted- Average Exercise Shares Price --------- --------- Outstanding at year-end 1995 2,136,996 $19.22 Granted 626,800 25.75 Exercised (31,045) 20.51 Canceled (26,182) 22.95 --------- --------- Outstanding at year-end 1996 2,706,569 20.70 Granted 568,600 23.25 Exercised (94,485) 17.64 Canceled (117,072) 24.28 --------- --------- Outstanding at year-end 1997 3,063,612 21.13 Granted 633,700 27.35 Exercised (259,303) 20.13 Canceled (28,606) 23.82 --------- --------- Outstanding at year-end 1998 3,409,403 $22.34 ========= =========
EXERCISABLE STOCK OPTIONS AT YEAR-END Stock Options ------------- 1996 1,147,869 1997 1,245,931 1998 1,433,759
SHARES AVAILABLE FOR FUTURE GRANT AT YEAR-END Shares --------- 1996 131,675 1997 1,306,959 1998 599,057
The following tables summarize information about stock options outstanding at December 31, 1998. COMPONENTS OF OUTSTANDING STOCK OPTIONS Average Weighted- Range of Remaining Average Exercise Number Contract Exercise Prices Outstanding Life Price ------------- ----------- --------- -------- $ 8.50 - 17.75 637,794 2.2 $14.14 19.41 - 27.91 2,771,609 7.1 24.22 --------- $ 8.50 - 27.91 3,409,403 6.2 $22.34 =========
COMPONENTS OF EXERCISABLE STOCK OPTIONS Weighted- Range of Average Exercise Number Exercise Prices Exercisable Price -------------- ----------- --------- $ 8.50 - 17.75 637,794 $14.14 19.41 - 27.91 795,965 22.79 --------- $ 8.50 - 27.91 1,433,759 $18.94 =========
Under the 1997 Plan, performance awards are granted in the form of restricted stock awards which vest based on the achievement of specified earnings objectives over a three year period. The 1997 Plan also permits the granting of other restricted stock awards, which also vest three years from the date of grant. During the restriction period, restricted stock awards entitle the holder to all the rights of a holder of common shares, including dividend and voting rights. Unvested shares are restricted as to disposition and subject to forfeiture under certain circumstances. The amount of compensation expense recognized for restricted stock, including performance awards, was $4.6 million, $5.0 million and $.9 million in 1998, 1997 and 1996, respectively. Restricted stock award activity is as follows: RESTRICTED STOCK ACTIVITY 1998 1997 1996 ------ ------- ------ Restricted stock awarded 92,194 281,190 58,746 Weighted-average market value on date of grant $27.02 $22.99 $25.55
Of the 92,194 shares of restricted stock awarded in 1998, 52,694 were performance awards subject to contingent vesting. A total of 205,075 such shares were issued in 1997. Cancellations of restricted stock, including shares canceled to pay employee withholding taxes at maturity, totaled 50,595 in 1998, 6,758 in 1997 and 20,172 in 1996. During 1998, 10,819 shares related to performance awards earned under a prior plan and to deferred director's fees were issued. A total of 10,210 performance shares under the prior plan were issued in 1997. Pro forma earnings amounts prepared under the assumption that the stock options granted in years 1995 through 1998 had been accounted for based on their fair value as determined under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," are as follows: PRO FORMA EARNINGS (In millions, except per-share amounts) 1998 1997 1996 ----- ----- ----- Net earnings $38.1 $77.5 $63.5 ===== ===== ===== Net earnings per common share Basic $ .97 $1.95 $1.68 ===== ===== ===== Diluted $ .96 $1.93 $1.67 ===== ===== =====
The weighted-average fair value of stock options granted during 1998, 1997 and 1996 was $8.38, $7.51 and $8.66, respectively. The fair value of the options was calculated as of the date of grant using the Balck-Scholes option pricing model using the following assumptions: FAIR VALUE ASSUMPTIONS 1998 1997 1996 --------- --------- --------- Dividend yield 1.76% 2.06% 1.40% Expected volatility 32 - 39% 31 - 41% 30 - 41% Risk free interest rate at grant date 5.4 - 5.6% 5.9 - 6.3% 5.3 - 5.6% Expected life in years 2 - 7 2 - 7 2 - 7
Statement of Financial Accounting Standards No. 123 does not apply to awards granted prior to 1995. Because additional awards in future years are anticipated the pro forma effects of applying this statement presented above are not indicative of future amounts. ORGANIZATION Milacron Inc. is a worldwide manufacturer of machinery and supplies for processing plastics and cutting tools and other products for metalworking. The company has operations in the United States and other countries located principally in western Europe. The company's business segments are determined based on the nature of the products produced and the markets served. The plastics technologies segment includes the production of injection molding machines, mold bases, systems for extrusion and blow molding and various other specialty equipment. The market is driven by the consumer economy and the automotive industry. The cutting process technologies segment serves a variety of metalworking industries, including the automotive industry. It produces five basic types of products: metalcutting tools, metalworking fluids, precision grinding wheels, carbide wear parts and industrial magnets. The markets for both business segments are highly competitive and can be cyclical in nature. Financial data for the past three years for the company's business segments are shown in the following tables. The accounting policies followed by the segments are identical to those used in the preparation of the company's consolidated financial statements. The effects of intersegment transactions, which are not material in amount, have been eliminated. The company incurs costs and expenses and holds certain assets at the corporate level which relate to its business as a whole. Certain of these amounts have been allocated to the company's business segments by various methods, largely on the basis of usage. Management believes that all such allocations are reasonable. SALES BY SEGMENT (In millions) 1998 1997 1996 -------- -------- -------- Plastics technologies $ 796.4 $ 735.7 $ 662.4 Cutting process technologies 718.3 703.0 695.5 -------- -------- -------- Total sales $1,514.7 $1,438.7 $1,357.9 ======== ======== ========
OPERATING INFORMATION BY SEGMENT (In millions) 1998 1997 1996 -------- -------- -------- Operating earnings Plastics technologies $ 80.3 $ 59.7 $ 59.2 Cutting process technologies 82.2 81.2 73.7 Corporate expenses (18.9) (17.2) (16.8) Other unallocated expenses (a) (5.7) (5.8) (5.7) -------- -------- -------- Operating earnings 137.9 117.9 110.4 -------- -------- -------- Interest expense-net (30.7) (27.5) (30.9) -------- -------- -------- Earnings from continuing operations before income taxes and minority shareholders' interests $ 107.2 $ 90.4 $ 79.5 ======== ======== ======== Segment assets (b) Plastics technologies $ 882.8 $ 587.2 $ 591.8 Cutting process technologies 547.2 476.8 452.0 -------- -------- -------- 1,430.0 1,064.0 1,043.8 Discontinued machine tools segment - 246.6 233.0 Cash and cash equivalents 48.9 25.7 27.8 Receivables sold (63.1) (75.0) (75.0) Deferred income taxes 55.0 54.4 35.1 Unallocated corporate and other (c) 86.3 76.8 71.6 -------- -------- -------- Total assets $1,557.1 $1,392.5 $1,336.3 ======== ======== ======== Capital expenditures Plastics technologies $ 29.6 $ 26.0 $ 19.9 Cutting process technologies 38.8 33.9 27.9 Unallocated corporate 2.4 2.0 2.3 -------- -------- -------- 70.8 61.9 50.1 Discontinued machine tools segment 10.6 17.6 15.1 -------- -------- -------- Total capital expenditures $ 81.4 $ 79.5 $ 65.2 ======== ======== ======== Depreciation and amortization Plastics technologies $ 26.6 $ 21.9 $ 20.3 Cutting process technologies 23.3 23.0 23.0 Unallocated corporate 1.5 2.9 2.9 -------- -------- -------- 51.4 47.8 46.2 Discontinued machine tools segment 6.0 5.9 4.7 -------- -------- -------- Total depreciation and amortization $ 57.4 $ 53.7 $ 50.9 ======== ======== ========
(a) Includes financing costs related to the sale of accounts receivable. (b) Segment assets consist principally of accounts receivable, inventories, goodwill and property, plant and equipment which are considered controllable assets for management reporting purposes. (c) Consists principally of corporate assets, nonconsolidated investments, certain intangible assets, cash surrender value of company-owned life insurance, prepaid expenses and deferred charges. GEOGRAPHIC INFORMATION (In millions) 1998 1997 1996 -------- -------- -------- Sales (a) United States $ 912.7 $ 845.3 $ 719.2 Non-U.S. operations Germany 235.6 219.5 249.3 Other western Europe 252.2 248.2 271.6 Asia 74.5 87.1 82.2 Other 39.7 38.6 35.6 -------- -------- -------- Total sales $1,514.7 $1,438.7 $1,357.9 ======== ======== ======== Noncurrent assets United States $ 542.3 $ 377.7 $ 347.8 Non-U.S. operations Germany 108.6 80.7 92.6 Other western Europe 117.9 78.9 87.2 Asia 18.4 17.8 15.1 Other 7.5 6.1 5.3 Discontinued operations - 64.4 55.5 -------- -------- -------- Total noncurrent assets $ 794.7 $ 625.6 $ 599.0 ======== ======== ========
(a) Sales are attributed to specific countries or geographic areas based on the origin of the shipment. Sales of U.S. operations include export sales of $180.5 million in 1998, $168.0 million in 1997 and $141.1 million in 1996. Total sales of the company's U.S. and non-U.S. operations to unaffiliated customers outside the U.S. were $672.3 million, $678.1 million and $689.3 million in 1998, 1997 and 1996, respectively. SUBSEQUENT EVENT On February 5, 1999, the company's Board of Directors approved a stockholder rights plan which provides for the issuance of one nonvoting preferred stock right for each common share issued as of that date or issued subsequent thereto. Each right, if activated, will entitle the holder to purchase 1/1000 of a share of Series A Participating Cumulative Preferred Stock at an initial exercise price of $70.00. Each 1/1000 of a preferred share will be entitled to participate in dividends and vote on an equivalent basis with one whole common share. Initially, the rights are not exercisable. The rights will become exercisable if any person or group acquires, or makes a tender offer for, more than 15% of the company's outstanding common shares. In the event that any party should acquire more than 15% of the company's common shares without the approval of the Board of Directors, the rights entitle all other shareholders to purchase the preferred shares at a substantial discount. In addition, if a merger occurs with any potential acquirer owning more than 15% of the shares outstanding, holders of rights other than the potential acquirer will be able to purchase the acquirer's common stock at a substantial discount. The rights plan expires in February, 2009. REPORT OF INDEPENDENT AUDITORS Board of Directors Milacron Inc. We have audited the accompanying Consolidated Balance Sheet of Milacron Inc. and subsidiaries as of December 31, 1998 and December 27, 1997, and the related Consolidated Statements of Earnings, Comprehensive Income and Shareholders' Equity, and Cash Flows for each of the three years in the period ended December 31, 1998. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Milacron Inc. and subsidiaries at December 31, 1998 and December 27, 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP Cincinnati, Ohio February 8, 1999 OPERATING RESULTS BY QUARTER (UNAUDITED) (In millions, except per-share amounts) 1998 ( a) ------------------------------------ Qtr 1 Qtr 2 Qtr 3 Qtr 4 ------ ------ ------ ------ Sales $356.5 $370.5 $352.1 $435.6 Manufacturing margins 96.6 103.7 99.9 122.2 Percent of sales 27.1% 28.0% 28.4% 28.1% Earnings from continuing operations 15.0 18.3 18.5 23.6 Per common share Basic .38 .47 .47 .62 Diluted .37 .45 .47 .62 Discontinued operations 2.6 2.6 (39.1) - Per common share Basic .07 .06 (1.00) - Diluted .07 .07 (1.00) - Net earnings 17.6 20.9 (20.6) 23.6 Per common share Basic .45 .53 (.53) .62 Diluted .44 .52 (.53) .62 1997 ( a) ------------------------------------ Sales $287.7 $346.9 $431.2 $372.9 Manufacturing margins 78.1 92.3 114.9 101.9 Percent of sales 27.1% 26.6% 26.6% 27.3% Earnings from continuing operations 10.8 16.5 20.3 21.5 Per common share Basic .27 .42 .51 .54 Diluted .27 .41 .51 .53 Discontinued operations 2.2 1.7 2.3 5.3 Per common share Basic .06 .04 .06 .13 Diluted .05 .05 .05 .14 Net earnings 13.0 18.2 22.6 26.8 Per common share Basic .33 .46 .57 .67 Diluted .32 .46 .56 .67
(a) In 1998, the fiscal year consists of twelve calendar months with three months in each quarter. In 1997, the fiscal year consisted of 13 four-week periods. The first, second and fourth quarters consisted of three periods (or twelve weeks) each, and the third quarter, four periods (or 16 weeks). Given the number of subjective assumptions and estimations that would be required, quarterly amounts for 1997 have not been restated because precise calculations would be impracticable. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III - -------- ITEM 10. RECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 is (i) incorporated herein by reference to the "Election of Directors" section of the company's proxy statement dated March 26, 1999 and (ii) included in Part I on pages 18 through 19 of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The "Components of Compensation" section of the company's proxy statement dated March 26, 1999 is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The "Principal Holders of Voting Securities" section of the company's proxy statement dated March 26, 1999 is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The paragraph captioned "Stock Loan Programs" of the company's proxy statement dated March 26, 1999 is incorporated herein by reference. PART IV - ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Item 14(a)(1)&(2)-- LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of Milacron Inc. and subsidiaries are included in Item 8: Page No. Consolidated Statement of Earnings - 1998, 1997 and 1996 33 Consolidated Balance Sheet - 1998 and 1997 34 Consolidated Statement of Comprehensive Income And Shareholders' Equity - 1998, 1997 and 1996 35 Consolidated Statement of Cash Flows - 1998, 1997 and 1996 36 Notes to Consolidated Financial Statements 37 Report of Independent Auditors 51 Supplementary Financial Information 52 The following consolidated financial statement schedule of Milacron Inc. and subsidiaries is included in Item 14(d) for the years ended 1998, 1997 and 1996: Page No. Schedule II- Valuation and Qualifying Accounts and Reserves 65 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. ITEM 14 (A)(3) - LIST OF EXHIBITS (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation, or Succession - not applicable (3) Articles of Incorporation and By-Laws 3.1 Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on November 17, 1998 -Incorporated herein by reference to the company's Registration Statement on Form S-8 (Registration No. 333-70733) 3.2 By-laws, as amended -Incorporated herein by reference to the company's Registration Statement on Form S-8 (Registration No. 333-70733) (4) Instruments Defining the Rights of Security Holders, Including Indentures: 4.1 8-3/8% Notes due 2004 -Incorporated herein by reference to the company's Amendment No. 3 to Form S-4 Registration Statement dated July 7, 1994 (File No. 33-53009) 4.2 7-7/8% Notes due 2000 -Incorporated by reference to the company's Registration Statement on Form S-4 dated July 21, 1995 (File No. 33-60081) 4.3 Milacron Inc. hereby agrees to furnish to the Securities and Exchange Commission, upon its request, the instruments with respect to long-term debt for securities authorized thereunder which do not exceed 10% of the registrant's total consolidated assets (9) Voting Trust Agreement- not applicable (10) Material Contracts: 10.1 Milacron 1987 Long-Term Incentive Plan -Incorporated herein by reference to the company's Proxy Statement dated March 27, 1987. 10.2 Milacron 1991 Long-Term Incentive Plan -Incorporated herein by reference to the company's Proxy Statement dated March 22, 1991. 10.3 Milacron 1994 Long-Term Incentive Plan -Incorporated herein by reference to the company's Proxy Statement dated March 24, 1994. 10.4 Milacron 1997 Long-Term Incentive Plan, as amended -Filed herewith. 10.5 Milacron 1996 Short-Term Management Incentive Plan -Incorporated herein by reference to the company's Form 10-K for the fiscal year ended December 28, 1996. 10.6 Milacron Inc. Supplemental Pension Plan, as amended -Filed herewith. 10.7 Milacron Inc. Supplemental Retirement Plan, as amended -Filed herewith. 10.8 Milacron Inc. Plan for the Deferral of Directors' Compensation, as amended -Filed herewith. 10.9 Milacron Inc. Retirement Plan for Non-Employee Directors, as amended -Filed herewith. 10.10 Milacron Supplemental Executive Retirement Plan, as amended -Filed herewith. 10.11 Amended and Restated Revolving Credit Agreement dated as of November 30, 1998 among Milacron Inc., Cincinnati Milacron Kunststoffmaschinen Europe GmbH, the lenders listed therein and Bankers Trust Company, as agent. -Filed herewith. 10.12 Milacron Compensation Deferral Plan, as amended -Filed herewith. 10.13 Rights Agreement dated as of February 5, 1999, between Milacron, Inc. and Chase Mellon Shareholder Services, L.L.C., as Rights Agent. -Incorporated herein by reference to the company's Registration Statement on Form 8-A (File No. 001-08485). 10.14 Purchase and Sale Agreement between UNOVA, Inc., UNOVA Industrial Automation Systems, Inc., UNOVA U.K. Limited and Cincinnati Milacron, Inc. dated August 20, 1998. -Incorporated herein by reference to the company's Form 8-K dated December 30, 1995. 10.15 Purchase and Sale Agreement between Johnson Controls, Inc., Hoover Universal, Inc. and Cincinnati Milacron Inc., dated August 3, 1998. -Incorporated herein by reference to the company's Form 8-K dated September 30, 1998. (11) Statement Regarding Computation of Per-Share Earnings (12) Statement Regarding Computation of Ratios - not applicable (13) Annual report to security holders, Form 10-Q or quarterly report to security holders - not applicable (16) Letter re Change in Certifying Accountant - not applicable (18) Letter Regarding Change in Accounting Principles - not applicable (21) Subsidiaries of the Registrant (22) Published Report Regarding Matters Submitted to Vote of Security Holders -Incorporated by reference to the company's Proxy Statement dated March 26, 1999. (23) Consent of Experts and Counsel (24) Power of Attorney - not applicable (27) Financial Data Schedule (99) Additional Exhibits - not applicable ITEM 14(B)-- REPORTS ON FORM 8-K - A Current Report on Form 8-K, Item 2, dated September 30, 1998, was filed regarding the closing of the acquisition of the plastics machinery division of Johnson Controls, Inc., and the terms thereof. Financial statements were not required to be filed. - A Current Report on Form 8-K, Items 2, 5 and 7, dated October 2, 1998, was filed regarding the closing of the sale of the company's machine tools segment to UNOVA, Inc. Pro forma financial statements under Item 7 (b) were included in this filing. The filing also disclosed the change of the change of the company's name to Milacron Inc. and its intention to purchase up to two million shares of its outstanding common stock. ITEM 14(C)&(D)-- EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The responses to these portions of Item 14 are submitted as a separate section of this report. SIGNATURES - ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MILACRON INC. BY: /s/ Daniel J. Meyer ---------------------------- Daniel J. Meyer; Chairman, President and Chief Executive Officer (Chief Executive Officer) BY: /s/ Ronald D. Brown ---------------------------- Ronald D. Brown; Vice President- Senior Finance and Administration and Chief Financial Officer (Chief Financial Officer) BY: /s/ Jerome L. Fedders ---------------------------- Jerome L. Fedders; Controller (Chief Accounting Officer) Date: March 26, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Darryl F. Allen /s/ Neil A. Armstrong - -------------------------------- ------------------------------- Darryl F. Allen; Neil A. Armstrong; March 26, 1999 March 26, 1999 (Director) (Director) /s/ Barbara Hackman Franklin /s/ Harry A. Hammerly - -------------------------------- ------------------------------- Barbara Hackman Franklin; Harry A. Hammerly; March 26, 1999 March 26, 1999 (Director) (Director) /s/ David L. Burner - -------------------------------- David L. Burner; March 26, 1999 (Director) ITEM 14(C) AND (D)-- INDEX TO CERTAIN EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Page No. Exhibit 10.4 Milacron 1997 Long-Term Incentive Plan, as amended Bound Separately Exhibit 10.6 Milacron Inc. Supplemental Pension Plan, as amended Bound Separately Exhibit 10.7 Milacron Inc. Supplemental Retirement Plan, as amended Bound Separately Exhibit 10.8 Milacron Inc. Plan for the Deferral of Directors' Compensation, as amended Bound Separately Exhibit 10.9 Milacron Inc. Retirement Plan for Non- Employee Directors, as amended Bound Separately Exhibit 10.10 Milacron Supplemental Executive Retirement Plan, as amended Bound Separately Exhibit 11 Computation of Per-Share Earnings 60 Exhibit 21 Subsidiaries of the Registrant 61 Exhibit 23 Consent of Experts of Counsel 63 Exhibit 27 Financial Data Schedule 64 Schedule II Valuation and Qualifying Accounts and Reserves 65 MILACRON INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Years Ended 1998, 1997 and 1996 (In Thousands) COL. A COL. B COL. C COL. D COL. E - ------------------------------------------------------------------------------------------------- Additions ------------------------ Balance at Charged to Balance Beginning Costs and Other Deductions at End Description of Period Expenses -Describe -Describe of Period - ------------------------------------------------------------------------------------------------- YEAR ENDED 1998 Allowances for doubtful accounts $13,004 $ 5,757 $ 1,341 (a) $ 4,639 (b) $12,083 199 (c) 3,579 (e) Restructuring and consolidation, closing and relocation and special charge reserves $ 933 $ - $ - $ 412 (b) $ 521 Allowances for inventory obsolescence $41,657 $10,074 $ 1,093 (a) $10,137 (b) $37,350 1,771 (c) 7,108 (e) YEAR ENDED 1997 Allowances for doubtful accounts $13,715 $ 5,528 $ 200 (a) $ 5,624 (b) $13,004 815 (c) Restructuring and consolidation, closing and relocation and special charge reserves $ 2,324 $ - $ - $ 1,266 (b) $ 933 125 (c) Allowances for inventory Obsolescence $45,649 $12,636 $ - $13,223 (b) $41,657 3,405 (c) YEAR ENDED 1996 Allowances for doubtful accounts $12,935 $ 4,667 $ 1,429 (a) $ 4,687 (b) $13,715 629 (c) Restructuring and integration charge reserves $18,336 $ - $ - $14,646 (b) $ 2,324 766 (c) 600 (d) Allowances for inventory Obsolescence $53,458 $10,805 $ 1,598 (a) $18,557 (b) $45,649 1,655 (c)
(a) Consists of reserves of subsidiaries purchased during the year. (b) Represents amounts charged against the reserves during the year. (c) Represents foreign currency translation adjustments during the year. (d) Reversal of excess Valenite restructuring reserve established in 1993. (e) Consists of reserves of businesses sold during the year. EX-11 2 Milacron Inc. and Subsidiaries Computation of Per Share Earnings (Unaudited) (In thousands, except per-share amounts) 1998 1997 1996 -------- ------- -------- Net earnings $ 41,532 $80,589 $66,301 Less preferred dividends 240 240 240 -------- ------- ------- Net earnings available to common shareholders $ 41,292 $80 349 $66,061 ======== ======= ======= Basic Earnings Per Share Weighted-average common shares outstanding 38,875 39,583 37,667 ======== ======= ======= Per share amount $ 1.06 $ 2.03 $ 1.75 ======== ======= ======= Diluted Earnings Per Share Weighted-average common shares outstanding 38,875 39,583 37,667 Add dilutive effect of stock options and restricted shares based on treasury stock method 366 373 276 -------- ------- ------- Total 39,241 39,956 37,943 ======== ======= ======= Per share amount $ 1.05 $ 2.01 $ 1.74 ======== ======= =======
EX-21 3 SUBSIDIARIES OF THE REGISTRANT MILACRON INC. Date Incorporated Incorporated or (if later) Percentage State or Country Date Acquired Owned ------------------- ------------- ---------- MILACRON INC. Delaware(Registrant) 1983 Milacron Assurance Ltd. Bermuda 1977 100% Cincinnati Milacron B.V. The Netherlands 1952 100% Cincinnati Milacron Nederland B.V. The Netherlands 1998 100% Cimcool Europe B.V. The Netherlands 1989 100% Widia Nederland B.V. The Netherlands 1995 100% Cimcool IndustrialProducts B.V. The Netherlands 1960 100% Cincinnati Milacron Holding Gesellschaft, MbH Austria 1970 100% Cincinnati Milacron Austria Gesellschaft MbH Austria 1976 100% Cincinnati Milacron Kunststoffmaschinen Europa GmbH Germany 1990 100% Ferromatik Milacron Maschinenbau GmbH Germany 1993 100% Ferromatik Milacron S.A. France 1993 100% Ferromatik Milacron Benelux B.V. The Netherlands 1993 100% Ferromatik Milacron S.A. Spain 1993 100% Ferromatik Milacron Ltd. England 1993 100% Ferromatik Milacron South Africa 1993 100% Widia GmbH Germany 1995 100% Widia Valenite France S.A. France 1995 100% Widia Valenite U.K. Ltd. England 1995 100% Widia Valenite Italia S.P.A. Italy 1995 100% Widia Valenite Iberica S.L. Spain 1995 100% Herko Vitoria S.A. Spain 1995 100% Widia Vertriebsgesellschaft mbH Austria 1995 100% Widia Valenite KFT Hungary 1998 100% Widia Polska S 00 Poland 1998 99% Meturit A.G. Switzerland 1995 100% Widia (India) Ltd. India 1995 51% DME Normalien GmbH Germany 1996 100% DME France S.a.r.l. France 1996 100% D-M-E Belgium N.V. Belgium 1996 100% Uniloy France S.A. France 1998 100% Uniloy (U.K.) Ltd. England 1998 100% B&W Kunstsofmaschinenbau & Handelsgesellschaft GmbH Germany 1998 100% Indu Tecnospol s.r.o. Czech Republic 1998 100% Uniloy Holdings S.R.L. Italy 1993 100% Uniloy S.R.L. Italy 1998 100% Expulsores Girona SL Spain 1997 100% Cincinnati Milacron Foreign Sales Corp. Barbados 1996 100% Milacron-Holdings Mexicana S.A. de C.V. Mexico 1992 100% Milacron-Mexicana S.A. de C.V. Mexico 1993 100% Milacron Marketing Company Ohio 1931 100% Milacron Commercial Corp. Delaware 1993 100% Milacron International Marketing Company Delaware 1966 100% Milacron Equipamentos Plasticos Ltda. Brazil 1997 100% Northern Supply Company, Inc. Minnesota 1998 100% Autojectors, Inc. Indiana 1998 100% Cincinnati Milacron Private Ltd. India 1995 74% Milacron Resin Abrasives Inc. Delaware 1991 100% D-M-E Company Delaware 1996 100% D-M-E UK Limited England 1996 100% VSI International N.V. Belgium 1996 100% D-M-E of Canada Limited Canada 1996 100% 450500 Ontario Limited Canada 1996 100% Japan D-M-E Corporation Japan 1996 51% Master Unit Die Products, Inc. Delaware 1998 100% Uniloy Milacron Inc. Delaware 1998 100% Uniloy Milacron Machinery - Mexico, S.A. d.e.C.V. Mexico 1998 100% Uniloy Milacron Services - Mexico, S.A. d.e.C.V. Mexico 1998 100% Valenite Inc. Delaware 1993 100% Valenite-Modco International Inc. Michigan 1993 100% Valenite-Widia Japan Inc. Japan 1993 100% Valenite-Modco Limited Canada 1993 100% Milacron Canada, Inc. Canada 1996 100% Valenite de Mexico, S.A. d.e.C.V. Mexico 1993 100% Cincinnati Milacron IPK, Inc. Korea 1993 100% Talbot Holdings, Ltd. Delaware 1995 100% Fastcut Tool Corporation Delaware 1995 100%
EX-23 4 CONSENT OF EXPERTS AND COUNSEL CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 2-89499) pertaining to the 1984 Long-term Incentive Plan, in the Registration Statement (Form S-8 No. 33-20503) pertaining to the 1987 Longterm Incentive Plan, in the Registration Statement (Form S-8 No. 33-33623) pertaining to the Retirement Savings Plan, in the Registration Statement (Form S-8 No. 33-44423) pertaining to the 1991 Long-term Incentive Plan, in the Registration Statement (Form S-8 No. 33-56403) pertaining to the 1994 Longterm Incentive Plan, in the Registration Statement (Form S-8 No. 333-36743) pertaining to the 1997 Long-term Incentive Plan of Milacron Inc., and in the Registration Statement (Form S-8 No. 333-70733) pertaining to the Milacron Inc. Plan for the Deferral of Director's Compensation, of our report dated February 8, 1999, with respect to the consolidated financial statements and schedule included in this Annual Report (Form 10-K) of Milacron Inc. for the year ended December 31, 1998. /s/ ERNST & YOUNG LLP Cincinnati, Ohio March 24, 1999 EX-27 5
5 1,000 YEAR DEC-31-1998 DEC-27-1997 DEC-31-1998 48,900 0 249,000 12,100 401,000 730,500 605,200 254,300 1,557,100 550,900 0 379,000 0 6,000 91,600 1,557,100 1,514,700 1,514,700 1,092,300 1,092,300 288,200 0 30,700 103,500 28,100 75,400 33,900 0 0 41,500 1.06 1.05
EX-10 6 Exhibit 10.4 MILACRON INC. 1997 Long-Term Incentive Plan, As Amended Section 1. GENERAL PROVISIONS 1.1 Purposes The purposes of the 1997 Long-Term Incentive Plan (the "Plan") of Milacron Inc. (the "Company") are to promote the interests of the Company and its shareowners by (i) helping to attract and retain individuals of outstanding ability; (ii) strengthening the Company's capability to develop, maintain and direct a competent management team; (iii) motivating key employees by means of performance-related incentives; (iv) providing incentive compensation opportunities which are competitive with those of other major corporations; and (v) enabling such individuals to participate in the long- term growth and financial success of the Company. 1.2 Definitions "Affiliate"- means any corporation or other entity which is not a Subsidiary but as to which the Company possesses a direct or indirect ownership interest and has power to exercise management control. "Award"- means a Stock Option grant, a Restricted Stock grant and/or a Performance Share Grant under the Plan. "Board of Directors"- means the board of directors of the Company. "Code"- means the Internal Revenue Code of 1986, as it may be amended from time to time. "Committee"- means those members of the Personnel and Compensation Committee of the Board of Directors who qualify as "Non-Employee Directors" pursuant to Rule 16b-3(b)(3) issued under the Exchange Act and who qualify as outside directors pursuant to Code Section 162(m) and any regulations issued thereunder. "Common Stock"- means the common shares of the Company. "Corporation"- means the Company, its divisions, Subsidiaries and Affiliates. "Director"- means a member of the Board of Directors of the Company. "Disability Date"- means the date on which a Participant is deemed disabled under the employee benefit plans of the Corporation applicable to the Participant. "Earnings Per Share"- shall mean earnings from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting, but including or excluding any income or expense items which, in the opinion of the Committee, are properly includable or excludable in the determination of earnings within the intent of the Plan, reduced by the preferred dividend requirement, divided by the number of common share used to calculate "basic earnings per share" as that term is defined in Statement of Financial Accounting Standards No. 128. In the event that generally accepted accounting principles for the calculation of Earnings Per Share change during the term of a Performance Period, the number of common shares used to calculate Earnings Per Share at the beginning and end of the Performance Period shall be determined by a method, to be chosen at the Committee's discretion, which shall be applied consistently throughout the Performance Period. "Employee"- means any salaried employee of the Corporation. "Exchange Act" - means the Securities Exchange Act of 1934, as amended. "Fair Market Value"- means the average of the high and low prices of the Common Stock on the date on which it is to be valued hereunder, as reported for New York Stock Exchange-Composite Transactions, or if there were no sales of Common Stock on that day, the next preceding day on which there were sales. "Incentive Stock Options"- means Stock Options which constitute "incentive stock options" under Section 422 (or any successor section) of the Code. "Initial Performance Period"- shall mean the Performance Period beginning December 29, 1996. "Non-Employee Director"- means a Director who is not an Employee. "Non-Qualified Stock Options" means Stock Options which do not constitute Incentive Stock Options. "Participant"- means an Employee who is selected by the Committee to receive an Award under the Plan. "Performance Cycle"- means a fiscal year of the Company in which this Plan is in effect. "Performance Period"- shall mean the three year period following the beginning of the fiscal year in which the Performance Share Grant is awarded. "Performance Share Grant"- shall mean a number of shares of Restricted Stock granted to the Participant at the beginning of a Performance Period that ranges from 20% to 100%, as determined by the Committee, of the Participant's base earnings during the year of award divided by the average of the closing prices per share of Common Stock during the month immediately preceding the Performance Period. "Performance Share Multiple"- shall mean a percentage of 0%, 100%, 150% or 200% which, when multiplied by the Performance Share Grant, results in the final number of Performance Shares Earned by the Participant for a specific Performance Period. "Performance Shares Earned"- shall mean the product of the Performance Share Multiple multiplied by the Performance Share Grant. "Restricted Period"- means the period of up to three (3) years selected by the Committee during which a grant of Restricted Stock may be forfeited to the Company. "Restricted Stock"- means shares of Common Stock contingently granted to a Participant under Sections 3, 4 or 5 of the Plan. "Retirement Date" - means the actual date of retirement from the Company (i) for those Participants who have attained age 55 and have at least ten Years of Credited Service (as that term is defined in the Milacron Retirement Plan); or, (ii) as may be determined under a temporary early retirement program. "Stock Options" - means an Incentive Stock Option and/or a Non-Qualified Stock Option granted under Section 2 of the Plan. "Subsidiary"- means any corporation in which the Company possesses directly or indirectly fifty percent (50%) or more of the total combined voting power of all classes of its stock. "Total Growth Rate"- shall mean the percentage increase in Earnings Per Share for threshold, target and maximum levels of attainment in the third year of the Performance Period divided by the Earnings Per Share in the year immediately prior to that Performance Period, and will be the result of the annual compound growth rate over the three year Performance Period. 1.3 Administration The Plan shall be administered by the Committee, which shall at all times consist of three or more members. The Committee shall have sole and complete authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time deem advisable, and to interpret the terms and provisions of the Plan. The Committee's decisions are binding upon all parties. 1.4 Eligibility All Employees who have demonstrated significant management potential or who have contributed in a substantial measure to the successful performance of the Corporation, as determined by the Committee, are eligible to be Participants in the Plan. Also, in instances where another corporation or other business entity is being acquired by the Company, and the Company has assumed outstanding employee option grants and/or the obligation to make future or potential grants under a prior existing plan of the acquired entity, adjustments are permitted at the discretion of the Committee subject to Section 1.5(a) below. Awards to Employees are made at the discretion of the Committee. Non-Employee Directors shall also participate pursuant to Section 5 herein. 1.5 Shares Reserved (a) There shall be reserved for grant pursuant to the Plan a total of 2,000,000 shares of Common Stock. In the event that (i) a Stock Option expires or is terminated unexercised as to any shares covered thereby, or (ii) Restricted Stock grants, are forfeited or unearned for any reason under the Plan, such shares shall thereafter be again available for grant pursuant to the Plan. (b) In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recap italization, merger, consolidation, spin-off, combination or exchange of shares or other corporate change, or any distri butions to common shareholders other than cash dividends, the Committee shall make such substitution or adjustment, if any, as it deems to be equitable, as to the number or kind of shares of Common Stock or other securities granted or reserved for grant pursuant to the Plan, the number of outstanding Stock Options and the option price thereof, and the number of payable Performance Share Grants and shares of Restricted Stock. 1.6 Change of Control A "Change of Control" shall be deemed to have occurred if and when (a) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity, which theretofore beneficially owned securities representing less than twenty percent of the voting power of the Company in the election of directors, acquires, in a transaction or series of transactions, outstanding securities of the Company when, added to the voting power previously held, entitles such person to exercise more than twenty percent of the total voting power of the Company in the election of directors (the formation of a syndicate or group of existing shareholders not being deemed to constitute such an acquisition); (b) the Board of Directors (or, if approval of the Board of Directors is not required as a matter of law, the stockholders of the Company) shall approve (1) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (2) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (3) the adoption of any plan or proposal for the liquidation or dissolution of the Company; or (c) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity other than the Company shall make a tender or exchange offer to acquire any Common Stock or securities convertible into Common Stock for cash, securities or any other consideration if, after giving effect to the acquisition of all Common Stock or securities sought pursuant to such offer, such person, corporation or other entity would become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty percent or more of the outstanding Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire Common Stock); provided, that at least ten percent of such Common Stock or securities sought pursuant to such offer is acquired. In the event of a Change of Control of the Company (i) all time periods relating to the exercise or realization of Awards shall be accelerated so that such Awards may be exercised or realized in full beginning immediately following the Change of Control and extending for the remaining normal exercise period, and (ii) all Performance Share Grants eligible to be earned for the outstanding Performance Cycle will be immediately payable in full in cash. 1.7 Withholding The Corporation shall have the right to deduct from all amounts paid in cash any taxes required by law to be withheld therefrom. In the case of payments of Awards in the form of Common Stock, the amount of any taxes required to be withheld with respect to such Common Stock from the Participant may, at the Committee's discretion, be paid in cash, by tender by the Employee of the number of shares of Common Stock whose Fair Market Value equals the amount required to be withheld or, except for Non-Employee Directors receiving Awards of Common Stock pursuant to Section 5 herein, use of the Company's Key Employee Withholding Tax Loan Program. 1.8 Nontransferability No Award shall be assignable or transferable except by will or the laws of descent and distribution, and no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant. 1.9 No Right to Employment No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Corporation. Further, the Corporation expressly reserves the right at any time to dismiss a Participant free from any liability, or any claim under the Plan, except as provided herein or in a Stock Option or Restricted Stock agreement. 1.10 Construction of the Plan The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined solely in accordance with the laws of Ohio. 1.11 Amendment (a) The Board of Directors may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval which shall (i) increase (except as provided in Section 1.5(b) hereof) the total number of shares reserved for grant pursuant to the Plan, (ii) change the class of Employees eligible to be Participants, (iii) decrease the minimum option prices stated in Section 2.1 hereof (other than to change the manner of determining Fair Market Value to conform to any then applicable provision of the Code or regulations thereunder) (iv) extend the maximum period during which Non-Qualified Stock Options or Incentive Stock Options may be exercised, or (v) reduce the restriction period for Restricted Stock Awards (except as provided in Section 1.6 hereof). (b) With the consent of the Participant adversely affected thereby, the Committee may amend or modify any outstanding Award in any manner not inconsistent with the terms of the Plan, including without limitation, to change the form of payment or the date or dates as of which (i) a Stock Option becomes exercisable, (ii) the restrictions on shares of Restricted Stock are removed, or (iii) a Performance Share Grant is payable. 1.12 Authority of Committee Subject to the provisions of the Plan, the Committee shall have the sole and complete authority to determine the Employees to receive Awards, and: (a) Stock Options. The number of shares to be covered by each Stock Option and the conditions and limitations, if any, in addition to those set forth in Section 2.2 hereof, applicable to the exercise of the Stock Option shall be determined by the Committee. The Committee shall have the authority to grant Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant both types of Stock Options. In the case of Incentive Stock Options, the maximum aggregate Fair Market Value (at the date of grant) of the shares, under this Plan or any other plan of the Company or a corporation which (at the date of grant) is a parent of the Company or a Subsidiary, which are exercisable by an Employee for the first time during any calendar year shall not exceed $100,000 or, if different, the maximum limitation in effect at the time of grant under Section 422 of the Code, or any successor provision. (b) Restricted Stock. The number of shares of Restricted Stock to be granted to each Participant, the duration of the Restricted Period during which and the conditions under which the Restricted Stock may be forfeited to the Company, and the terms and conditions of the Award in addition to those contained in Section 3.1 shall be determined by the Committee. Such determinations shall be made by the Committee at the time of the grant. 1.13 Effective Dates The Plan shall be effective on December 29, 1996, and shall expire on the earlier of (i) a date determined by the Board of Directors, or (ii) the full use of the shares reserved for grant pursuant to the Plan, provided however, that the Plan shall be null and void unless approved at the 1997 annual meeting of the shareholders of the Company. 1.14 Government and Other Regulations The obligation of the Company with respect to Awards shall be subject to all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of any registration statement required under the Securities Act of 1933, and the rules and regulations of any securities exchange on which the Common Stock may be listed. For so long as the Common Stock is registered under the Exchange Act, the Company shall use its reasonable efforts to comply with any legal requirements (a) to maintain a registration statement in effect under the Securities Act of 1933 with respect to all shares of Common Stock that may be issued to Holders under the Plan, and (b) to file in a timely manner all reports required to be filed by it under the Exchange Act. 1.15 Non-Exclusivity Neither the adoption of the Plan by the Board of Directors nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board of Directors to adopt such other incentive arrangements as it may deem desirable including, without limitation, the granting of stock options and the awarding of stock and cash otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 1.16 Forfeiture Provision If the Employee has (i) used for profit or disclosed confidential information or trade secrets of the Company to unauthorized persons, or (ii) breached any contract with or violated any legal obligations to the Company, or (iii) failed to make himself or herself available to consult with, supply information to, or otherwise cooperate with the Company at reasonable times and upon a reasonable basis, or (iv) engaged in any other activity which would constitute grounds for his or her discharge for cause by the Company or a Subsidiary, the Employee will forfeit all undelivered portions of an Award. Section 2: STOCK OPTIONS 2.1 Option Price The Committee shall establish the option price at the time each Stock Option is granted, which price shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant. The option price shall be subject to adjustment in accordance with the provisions of Section 1.5(b) hereof. 2.2 Exercise of Options (a) Except as stated in Section 2.2(c), each Stock Option by its terms shall require the Participant to remain in the continuous employ, or service to the Board of Directors if the individual is a Non- Employee Director and awarded Stock Options under Section 5 herein, of the Corporation for at least two years from the date of grant of the Stock Option before any part of the Stock Option shall be exercisable. Non-Qualified Stock Options and Incentive Stock Options may not be exercisable later than ten years after their date of grant. (b) Stock Options shall become exercisable in installments with twenty-five percent (25%) becoming exercisable upon the second anniversary of the date of grant of the Stock Option and additional increments of twenty-five percent (25%) of the Stock Option shall become exercisable on each anniversary thereafter until the entire Stock Option is exercisable. (c) In the event a Participant ceases to be an Employee or a Non-Employee Director as a result of his death, all time periods related to the exercise of any outstanding Stock Options shall be accelerated and the Stock Options shall become exercisable immediately following the Participant's death and extending for the remaining normal exercise period. In the event a Participant ceases to be an Employee or a Non-Employee Director upon the occurrence of his Retirement Date, Disability Date, or otherwise with the consent of the Committee, his Stock Options shall be exercisable as described in 2.2(b) above as if the individual had remained as an Employee or Non- Employee Director and extending for the normal exercise period. The Committee may at any time and with regard to all Participants or any individual Participant accelerate time periods related to the exercise of any outstanding Stock Options, and the Stock Option shall become exercisable immediately thereafter and extending for the remaining normal exercise period. In all other circumstances when a Participant ceases to be an Employee or a Non-Employee Director, his rights under all Stock Options shall terminate immediately. (d) Each Stock Option shall be confirmed by a Stock Option agreement executed by the Company and by the Participant which agreement shall designate the Stock Options granted as Incentive Stock Options or NonQualified Stock Options. The option price of each share as to which an Option is exercised shall be paid in full five (5) days from the date of such exercise, but in no event shall the shares issued pursuant to said option exercise be delivered to the Participant until said payment has been received by the Company. Such payment shall be made in cash, by tender of shares of Common Stock owned by the Participant valued at Fair Market Value as of the date of exercise, subject to such limitations on the tender of Common Stock as the Committee may impose, pursuant to the provisions of the Company's Key Employee Stock Option Loan Program, if applicable, (or any other loan program or arrangement which may be established by the Company under this Plan, or otherwise) or by a combination of the foregoing. 2.3 Maximum Number of Shares The maximum number of shares that may be granted to any Participant under all Stock Option Awards under this Plan during any one year shall not exceed 100,000 shares. Section 3: RESTRICTED STOCK GRANTS 3.1 The terms and conditions regarding Restricted Stock grants are as follows: (a) Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as herein provided, during the Restricted Period. Certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and deposited by him, together with a stock power endorsed in blank, with the Company. At the expiration of the Restricted Period, the Company shall deliver such certificates to the Participant or his legal representative, except that the Participant may defer receipt of his Restricted Stock under terms established by the Committee by extending the Restricted Period. (b) Except as provided in subsection (a) hereof, the Participant shall have all the rights of a holder of Common Stock, including but not limited to the rights to receive dividends and to vote during the Restricted Period. (c) In the event a Participant ceases to be an Employee or a Non-Employee Director during the Restricted Period as a result of his death, the restrictions imposed hereunder shall immediately lapse with respect to such shares of Restricted Stock. In the event a Participant ceases to be an Employee or a Non-Employee Director during the Restricted period and upon the occurrence of his Retirement Date, Disability Date, or with the consent of the Committee, the restrictions imposed hereunder shall continue as if the individual had remained as an Employee or Non- Employee Director. The Committee may at any time and with regard to all Participants or any individual Participant lapse any restrictions imposed hereunder with respect to shares of Restricted Stock. In all other circumstances in which a Participant ceases to be an Employee or Non- Employee Director, all shares of Restricted Stock shall thereupon be forfeited to the Company and the certificate or certificates representing such Restricted Stock shall be immediately canceled. (d) Each grant shall be confirmed by a Restricted Stock agreement executed by the Company and by the Participant. Section 4: PERFORMANCE SHARE GRANTS (a) Not later than May 1 of each calendar year in which this Plan is in effect, the Committee may make a Performance Share Grant, effective as of the beginning of the year, to any Participant selected by the Committee. The Committee may make a Performance Share Grant to a Participant in any given year which relates to a Performance Period already in progress. In such event, (i) the Performance Share Grant determined under Section 4(b) shall be prorated based on the remaining whole years of the relevant Performance Period as of the date of grant compared to the entire length of the relevant Performance Period, (ii) the Participant shall receive Restricted Shares immediately upon the date of grant, and, (iii) the Total Growth Rate and level of attainment factors determined by the Committee at the beginning of the relevant Performance Period shall be used to determine the Participant's ultimate payout under Section 4(d) herein. If awarded not later than May 1, the Performance Share Grant shall relate back to the beginning of the year in which made for purposes of proration. (b) The Committee shall, at the beginning of each Performance Period or not later than 90 days thereafter, determine the Performance Share Grant to be made to each Participant in Restricted Stock and establish the threshold, target and maximum levels of attainment for Total Growth Rate during the Performance Period. (c) If Earnings Per Share during the third year of a Performance Period are equal to or exceed the threshold for a Total Growth Rate set by the Committee at the beginning of a Performance Period, a Performance Share Multiple of 100%, 150% or 200% will be applied to the Performance Share Grant. If Earnings Per Share are below the threshold level of attainment, the Performance Share Multiple will be 0%. Below is the Total Growth Rate and the threshold, target and maximum levels of attainment for the Initial Performance Period.
Earnings Per Share Total Level of Performance Compounded Growth Attainment Share Annually Rate Multiple ________________________________________________________________ Less than 12% Less than 40.5% 0% At least 12%, At least but less than 15% 40.5% but Threshold 100% less than 52.1% At least 15%, At least Target 150% but less than 18% 52.1% but less than 64.3% Equal to or greater 64,3% or Maximum 200% than 18% greater
(d) Payment for the value of Performance Shares Earned shall be made to a Participant not later than three months following the end of a Performance Period. If the threshold Total Growth Rate during the Performance Period is not attained in the third year the performance goals attached to the Performance Share Grant will not have been met and the Participant shall forfeit his Restricted Stock. Payment related to a Performance Share Multiple of 100% shall be the lapse of restrictions for the Participant's Performance Share Grant and he shall receive the certificate for unrestricted ownership of such shares. Payment related to that portion, if any, of a Performance Share Multiple of 150% or 200% shall be as follows: a) for the first 100%, payment shall be the transfer of unrestricted share certificates as a result of the lapse of restrictions on the Performance Share Grant and b) for the 50% or 100% premium, payment shall be an amount of cash equal to the value of the Performance Shares Earned in excess of the 100% multiplied by the average of the closing prices per share of the Common Stock for the last month in the Performance Period. In the event of a Change of Control (as defined in Section 1.6), payment shall be made as if the maximum targets for the three year performance period had been met and shall be paid within thirty days following the Change of Control. Such payment shall be in a cash amount equal to the Performance Share Grant multiplied by the higher of (i) the highest average of the high and low prices per share of the Common Stock on any date within the period commencing 30 days prior to the Change in Control or (ii) if the Change in Control occurs as a result of a tender or exchange offer or consummation of a corporate transaction, the highest price paid per share of Common Stock pursuant thereto. (e) The Committee may make adjustments from time to time in the Performance Share Multiple, in the Total Growth Rate or in Earnings Per Share in such reasonable manner as the Committee may determine to reflect (i) any increase or decrease in the number of issued shares of Common Stock of the Company resulting from a subdivision or consolidation of shares or any other capital adjustment, the payment of stock dividends or other increases or decreases in such shares effected without receipt of consideration by the Company, (ii) material changes in the Company's accounting practices or principles, the effect of which would be to cause inconsistency in reporting earnings per share, (iii) material acquisitions or dispositions, the effect of which would be to cause fluctuations in reported earnings per share which are not within the intent of the Plan, or (iv) extraordinary, unusual and nonrecurring items (such as restructuring charges or a disposal of a business) which are disclosed in the published, audited financial statements; provided, however, that no such adjustments shall be made to the extent that the Committee determines that the adjustment would cause payment in respect of Performance Share Grant to fail to be fully deductible by the Company on account of Section 162(m) of the Code. (f) With respect to a Performance Share Grant, the Participant shall have the rights of a holder of Common Stock, including but not limited to the rights to receive dividends and to vote during the Restricted Period until such Participant ceases to be an Employee of the Corporation for any reason other than death or termination of Employment on a Disability Date or Retirement Date. (g) In the event a Participant ceases to be an Employee upon the occurrence of his death, Retirement Date or Disability Date prior to the end of a Period, payment for the value of Performance Shares Earned shall be prorated for the amount of time the Participant remained an Employee compared to the length of the Performance Period, provided the Participant has completed at least the first full year of the Performance Period. In such event, any prorated payment for Performance Shares Earned shall be distributed in unrestricted share certificates or paid in cash (depending on whether the threshold, target or maximum Total Growth Rate is attained) in accordance with Paragraphs (c) and (d) above. In all other circumstances in which a Participant ceases to be an Employee, Performance Share Grant shall terminate and no amounts shall be payable at any time. (h) If there is an event constituting a Change of Control (as defined in Section 1.6), the value of any outstanding Performance Share Grant shall immediately vest in the Participant to whom such Performance Share Grant has been awarded as of the date such Change of Control occurs and at the closing price per share of Common Stock on such date. Such value shall be equal to the maximum Performance Share Multiple multiplied by the Performance Share Grant. Section 5: NON-EMPLOYEE DIRECTORS (a) Each individual then serving as a Non-Employee Director shall receive a Non-Qualified Stock Option of 2,000 shares at or about the effective date of the Plan and at the beginning of each of the Company's fiscal years thereafter so long as the Plan is in effect. As a portion of their compensation, the Committee may also award to Non- Employee Directors shares of Restricted Stock, as it may determine, not to exceed 2,000 shares per individual every three years. EX-10 7 Exhibit 10.6 MILACRON SUPPLEMENTAL PENSION PLAN, As Amended This Plan is an amended version of the plan originally approved by the Board of Directors on September 10, 1980, to provide supplemental retirement benefits to certain officers of the Company, as described in letters to them dated September 26, 1980. 1. The term Plan means the Milacron Supplemental Pension Plan as described in this document. 2. The following terms shall have the same meanings as those defined In the Milacron Retirement Plan, hereinafter called the Retirement Plan - Highest Average Compensation; Accrued Benefit; Year of Credited Service; Benefit Commencement Date; Normal Retirement Date; Early Retirement Date; Primary Social Security Benefit; Actuarial Equivalent; Company; Board; Participant. For purposes of this Plan, the term Highest Average Compensation shall be determined using "Compensation" as defined under the Milacron Retirement Plan without regard to any dollar limitations and including employee deferrals under the Milacron Compensation Deferral Plan. 3. The term Recipient shall mean a Participant who has been designated by the Board as being entitled to benefits under the Plan. 4. As used in this document, the words "he", "him" and "his" shall be taken to refer equally to a man or a woman. 5. Subject to the possible choice of a different form of benefit as provided in Section 8, a Recipient shall receive, beginning on his Benefit Commencement Date and ending on the first day of the month in which he dies, a monthly pension equal to one-twelfth of the net annual benefit defined in Section 6, provided that his benefit has become vested as provided in Section 9. 6. The net annual benefit shall consist of a gross amount, as defined in Section 7, reduced by the sum of (a) the Recipient's Accrued Benefit under the Retirement Plan, (b) one-half of his Primary Social Security Benefit, and (c) the annual amount of a straight life annuity computed as the Actuarial Equivalent of any and all pensions paid or payable to him by employers other than the Company. 7. The gross amount for any Recipient shall be the sum of (a) 1.5% of his Highest Average Compensation multiplied by the number (not greater than 35) of his Years of Credited Service, and (b) 1% of his Highest Average Compensation multiplied by the number (not greater than 12) of his years of service as an officer of the Company; provided, however, that the gross amount shall not be less than 52.5%, nor greater than 64.5%, of his Highest Average Compensation. 8. A Recipient shall have options to elect different forms of benefit, and his spouse shall have pre-retirement survivor benefits, consistent with those provided by the Retirement Plan. Elections made under the Retirement Plan and under this Plan need not be the same. 9. Unless forfeited pursuant to Section 13, a Recipient's benefit shall become vested - (a) on his Normal Retirement Date; or (b) on his Early Retirement Date; or (c) on involuntary termination of employment before reaching the age of 55 but after completion of ten Years of Credited Service. 10. By accepting payment of any benefit under the Plan the Recipient agrees not to be employed, or consult, in any business which is, or is about to be, engaged in a business of the same or substantially the same nature as the businesses of the Company or its subsidiaries without prior written consent of the Company, and breach of this agreement by the Recipient shall be cause for termination of payment of benefits under the Plan. 11. The establishment of the Plan shall not be construed as conferring any legal rights upon any Recipient or other person for a continuation of employment, nor shall it interfere with the rights of the Company to discharge any Recipient and to treat him without regard to the effect which such treatment might have upon him as a Recipient. 12. Any benefit payable under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, lien or charge, and any attempt to cause any such benefit to be so subjected shall not be recognized except to such extent as may be required by law. 13. In the event that a Recipient shall at any time be convicted of a crime involving dishonesty or fraud on his part in his relationship with the Company, all benefits which would otherwise be payable to him under the Plan shall be forfeited. 14. The Plan shall be administered by the Personnel and Compensation Committee of the Board. 15. The Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes. 16. In the event that a Recipient is unable to care for his affairs because of illness or accident, the Board may direct that any benefit payment due him, unless claim shall have been made therefor by a duly appointed legal representative, be paid to his spouse, a child, a parent or other blood relative, or to a person with whom he resides, and any such payment so made shall be a complete discharge of the liabilities of the Plan therefor. 17. The Board reserves the right to modify or to amend, in whole or in part, or to terminate, this Plan at any time. However, no modification, amendment or termination of the Plan shall adversely affect the right of any Recipient to receive the benefits granted to him under the Plan before the date of modification, amendment or termination. 18. Amounts, if any, contributed to the Plan by the Company shall be held in trust, but shall not be held for the separate account of any Recipient. 19. The Plan shall be governed and construed by the laws of the State of Ohio. EX-10 8 Exhibit 10.7 MILACRON INC. SUPPLEMENTAL RETIREMENT PLAN, As Amended This Plan was approved by the Board of Directors on September 15, 1987, to provide supplemental retirement benefits to certain officers of Milacron Inc. 1. The term Plan means the Milacron Inc. Supplemental Retirement Plan as described in this document. 2. The following terms shall have the same meanings as those defined in the Milacron Retirement Plan, hereinafter called the Retirement Plan - Highest Average Compensation; Accrued Benefit; Year of Credited Service; Benefit Commencement Date; Normal Retirement Date; Early Retirement Date; Primary Social Security Benefit; Actuarial Equivalent; Company; Board; Participant. For purposes of this Plan, the term Highest Average Compensation shall be determined using "Compensation" as defined under the Milacron Retirement Plan without regard to any dollar limitations and including employee deferrals under the Milacron Compensation Deferral Plan. 3. The term Recipient shall mean a Participant who also holds one of the following offices in Milacron Inc.: Chairman, President, Vice President, Treasurer, Secretary or Controller. 4. As used in this document, the words "he", "him" and "his" shall be taken to refer equally, to a man or a woman. 5. Subject to the possible choice of a different form of benefit as provided in Section 8, a Recipient shall receive, beginning on his Benefit Commencement Date and ending on the first day of the month in which he dies, a monthly pension equal to one-twelfth of the net annual benefit defined in Section 6, provided that his benefit has become vested as provided in Section 9. 6. The net annual benefit shall consist of a gross amount, as defined in Section 7, reduced by the sum of (a) the Recipient's Accrued Benefit under the Retirement Plan, and (b) the product obtained by multiplying 1/70th of his Primary Social Security Benefit by the number, not in excess of 35, of his years of Credited Service. 7. The gross amount for any Recipient shall be 1.5% of his Highest Average Compensation multiplied by the number (not greater than 35) of his Years of Credited Service and shall be adjusted to reflect an Actuarial Equivalent unless retirement is elected under a Company sponsored temporary early retirement program. 8. A Recipient shall have options to elect different forms of benefit, and his spouse shall have pre-retirement survivor benefits and costs associated therewith, consistent with those provided by the Retirement Plan. Elections made under the Retirement Plan and under this Plan need not be the same. 9. Unless forfeited pursuant to Section 13, a Recipient's benefit shall become vested - (a) on his Normal Retirement Date; or (b) on his Early Retirement Date; or (c) on involuntary termination of employment before reaching the age of 55 but after completion of ten Years of Credited Service. 10. By accepting payment of any benefit under the Plan the Recipient agrees not to be employed, or consult, in any business which is, or is about to be, engaged in a business of the same or substantially the same nature as the businesses of the Company or its subsidiaries without prior written consent of the Company, and breach of this agreement by the Recipient shall be cause for termination of payment of benefits under the Plan. 11. The establishment of the Plan shall not be construed as conferring any legal rights upon any Recipient or other person for a continuation of employment, nor shall it interfere with the rights of the Company to discharge any Recipient and to treat him without regard to the effect which such treatment might have upon him as a Recipient. 12. Any benefit payable under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, lien or charge, and any attempt to cause any such benefit to be so subjected shall not be recognized except to such extent as may be required by law. 13. In the event that a Recipient shall at any time be convicted of a crime involving dishonesty or fraud on his part in his relationship with the Company, all benefits which would otherwise by payable to him under the Plan shall be forfeited. 14. The Plan shall be administered by the Personnel and Compensation Committee of the Board. 15. The Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes. 16. In the event that a Recipient is unable to care for his affairs because of illness or accident, the Board may direct that any benefit payment due him, unless claim shall have been made therefor by a duly appointed legal representative, be paid to his spouse, a child, a parent or other blood relative, or to a person with whom he resides, and any such payment so made shall be a complete discharge of the liabilities of the Plan therefor. 17. The Board reserves the right to modify or to amend, in whole or in part, or to terminate, this Plan at any time. However, no modification, amendment or termination of the Plan shall adversely affect the right of any Recipient to receive the benefits granted to him under the Plan before the date of modification, amendment or termination. 18. Amounts, if any, contributed to the Plan by the Company shall be held in trust, but shall not be held for the separate account of any Recipient. 19. The Plan shall be governed and construed by the laws of the State of Ohio. EX-10 9 Exhibit 10.8 MILACRON INC. Plan for the Deferral of Directors' Compensation, As Amended 1. Purposes. The purposes of the Milacron Inc. (the "Company") Plan for the Deferral of Directors' Compensation (the "Plan") are to encourage the Company's Directors to invest in the future of the Company through ownership of its common stock and to insure the availability to the Company of its current and prospective Directors. 2. Eligibility. Any Director of the Company who is not an officer or employee of the Company or a subsidiary of the Company is eligible to participate in the Plan. 3. Participant Accounts. A Participant Account shall be established for each participant which shall include a Deferred Cash Account and a Deferred Stock Account. A separate Special Deferred Stock Account shall be established as set forth in Section 10. Each Deferred Cash Account shall be credited with the amounts deferred on behalf of a participant plus annual interest as described in Section 7. The total cumulative value of the Deferred Cash Account shall be adjusted not less frequently than annually, usually on the 31st day of December, to reflect contributions to the Account, payments from the Account as hereinafter provided, and assumed interest. Each Deferred Stock Account shall be credited with the number of shares as determined pursuant in Section 4 herein. Additional shares shall be credited to the participant's Deferred Stock Account on the payment date for dividends on the Company's common shares in an amount equal to the quotient of (1) dividends attributable to the number of shares of stock credited in the participant's Deferred Stock Account as of the record date set by the Company's Board of Director's for the payment of dividends divided by (2) the fair market value of the Company's common stock as of the close of business on the dividend payment date. Any cash amounts remaining in a Deferred Stock Account after shares are credited to the account shall be held in the Deferred Stock Account to be added to future cash amounts for the determination of the number of shares to be credited to the account. Cash amounts held in a Deferred Stock Account shall accrue interest as described in Section 7. 4. Amount of Deferral. A participant may elect to defer receipt of all or a specified portion of the fees otherwise payable to the participant for serving on the Company's Board of Directors or any committee thereof. Deferred compensation will be credited to the participant's Participant Account on the date such compensation is otherwise payable. A portion of the base retainer, as determined by the Company's Board of Directors, that is payable to the participant for serving on the Company's Board of Directors or any committee thereof, shall automatically be deferred and credited to the participant's Deferred Stock Account and shall not be eligible to be transferred to the Deferred Cash Account. The number of shares to be credited to a participant's Deferred Stock Account shall be the quotient of (1) the amount of the deferral divided by (2) the fair market value of the Company's common stock on the date of deferral. Any cash amounts remaining in a Deferred Stock Account after shares are credited to the account shall be held in the Deferred Stock Account to be added to future cash amounts for the determination of the number of shares to be credited to the account. Cash amounts held in a Deferred Stock Account shall accrue interest as described in Section 7. 5. Fair Market Value. For purposes of this Plan, fair market value of the Company's common stock shall be the average of the high and low prices at which the stock was traded on the New York Stock Exchange determined as of the (1) dividend payment date for Section 3, or (ii) date of deferral for Section 4. 6. Time for Electing Deferral. Any election to: (i) defer Directors' fees, (ii) alter percentages applied to the participant's Deferred Cash Account and Deferred Stock Account, or (iii) revoke an election to defer, must be made no later than the time that such fees are to be earned by the participant and must be made on a form designated by the Administrator. An election to commence a deferral may be made at any time in accordance with the procedures set forth in Section 9 and shall indicate the amount of fees deferred and the percentage of such deferral to be credited to the participant's Deferred Cash Account and Deferred Stock Account. Any election so made shall remain in effect beginning from the date of election until the participant ceases to be a Director or elects in writing to change his or her election. A change in election may alter the amount of total deferral or alter the percentage of the total deferral for credit to the Deferred Cash and Deferred Stock Accounts. A change in election to defer shall be effective only with regard to fees subsequently earned. Those Directors who have deferred fees pursuant to previous plans may, on or before May 10, 1991, elect what, if any, portion of previously deferred fees shall be transferred to the participant's Deferred Stock Account. Absent such an election on or before May 10, 1991, one hundred percent (100%) of previously deferred fees shall be credited to the participant's Deferred Cash Account. Funds shall be transferred following the date the election is made and the number of shares credited to the participant's account shall be based on the fair market value of the Company's common stock on the day the election becomes effective. 7. Interest. Interest will be credited to each Participant Account at a rate equal to that interest rate prescribed from time to time by the Internal Revenue Service under Section 6621(b) of the Internal Revenue Code of 1986, as amended. This assumed interest shall be compounded annually and treated as earned from the date deferred compensation is credited to the date of withdrawal. 8. Payment of Deferred Amounts. No payment may be made from any Participant Account except as provided in this Section 8. Payments from a Participant Account shall be made at such time as the participant has elected in accordance with Section 9. Payments shall be made in the form of either a lump sum or annual installments over a period of years not to exceed ten. Payments from a Deferred Cash Account shall be made only in cash, and payments from a Deferred Stock Account shall be made only in the common stock of the Company. If annual installments are elected, such payments shall be made on each January 15 in accordance with the participant's election as provided for in Section 9. The first installment may be in the calendar year following termination of service as a Director or in a subsequent year. The amount of the first payment shall be a fraction of the value of the participant's Deferred Cash Account and a fraction of the shares in the participant's Deferred Stock Account. The fraction shall have a numerator of one and a denominator of the total number of installments elected. The amount of each subsequent payment shall be a fraction of the value of the Deferred Cash Account (including interest earned) and a fraction of the number of shares credited to the Deferred Stock Account on the day preceding each subsequent payment. The fraction for determining subsequent payments shall have a numerator of one and a denominator of the total number of installments elected minus the number of installments previously paid. In the event of a participant's death before he or she has received all of the deferred payments to which he or she is entitled hereunder, the value of the participant's Deferred Cash Account and the number of shares in the participant's Deferred Stock Account shall be determined as of the day immediately following death and such amount and number of shares shall be paid in a single payment to the participant's estate as soon as reasonably practical thereafter. Notwithstanding a participant's election of installment payments, the Company, in its sole discretion, shall have a right to accelerate any such payments or to make payment of the balance in a Participant Account in a lump sum. 9. Manner of Electing Deferral. A participant shall elect a deferral by giving written notice to the Administrator (as defined in Section 13) on a form designated by the Administrator. The notice shall include (1) the amount to be deferred; (2) the time as of which deferral is to commence; (3) the percentage of the deferral to be credited to the Deferred Cash Account and the Deferred Stock Account; (4) an election of a lump sum payment or the number of annual installments (not to exceed 10) for the payment of the deferred amounts; and (5) the date of the lump sum payment or the first installment payment (not to be later than January 15th of the year following the participant's 72nd birthday). 10. Special Deferred Stock Account. A Special Deferred Stock Account shall be established for each participant in the Plan who has elected to cease participation under the Cincinnati Milacron Inc. Retirement Plan for Non-Employee Directors and shall be credited with the number of shares of the common stock of the Company as determined by the Board of Directors of the Company. Any dividends on the Company's common shares shall be credited to the Special Deferred Stock Account in accordance with the provisions of Section 3. Amounts credited to the Special Deferred Stock Account shall not be eligible to be transferred to the Deferred Cash Account. The entire Special Deferred Stock Account shall be paid to the participant in the form of common stock of the Company in the month following the date the participant ceases to be a Director of the Company. In the event of a participant's death before he or she has received a distribution from the Special Deferred Stock Account, the number of shares in the participant's Special Deferred Stock Account shall be determined as of the day immediately following death and the number of shares shall be paid in a single payment to the participant's estate as soon as reasonably practical thereafter. 11. Participant's Rights Unsecured. The right of any participant to receive a distribution under the provisions of this Plan shall be an unsecured claim against the general assets of the Company. The maintenance of individual accounts is for bookkeeping purposes only. The Company is not obligated to acquire or set aside any particular assets for the discharge of its obligations, nor is any participant to have any property rights in any particular assets held by the Company, whether or not held for the purpose of funding the Company's obligations. 12. Statement of Account. Statements will be sent on or about January 15th of each year to participants as to the value of their accounts. 13. Assignability. No right to receive payments hereunder shall be transferable or assignable by a participant, except by will or by the laws of descent and distribution. 14. Plan Administrator. The Administrator of this Plan shall be an officer of the Company who is from time to time appointed by the chief executive officer of the Company. The Administrator shall have the authority to adopt rules and regulations for carrying out the Plan, and to interpret, construe and implement the provisions of the Plan. 15. Amendment or Termination. This Plan may at any time or from time to time be amended, modified or terminated by the Board of Directors of the Company. No amendment, modification or termination shall, without the consent of a participant, adversely affect such participant's accruals in his or her accounts. 16. Governing Law. This Plan and any participant elections hereunder shall be interpreted and enforced in accordance with the laws of the State of Ohio. 17. Effective Date. The effective date of this Plan is January 1, 1991. EX-10 10 Exhibit 10.9 MILACRON INC. RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS ARTICLE I PURPOSE 1.1 The purpose of this Plan is to provide retirement benefits to Directors of Milacron Inc. (the "Company") who meet the eligibility requirements of the Plan. ARTICLE II DEFINITIONS 2.1 "Base Retainer" means the basic annual retainer for non- employee Directors in effect as of an Eligible Director's last date of service on the Milacron Inc. Board of Directors. As used herein, Base Retainer shall not include any additional annual retainer available as a result of a Director acting as chairman of any committee nor shall it include any fees available as a result of attendance at Board of Directors' or its committees' meetings, or other payments made for other services a Director may render. 2.2 "Board of Directors" means the Board of Directors of Milacron Inc. 2.3 "Company" means Milacron Inc. 2.4 "Compensation Committee" means the Compensation Committee of the Board of Directors. 2.5 "Director" means a duly-elected member of the Board of Directors. 2.6 "Eligible Director" means a Director or former Director who has served on the Board of Directors on or after the Effective Date of this Plan as set forth in Item 3.1, who is not an employee of the Company and who does not qualify to receive a retirement benefit under any pension plan of the Company or its subsidiaries other than this Plan. 2.7 "Employee" means a person employed by the Company or its subsidiaries in any capacity other than as a Director. 2.8 "Plan" means this Retirement Plan for Non-Employee Directors. 2.9 "Service" means service as an Eligible Director. ARTICLE III EFFECTIVE DATE 3.1 This Plan shall be effective as of September 12, 1989 (the "Effective Date"). ARTICLE IV PARTICIPATION 4.1 Each Eligible Director serving on the Board of Directors on or after the Effective Date and prior to February 6, 1998, who does not elect to cease participation under the Plan as set forth in Item 4.2, shall participate in the Plan. 4.2 During the period of February 6, 1998 to April 6, 1998, an Eligible Director who is currently serving on the Board of Directors may make an irrevocable one time election to cease participation under the Plan effective January 1, 1998 and have the current value of the Eligible Director's projected benefit under the Plan, as determined by the Board of Directors, credited to a special account under the Milacron Inc. Plan for the Deferral of Directors' Compensation, to be held and paid in accordance with the terms of such plan, as amended effective February 6, 1998. No benefits shall be payable from the Plan after the date of the election. ARTICLE V RETIREMENT BENEFITS/VESTING 5.1 An Eligible Director's annual retirement benefit under this Plan shall be vested when he has six (6) years of Service and shall be equal to a percentage of that Director's Base Retainer in accordance with the table below: Years of Service Percentage of Base Retainer Less than 6 years 0% 6 years 60% 7 years 70% 8 years 80% 9 years 90% 10 years and above 100% In no event shall an Eligible Director's percentage of benefit under this Plan exceed One Hundred Percent (100%) of the Eligible Director's Base Retainer. ARTICLE VI YEARS OF SERVICE 6.1 For purposes of this Plan, one year of Service shall mean 365 days of Service as an Eligible Director beginning with an Eligible Director's initial election or appointment to the Board of Directors. 6.2 In the event of a break in Service, a Director's Service as an Eligible Director before and after the break in Service shall be combined to determine years of service for vesting as set forth in Item 5.1. 6.3 A Director's Service as an Eligible Director prior to the Effective Date of this Plan shall count toward the vesting rules of Item 5.1. ARTICLE VII PAYMENT OF RETIREMENT BENEFITS 7.1 An Eligible Director will be entitled to receive retirement benefits upon (i) the vesting of the benefit as set forth in Item 5.1 and (ii) the Eligible Director reaching age seventy (70). An Eligible Director who has met the two requirements in the preceding sentence shall be entitled to receive retirement benefits whether or not the Eligible Director is a member of the Board of Directors on his seventieth (70th) birthday. 7.2 All retirement benefits hereunder shall be payable in monthly installments equal to one-twelfth (1/12th) of the annual amounts determined under this Plan. An Eligible Director's vested retirement benefit hereunder, if any, shall be payable for the life of the Eligible Director, commencing on the month next following the Eligible Director's seventieth (70th) birthday. ARTICLE VIII DEATH BENEFIT 8.1 Notwithstanding anything herein to the contrary, in the event an Eligible Director whose benefit under this Plan is vested dies prior to age seventy (70), his estate shall receive thirty-six (36) monthly payments in an amount equal to one-twelfth (1/12th) of his annual vested benefit on the date of his death. In the event an Eligible Director whose benefit under this Plan is vested dies after attaining age seventy (70) but prior to receiving thirty-six (36) monthly retirement payments, the Eligible Director's estate shall receive monthly payments in an amount equal to the last monthly payment received hereunder by the Eligible Director before his death and for a number of months which, when added with the number of payments the Eligible Director received during life, equal thirty-six (36). The Company may, at its option, make the payments above to the Director's estate in a lump sum payment calculated on a present value basis. ARTICLE IX FUNDING 9.1 This Plan shall be unfunded. ARTICLE X PLAN ADMINISTRATION 10.1 The general administration of this Plan and the responsibility for carrying out the provisions hereof shall be vested in the Compensation Committee. The Compensation Committee may adopt such rules and regulations as it may deem necessary for the proper administration of this Plan, which are not inconsistent with the provisions hereof, and its decision in all matters shall be final, conclusive and binding. ARTICLE XI AMENDMENT AND TERMINATION 11.1 The Board of Directors reserves in its sole and exclusive discretion the right at any time and from time to time to amend this Plan in any respect or terminate this Plan without restriction and without the consent of any Eligible Director, provided, however, that no amendment or termination of this Plan shall impair the right of any Eligible Director to receive benefits which have become vested pursuant to Item 5.1 prior to such amendment or termination, except as provided in Item 4.2. ARTICLE XII MISCELLANEOUS PROVISIONS 12.1 Nothing contained in this Plan guarantees the continued retention of a Director on the Board of Directors, nor does this Plan limit the right to terminate a Director's Service on the Board of Directors. 12.2 No retirement benefit payable hereunder may be assigned, pledged, mortgaged or hypothecated and, to the extent permitted by law, no such retirement benefit shall be subject to legal process or attachment for the payment of any claims against any person entitled to receive the same. 12.3 If an Eligible Director entitled to receive any retirement benefit payments hereunder is deemed by the Compensation Committee or is adjudged by a court of competent jurisdiction to be legally incapable of giving valid receipt and discharge for such retirement benefit, such payments shall be paid to such person or persons as the Compensation Committee shall designate or to the duly appointed guardian or other legal representative of such Eligible Director. Such payments shall, to the extent made, be deemed a complete discharge for such payments under this Plan. 12.4 Payments made by the Company under this Plan to any Eligible Director shall be subject to withholding as shall, at the time for such payment, be required under any income tax or other laws, whether of the United States or any other jurisdiction. 12.5 All expenses and costs in connection with the operation of this Plan shall be borne by the Company. 12.6 The provisions of this Plan will be construed according to the laws of the State of Ohio. 12.7 The masculine pronoun wherever used herein shall include the feminine gender and the feminine the masculine and the singular number as used herein shall include the plural and the plural the singular unless the context clearly indicates a different meaning. 12.8 The titles to articles and headings of sections of this Plan are for convenience of reference only and in case of any conflict, the text of the Plan, rather than such titles and headings, shall control. ARTICLE XIII CHANGE OF CONTROL 13.1 The provisions of Section 13.3 shall become effective immediately upon the occurrence of a Change of Control (as defined in Section 13.2). 13.2 "Change of Control" - shall mean any one of the following: (a) Any person or group of persons (as defined in Rule 13d-5 under the Securities Exchange Act of 1934), together with its affiliates, becomes the beneficial owner, directly or indirectly, of twenty (20%) percent or more of the voting power of the then outstanding securities of the Company entitled to vote for the election of the Company's Directors; provided that the acquisition of any amount of the outstanding securities of the Company entitled to vote for the election of the Company's Directors by any employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended) maintained by the Company or any affiliate of the Company shall not constitute a Change of Control for purposes of this Plan; (b) the sale of substantially all of the assets of the Company, or the liquidation or dissolution of the Company, or the approval by the Company stockholders of the merger or consolidation of the Company with any other corporation, except, if in the case of a merger or consolidation, the incumbent Directors in office immediately prior to such merger or consolidation will constitute at least 2/3 of the Directors of the surviving corporation or of any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation; or (c) at least 2/3 of the incumbent Directors in office immediately prior to any action, taken by the Company's stockholders or otherwise occurring, determines that such action, if taken, would constitute a change of control of the Company and such action is taken. 13.3 (a) Section 7.2 is deleted and the following is inserted in lieu thereof: All vested retirement benefits hereunder shall be immediately payable upon a Change of Control in one lump sum payment. The lump sum shall be the present value actuarially determined with reference to the life expectancy of the Eligible Director whose benefits have vested pursuant to this Plan and prevailing interest rates. (b) Section 12.4 is deleted. (c) New Section 12.9 is inserted as follows: Notwithstanding any other provisions of the Plan to the contrary: (i) the vested benefit hereunder of any Eligible Director as of the date of a Change of Control may not be reduced; (ii) any Service accrued by an Eligible Director as of the date of a Change of Control cannot be reduced. EX-10 11 Exhibit 10.10 MILACRON SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, As Amended I. Purpose The purpose of the Milacron Supplemental Executive Retirement Plan (the "Plan") is to provide supplemental retirement benefits to certain key employees of Milacron Inc. and its subsidiaries (the "Company") who meet the eligibility requirements of the Plan. II. Definitions "Benefit Commencement Date" - shall be the date as determined by Article IX herein. "Compensation" - shall have the same meaning as that term is defined in the Milacron Retirement Plan, without regard to any dollar limitations and including employee deferrals under the Milacron Compensation Deferral Plan. "Compensation Committee" - shall mean the Compensation Committee of the Milacron Inc. Board of Directors. "Eligible Position" - shall mean the position of Chairman, President or Vice President of Milacron Inc. held by an individual who is first elected to the position of either Chairman, President or Vice President of Milacron Inc. prior to July 30, 1998 and who continues to hold any such position after July 30, 1998 or any specific position held by an individual subsequent to that individual's designation as a key employee by the Compensation Committee for purposes of this Plan. "Highest Average Compensation" - shall mean the highest average of the Participant's Compensation for three consecutive years. "Normal Retirement Date" - shall have the same meaning as that term is defined in the Milacron Retirement Plan. "Participant" - shall mean an individual eligible to participate in this Plan as set forth in Article V. "Years of Credited Service" - shall have the same meaning as that term is defined in the Milacron Retirement Plan. Solely for purposes of this Plan, the above terms that are defined in the Milacron Retirement Plan shall be applied to the Participant with respect to his employment with the Company, regardless of the Participant's eligibility under the Milacron Retirement Plan. III. Effective Date/Plan Year This Plan will be effective beginning January 1, 1994. The Plan year shall coincide with the calendar year. IV. Election Individuals may not participate in both this Plan and the Milacron Supplemental Pension Plan or the Milacron Supplemental Executive Pension Plan. Individuals eligible to participate in this Plan and the Milacron Supplemental Pension Plan or the Milacron Supplemental Executive Pension Plan must inform the Compensation Committee at the time of termination of the employment relationship between the Company and the individual as to which plan the individual shall participate. V. Eligibility An individual shall be eligible to participate in the Plan and thus become a "Participant" if: A. The individual holds or has held an Eligible Position; and, (i) the individual remains in the employ of the Company at least until his Normal Retirement Date; or, (ii) the individual is an employee of the Company on or after his 55th birthday and has at least ten (10) Years of Credited Service with the Company; or, (iii) the individual terminates employment with the Company due to disability as set forth in Article VIII, below. Or, B. The individual dies while holding an Eligible Position as set forth in Article X, below. VI. Benefit Participants who have ten (10) Years of Credited Service or more as an officer of Milacron Inc. shall receive as the annual benefit as of the Benefit Commencement Date the greater of: (i) one percent (1%) of the Participant's Highest Average Compensation for each Year of Credited Service the Participant served as an officer of Milacron Inc., however, in no event shall this annual benefit exceed ten percent (10%) of the Participant's Highest Average Compensation; or, (ii) an amount necessary to increase the Participant's combined annual benefits under this Plan, the Milacron Retirement Plan, the Milacron Retirement Savings Plan, the Milacron Compensation Deferral Plan and the Milacron Inc. Supplemental Retirement Plan to fifty-two and one half percent (52.5%) of the Participant's Highest Average Compensation. For purposes of this Plan, the Participant's vested account balance, if any, attributable to Employer Basic Contributions under the Milacron Retirement Savings Plan and Basic Credits and Discretionary Credits under the Milacron Compensation Deferral Plan will be converted to an actuarially equivalent annual benefit payable for the Participant's lifetime commencing at the Participant's Benefit Commencement Date, determined based on the actuarial assumptions used to calculate lump sum amounts as set forth in the Milacron Retirement Plan. All other Participants shall receive as the annual benefit as of the Benefit Commencement Date, one percent (1%) of the Participant's Highest Average Compensation for each Year of Credited Service the Participant served in an Eligible Position, however, in no event shall this annual benefit exceed ten percent (10%) of the Participant's Highest Average Compensation. VII. Maximum Benefit In no event shall a Participant receive total combined annual benefits from this Plan, the Milacron Retirement Plan, the Milacron Retirement Savings Plan (as determined under Article VI), the Milacron Compensation Deferral Plan (as determined under Article VI) and the Milacron Inc. Supplemental Retirement Plan in excess of 60% of the Participant's Highest Average Compensation and benefits from this Plan shall be reduced accordingly, if necessary. VIII. Disability An individual who terminates employment with the Company due to disability prior to his 55th birthday will be a Participant if: (i) the individual at the time of disability held an Eligible Position; and (ii) the individual has ten (10) years Credited Service with the Company; and (iii) the disability is certified by a physician or physicians designated by the Compensation Committee. IX. Benefit Commencement Date Except as otherwise stated in this Article IX and Article X, benefits shall commence on a Participant's Normal Retirement Date. For those Participants retiring prior to their Normal Retirement Date, benefits shall commence upon the date of retirement and shall not be actuarially reduced. Benefits to a Participant who terminates employment with the Company due to disability prior to age 55 shall commence upon the date the Participant begins receiving benefits from the Milacron Retirement Plan or would be eligible to receive benefits from the Milacron Retirement Plan if he participated therein. X. Death An individual who dies while employed by the Company and who is not otherwise a Participant in this Plan shall be a Participant if: (i) the individual holds an Eligible Position at the time of death; and, (ii) the individual was at the time of his death vested in the Milacron Retirement Plan or the Milacron Retirement Savings Plan. If a Participant dies prior to commencement of benefits under this Plan and the Participant is survived by a spouse to whom he was married on the date he became vested under this Plan, the Participant's surviving spouse shall receive monthly benefits under this Plan, at the time benefits may begin to the surviving spouse under the Milacron Retirement Plan, in the form of a life annuity in the amount of fifty percent (50%) of the Participant's benefits under this Plan (with a reduction for commencement prior to the date the Participant would have attained age 55, with such reduction determined in accordance with the Milacron Retirement Plan), determined in accordance with Article VI. XI. Payment Options Benefits shall be paid to Participants on a monthly basis. Participants who are single shall receive benefits under this Plan in the form of a life annuity. Participants who are married shall receive benefits in the form of a fifty (50%) percent joint and survivor annuity which shall not be actuarially reduced; however, the benefit to the Participant's spouse shall be available only if the Participant is survived by a spouse to whom he was married on the date he became vested under this Plan. XII. Vesting Unless forfeited pursuant to Article XIII, a Participant's benefit shall become vested - (i) on his Normal Retirement Date; or (ii) on the date he reaches age 55 and has at least ten (10) Years of Credited Service with the Company; or (iii) on the date of termination of employment due to disability or death. If a Participant no longer holds an Eligible Position, but remains an employee of the Company, the Participant's service in the Eligible Position and his resulting benefit under this Plan shall not be forfeited. XIII. Fraud In the event that a Participant shall at any time be dismissed for, or convicted of a crime involving, dishonesty or fraud on his part in his relationship with the Company, all benefits which would otherwise be payable to him under the Plan shall be forfeited. XIV. Competition By accepting payment of any benefit under the Plan the Participant agrees not to be employed, or consult, in any business which is, or is about to be, engaged in a business of the same or substantially the same nature as the businesses of the Company without prior written consent of the Company, and breach of this agreement by the Participant shall be cause for termination of payment of benefits under the Plan. XV. Funding The Plan shall be unfunded and benefits shall be paid only from the general assets of the Company. XVI. Administration The general administration of this Plan and the responsibility for carrying out and interpreting the provisions hereof shall be vested in the Compensation Committee. The Compensation Committee may adopt such rules and regulations as it may deem necessary for the proper administration of this Plan, which are not inconsistent with the provisions hereof, and its decision in all matters shall be final, conclusive and binding. XVII. Amendment and Termination The Board of Directors reserves in its sole and exclusive discretion the right at any time and from time to time to amend this Plan in any respect or terminate this Plan without restriction and without the consent of any Participant, provided however, that no amendment or termination of this Plan shall impair the right of any Participant to receive benefits which have become vested prior to such amendment or termination. XVIII. Miscellaneous (a) Nothing contained in this Plan guarantees the continued employment of a Participant with the Company. (b) No benefit hereunder may be assigned, pledged, mortgaged or hypothecated and, to the extent permitted by law, no such benefit shall be subject to legal process or attachment for the payment of any claims against any person entitled to receive the same. (c) If a Participant entitled to receive a benefit under this Plan is deemed by the Compensation Committee or is adjudged by a court of competent jurisdiction to be legally incapable of giving valid receipt and discharge for such benefit, such payments shall be paid to such person or persons as the Compensation Committee shall designate or to the duly appointed guardian or other legal representative of such Participant. Such payment shall, to the extend made, be deemed a complete discharge for such payments under this Plan. (d) Payments made under this Plan shall be subject to withholding as shall at the time be required under any income tax or other laws, whether of the United States or any other jurisdiction. (e) All expenses and costs in connection with the operation of this Plan shall be borne by the Company. (f) The provisions of this Plan shall be construed according to the laws of the State of Ohio. (g) The masculine pronoun wherever used herein shall include the feminine gender and the feminine shall include the masculine and the singular number as used herein shall include the plural and the plural shall include the singular unless the context clearly indicates otherwise. (h) The titles and headings used herein are for convenience of reference only and in case of any conflict, the text of this Plan, rather than such titles or headings, shall be controlling. EX-10 12 $375,000,000 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of November 30, 1998 among MILACRON INC., CINCINNATI MILACRON KUNSTSTOFFMASCHINEN EUROPA GMBH, THE LENDERS LISTED HEREIN and BANKERS TRUST COMPANY, as Agent TABLE OF CONTENTS Page SECTION 1. DEFINITIONS. 1 1.1 Definitions 1 1.2 Accounting Principles 27 1.3 Other Definitional Provisions 27 1.4 Closing Date 27 SECTION 2. AMOUNT AND TERMS OF LOANS. 27 2.1 The Revolving Loans 27 2.2 Minimum Amount of Each Borrowing 29 2.3 Notice of Borrowing 30 2.4 Disbursement of Funds 31 2.5 Evidence of Debt 32 2.6 Conversion or Continuation of Revolving Loans 33 2.7 Pro Rata Borrowings and Issuances 34 2.8 Interest 34 2.9 Interest Periods 36 2.10 Increased Costs, Illegality, etc. 37 2.11 Compensation 42 2.12 Proceeds of Revolving Loans 43 2.13 Fees and Commissions 43 2.14 Letters of Credit. 44 2.15 Replacement Lender 52 2.16 Certain Computations 53 2.17 Change of Lending Office 53 2.18 EURO Provisions 54 SECTION 3. REDUCTIONS IN COMMITMENTS; PREPAYMENTS AND PAYMENTS. 55 3.1 Voluntary Reductions in Total Revolving Loan Commitment 55 3.2 Voluntary Prepayments 55 3.3 Mandatory Prepayments 56 3.4 Method and Place of Payment 57 3.5 Net Payments 57 SECTION 4. CONDITIONS TO REVOLVING LOANS AND LETTERS OF CREDIT. 58 4.1 Conditions to All Revolving Loans 58 4.2 Conditions to All Letters of Credit 59 SECTION 5. AFFIRMATIVE COVENANTS. 60 5.1 Furnish Financial Statements and Information, etc. 60 5.2 Inspection 61 5.3 Taxes, Charges, etc. 61 5.4 Corporate Existence, etc. 62 5.5 Notice of Default 62 5.6 Consolidated Net Worth 62 5.7 ERISA 62 5.8 Insurance 63 5.9 Maintenance of Property 63 5.10 Compliance with Laws, etc. 63 5.11 Consolidated Total Indebtedness to Consolidated EBITDA 64 5.12 Environmental Events 64 5.13 Year 2000 65 SECTION 6. NEGATIVE COVENANTS. 65 6.1 Liens 65 6.2 Restrictions on Fundamental Changes 67 6.3 Domestic Subsidiary Indebtedness 68 6.4 Fixed Charge Coverage Ratio 69 6.5 ERISA 69 6.6 Sale or Discount of Notes Receivables 69 6.7 Amendments or Waivers of Charter or By- laws or of Certain Documents Relating to Certain Indebtedness 70 6.8 Sale-leaseback Transactions 70 6.9 No Further Negative Pledges 71 6.10 Refinancing Indebtedness 71 6.11 Investments 71 6.12 Sale, Transfer, etc. of Assets 72 SECTION 7. EVENTS OF DEFAULT. 72 7.1 Failure To Make Payments When Due 72 7.2 Breach of Certain Covenants 72 7.3 Breach of Warranty 72 7.4 Default in Other Agreements 73 7.5 Judgments 73 7.6 Other Defaults Under Agreement or Loan Documents 73 7.7 Bankruptcy; Appointment of Receiver, Dissolution, etc. 73 7.8 Unfunded ERISA Liabilities 74 7.9 Change in Control 74 SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. 76 8.1 Financial Information; Undisclosed Liabilities 76 8.2 Adverse Changes 77 8.3 Litigation 77 8.4 Authorization, etc. 77 8.5 Corporate Status 78 8.6 Title; Insurance 78 8.7 Taxes, etc. 79 8.8 ERISA 79 8.9 Margin Regulations 80 8.10 Disclosure 80 8.11 Patents, Trademarks, etc. 80 8.12 Environmental Matters 81 8.13 Year 2000 82 SECTION 9. AGENT. 83 9.1 Appointment 83 9.2 Nature of Duties 83 9.3 Rights, Exculpation, etc. 84 9.4 Reliance 84 9.5 Indemnification 85 9.6 The Agent, Individually 85 9.7 Holders of Notes 85 9.8 Resignation by the Agent 86 9.9 Removal 86 SECTION 10. CONDITIONS PRECEDENT. 87 10.1 Conditions to Effectiveness 87 SECTION 11. MISCELLANEOUS. 88 11.1 Exercise of Rights 88 11.2 Amendment and Waiver, etc 89 11.3 Expenses and Indemnification 90 11.4 Successors and Assigns; Participations and Assignments 92 11.5 Notices, Requests, Demands 95 11.6 Determination of Dollar Equivalent 96 11.7 Survival of Representations and Warranties 96 11.8 Governing Law 96 11.9 Counterparts 96 11.10 Set-Off 96 11.11 Proration of Excess Payments 97 11.12 Submission to Jurisdiction; Venue; Waiver of Jury Trial 98 11.13 Survival 99 11.14 Lender's Representation and Certain Agreements 99 11.15 Headings 101 11.16 Change in Accounting Principles 101 11.17 Defaulting Lender 101 11.18 Confidentiality 102 11.19 Judgment Currency 103 11.20 Register 104 SCHEDULES Schedule 2.1 - Lenders' Revolving Loan Commitment and Pro Rata Share Schedule 6.11 - Investments Schedule 8.6(b) - Insurance EXHIBITS EXHIBIT A-1 - Form of Dollar Revolving Note EXHIBIT A-2 - Form of Deutsche Mark Revolving Note EXHIBIT B-1 - Form of Notice of Borrowing EXHIBIT B-2 - Form of Notice of Conversion/Continuation EXHIBIT B-3 - Form of Request for Issuance EXHIBIT C-1 - Form of Opinion of Cravath, Swaine & Moore EXHIBIT C-2 - Form of Opinion of Wayne F. Taylor EXHIBIT C-3 - Form of Opinion of German Counsel EXHIBIT D - Form of Opinion of Cahill Gordon & Reindel EXHIBIT E - Form of Officers' Certificate EXHIBIT F - Form of Company Guaranty EXHIBIT G - Form of Assignment and Assumption Agreement AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated November 30, 1998 (the "Agreement") among MILACRON INC., a Delaware corporation (the "Borrower" and the "Company"), CINCINNATI MILACRON KUNSTSTOFFMASCHINEN EUROPA GMBH, a German corporation (the "German Borrower" and, collectively with the Company, the "Borrowers"), the LENDERS listed on Schedule 2.1 hereto (each, a "Lender" and collectively, the "Lenders") and BANKERS TRUST COMPANY, as the agent for the Lenders (in such capacity, the "Agent"). All capitalized terms used herein and not otherwise defined shall have the meaning specified in Section 1.1. R E C I T A L S : WHEREAS, the Company has requested that the Agent and the Lenders amend and restate the Existing Credit Agreement to provide for, among other things, an increase in the amount of the Commitments and the modification of certain covenants; WHEREAS, the Company, the Lenders and the Agent desire to amend and restate the Existing Credit Agreement in connection therewith and to reflect certain other agreed upon changes, all upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the Company, the German Borrower, the Lenders and the Agent hereto agree as follows: SECTION 1. DEFINITIONS. 1.1 Definitions. As used herein the following terms shall have the meanings herein specified: "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with that Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "Agent" shall have the meaning provided in the first paragraph of this Agreement. "Agent's Office" shall mean the office of the Agent located at 130 Liberty Street, New York, New York 10006, or such other office in New York as the Agent may hereafter designate in writing as such to the other parties hereto. "Agreement" shall mean this Amended and Restated Revolving Credit Agreement, as the same may after its execution be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Alternate Currency" shall mean Deutsche Marks. "Alternate Currency Equivalent" shall mean the Deutsche Mark Equivalent. "Alternate Currency Loan" shall mean any Alternate Currency Revolving Loan. "Alternate Currency Revolving Loan" shall mean a Deutsche Mark Revolving Loan. "Alternative Currency Sublimit" shall have the meaning provided in Section 2.1(b). "Applicable" shall mean, with respect to Regulation D being applicable to any determination of the Deutsche Mark Euro Rate, that Regulation D reserves would be applicable to the Deutsche Mark Revolving Loan as to which such interest rate would apply (including by giving effect to the assumption that a Lender had funded such Deutsche Mark Revolving Loan through the purchase of a Deutsche Mark deposit by a Subsidiary or Affiliate of such Lender in the London interbank market and the transfer thereof to such Lender from such Subsidiary or Affiliate). "Applicable Borrowing Margin" shall mean: (a) with respect to Eurodollar Loans and Alternate Currency Loans, if the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, as evidenced by the Compliance Certificate of the Company from the preceding quarter and upon receipt of such Compliance Certificate the relevant applicable Borrowing Margin will be given effect, is (x) greater than 3.25 to 1.0, 2.125% per annum, (y) equal to or less than 3.25 to 1.00 but greater than 2.75 to 1.0, 1.500% per annum, (z) equal to or less than 2.75 to 1.0 but greater than 2.50 to 1.0, 1.250% per annum, (xx) equal to or less than 2.50 to 1.0 but greater than 2.25 to 1.0, 1.000% per annum (yy) equal to or less than 2.25 to 1.0 but greater than 2.00 to 1.0, .750% per annum, (zz) equal to or less than 2.00 to 1.0 but greater than 1.50 to 1.0 .550% per annum and (xxx) equal to or less than 1.50 to 1.0, .350% per annum; and (b) with respect to Fixed CD Rate Loans, if the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, as evidenced by the Compliance Certificate of the Company from the preceding quarter and upon receipt of such Compliance Certificate the relevant applicable Borrowing Margin will be given effect, is (x) greater than 3.25 to 1.0, 3.375% per annum, (y) equal to or less than 3.25 to 1.00 but greater than 2.75 to 1.0, 2.750% per annum, (z) equal to or less than 2.75 to 1.0 but greater than 2.50 to 1.0, 2.500% per annum, (xx) equal to or less than 2.50 to 1.0 but greater than 2.25 to 1.0, 2.250% per annum, (yy) equal to or less than 2.25 to 1.0 but greater than 2.00 to 1.0, 1.325% per annum (zz) equal to or less than 2.00 to 1.0 but greater than 1.50 to 1.0, 1.305% per annum and (xxx) equal to or less than 1.50 to 1.0, 1.285% per annum. "Applicable Currency" shall mean Dollars and each Available Alternate Currency. "Applicable Fee Percentage" shall mean, with respect to the Facility Fee as defined in Section 2.13, if the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, as evidenced by the Compliance Certificate of the Company from the preceding quarter and upon receipt of such Compliance Certificate the relevant Applicable Fee Percentage will be given effect, is (x) greater than 3.25 to 1.0, .375% per annum, (y) equal to or less than 3.25 to 1.0 but greater than 2.75 to 1.0, .375% per annum, (z) equal to or less than 2.75 to 1.0 but greater than 2.50 to 1.0, .250% per annum, (xx) equal to or less than 2.50 to 1.0 but greater than 2.25 to 1.0, .250% per annum, (yy) equal to or less than 2.25 to 1.0 but greater than 2.00 to 1.0, .250% per annum, (zz) equal to or less than 2.00 to 1.0 but greater than 1.50 to 1.0, .200% per annum and (xxx) equal to or less than 1.50 to 1.0, .150% per annum. "Authorized Officer" shall mean, in the case of the Company, any of the chief executive officer, the president, the chief financial officer, the treasurer, any assistant treasurer, any vice-president, the secretary or the general counsel or, in case of the German Borrower, any of its managing directors or any other officer of the Borrower or German Borrower, as the case may be, who is designated in writing to the Agent and the Issuing Lender by any of the foregoing officers of such Borrowers as being authorized to give such notices under this Agreement. "Available Alternate Currency" shall mean the Alternate Currency except to the extent that the Agent has given notice to the Company and the German Borrower pursuant to Section 2.10(a) (which notice has not been rescinded by the Agent) that the Alternate Currency is no longer available. "Average Life" shall mean, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (a) the sum of the product of (i) the number of days from such date to the date of each successive scheduled principal or redemption payment of such Indebtedness multiplied by (ii) the amount of such principal or redemption payment by (b) the sum of all such principal or redemption payments, and then by (c) 365.25. "Bankruptcy Code" shall mean Title 11 of the United States Code entitled "Bankruptcy," as amended from time to time, and any successor statute. "Base Rate" shall mean at any time the higher of (i) the Federal Funds Rate plus 1/2 of 1% and (ii) the Prime Lending Rate. "Base Rate Loan" or "Base Rate Loans" shall mean any Dollar Revolving Loan or Dollar Revolving Loans during any period during which such Dollar Revolving Loan or Dollar Revolving Loans are bearing interest at the rates provided for in Section 2.8(a). "Borrower" shall mean Milacron Inc., a Delaware corporation. "Borrowing" shall mean and include the incurrence pursuant to a Notice of Borrowing and to the Loan Facility of one Type of Revolving Loan from all the Lenders on a given date, having the same Interest Period; provided, however, that Revolving Loans of a different Type extended pursuant to Section 2.10(b) shall be considered part of the related Borrowing. "BTCo" shall mean Bankers Trust Company. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Fixed Rate Loans, any day which is a Business Day described in clause (i) above and which is also a day for trading by and between banks in the London interbank Eurodollar market and which shall not be a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close in the city where the applicable Payment Office of the Agent is located including, but not limited to, German banking holidays, including but not limited to those in Frankfurt, in respect of such Fixed Rate Loan. "Capital Lease" shall mean, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of such Person. "Capitalized Lease Obligations" of any Person shall mean all obligations under Capital Leases of such Person or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than three years from the date of acquisition, (ii) marketable direct obligations issued by any State of the United States of America or any local government or other political subdivision thereof rated (at the time of acquisition of such security) at least AA by S&P or the equivalent thereof by Moody's having maturities of not more than one year from the date of acquisition, (iii) U.S. dollar denominated time deposits, certificates of deposit and bankers' acceptances of (x) any Lender or (y) any domestic financial institution having a short-term commercial paper rating (at the time of acquisition of such security) by S&P of at least A-1 or the equivalent thereof or by Moody's of at least P-1 or the equivalent thereof (any such Lender or financial institution, an "Approved Bank"), in each case with maturities of not more than one year from the date of acquisition, (iv) commercial paper and variable or fixed rate notes issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper and variable rate notes issued by, or guaranteed by, any industrial or financial company with a short- term commercial paper rating (at the time of acquisition of such security) of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long-term unsecured debt rating (at the time of acquisition of such security) of at least AA or the equivalent thereof by S&P or the equivalent thereof by Moody's and in each case maturing within one year after the date of acquisition, (v) repurchase agreements with any bank or any primary dealer maturing within one year from the date of acquisition that are fully collateralized by investment instruments that would otherwise be Cash Equivalents; provided that the terms of such repurchase agreements comply with the guidelines set forth in the Federal Financial Institutions Examination Council Supervisory Policy - - - Repurchase Agreements of Depository Institutions With Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985 and (vi) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (v) above. "CD Office" shall mean the office of each Lender set forth opposite its name on the signature page of this Agreement under such heading, or if no such office is set forth opposite its name, then its Domestic Office, or such other office as such Lender may specify from time to time. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, as amended from time to time. "Certain Existing Indebtedness" shall mean (i) the $115,000,000 aggregate principal amount of 8 3/8% Notes of the Company due 2004 and (ii) the $100,000,000 aggregate principal amount of 7 7/8% Notes of the Company due 2000. "Certificate of Deposit Rate" shall mean, with respect to each Interest Period for a Fixed CD Rate Loan, the average (rounded upward to the next whole multiple of 1/100 of 1%) of the consensus bid rates determined by the Agent for the bid rates per annum, at approximately 10:00 a.m. (New York time) on the first day of such Interest Period, of two or more New York certificate of deposit dealers of recognized standing selected by the Agent for the purchase at face value from the Agent in New York of its certificates of deposit in an aggregate amount approximately comparable to the Fixed CD Rate Loan to which such Interest Period is applicable and with a maturity equal to such Interest Period. "Closing Date" is defined in Section 1.4 hereof. "CMKE" shall mean Cincinnati Milacron Kunststoffmaschinen Europa GmbH, a German corporation and a wholly-owned Subsidiary of the Company. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor statute thereto. Section references to the Code are to the Code as in effect at the date of this Agreement and any subsequent provisions of the Code amendatory thereof, supplemental thereto or substituted therefor. "Commitment" shall mean, with respect to each Lender, the amount specified opposite such Lender's name on Schedule 2.1 hereto, as the same may be reduced from time to time pursuant to Section 3.1 hereof. "Company" shall have the meaning provided in the preamble of this Agreement. "Company Guarantee" shall have the meaning provided in Section 10.1(a)9. "Compliance Certificate" means a certificate delivered to the Lenders by the Company pursuant to Section 5.1(d)(ii). "Consolidated Capital Expenditures" shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as a liability and including expenditures for maintenance and repairs which should in accordance with GAAP be capitalized on the balance sheet of the Company and all obligations with respect to Capital Leases and all capitalized interest) by the Company and its Consolidated Subsidiaries during that period, which, in conformity with GAAP, are included or required to be included in "additions to property, plant or equipment" or similar items reflected in the consolidated statement of cash flows of the Company. "Consolidated EBIT" means, without duplication, for any consecutive four fiscal quarter period, the sum of the amounts for such period of (i) the Company's Consolidated Net Income, excluding therefrom any extraordinary or non-recurring items of gain or loss for such period (including, but not limited to, the loss resulting from discontinued operations in the fiscal quarter ending September 30, 1998 in the amount of $39,100,000), plus (ii) the aggregate amounts deducted in determining Consolidated Net Income for such period in respect of (a) the provision for taxes based on income of the Company and its Consolidated Subsidiaries and (b) Interest Expense, all as determined on a consolidated basis for the Company and its Consolidated Subsidiaries for such period in conformity with GAAP. "Consolidated EBITDA" means, without duplication, for any consecutive four fiscal quarter period, the sum of the amounts for such period of (i) the Company's Consolidated Net Income, excluding therefrom any extraordinary or non-recurring items of gain or loss for such period (including, but not limited to, the loss from discontinued operations in the fiscal quarter ending September 30, 1998 in the amount of $39,100,000), plus (ii) the aggregate amounts deducted in determining Consolidated Net Income for such period in respect of (a) the provision for taxes based on income of the Company and its Consolidated Subsidiaries, (b) Interest Expense and (c) depreciation, amortization and other similar non-cash expenses of the Company and its Consolidated Subsidiaries, all as determined on a consolidated basis for the Company and its Consolidated Subsidiaries for such period in conformity with GAAP. "Consolidated Net Income" of the Company for any period shall mean the net earnings of the Company and its Consolidated Subsidiaries determined on a consolidated basis for such period, after all proper charges, including charges for depreciation, depletion, obsolescence, amortization, interest on indebtedness and all taxes, including taxes in respect of income. "Consolidated Net Worth" shall mean, as at any date at which the amount thereof shall be determined, the sum for the company and its Consolidated Subsidiaries (determined without duplication in accordance with GAAP) of the following: (i) the amount of capital stock and paid in capital (excluding the cost of treasury shares or other similar equity interests), plus (ii) the amount of surplus and retained earnings (or, in the case of surplus or retained earnings deficit, minus the amount of such deficit). "Consolidated Subsidiary" shall mean, with respect to the Company, each Subsidiary of the Company the accounts of which are consolidated in the financial statements referred to in Section 8.1 or 5.1. "Consolidated Total Indebtedness" shall mean the aggregate of all Total Indebtedness of the Company and its Consolidated Subsidiaries determined on a consolidated basis; provided, however, that such amount shall be reduced by the amount in Dollars of cash and Cash Equivalents on the consolidated balance sheet of the Company and its Consolidated Subsidiaries on a consolidated basis in conformity with GAAP in excess of $25,000,000 as of the date of the amount thereof shall be determined; and provided further, however, that for the purposes of determining the ratio of Consolidated Total Indebtedness to Consolidated EBITDA in connection with any determination of the Applicable Borrowing Margin, such amount for the fiscal quarter ending September 30, 1998 shall also be reduced by the amount of $180,000,000 received in connection with the divestiture of the "Machine Tools" group. "Contingent Obligations" shall mean, as to any Person, without duplication, any obligation of such person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the maximum amount that such Person may be obligated to expend pursuant to the terms of such Contingent Obligation or, if such Contingent Obligation is not so limited, the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such person in good faith. "Contractual Obligation" shall mean, as applied to any Person, any provision of any security issued by that Person or of any loan or credit agreement, indenture, mortgage, lease or other instrument or agreement. "Default" shall mean any event, act or condition which with notice or lapse of time or both would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "Defaulting Lender" shall mean (i) any Lender that fails in its obligation to fund any Revolving Loan pursuant to Section 2.1 and such failure continues for five Business Days; (ii) any Lender as to which any event of the type described in Section 7.7 occurs (with all references in such Section to the Borrower instead being to such Lender); (iii) any Lender as to which any Governmental Authority (including, without limitation, the OTS, RTC, FDIC, OCC or Federal Reserve Board) directly or indirectly seizes, takes possession of or undertakes, authorizes or orders similar action with respect to, or authorizes, or orders the liquidation, dissolution, winding up, sale, transfer or other disposition of, or takes steps or institutes proceedings or otherwise proceeds to liquidate, dissolve, wind up, sell, transfer or otherwise dispose of, such Lender or all or any part of such Lender's property or appoints or authorizes or orders the appointment of a receiver, liquidator, sequestrator, trustee, custodian, conservator or other officer or entity having similar powers over such Lender or over all or any part of such Lender's property; or (iv) any Lender that fails in its obligation to make available to an Issuing Lender such Lender's participation in any unreimbursed amount of any drawing under any Letter of Credit as provided in Section 2.14(a) and such failure continues for five Business Days. "Deutsche Mark Equivalent" shall mean, at any time for the determination thereof, the amount of Deutsche Marks which could be purchased with the amount of Dollars involved in such computation at the spot exchange rate therefor as quoted by BTCo as of 11:00 a.m. (London time) on the date two Business Days prior to the date of any determination thereof for purchase on such date. "Deutsche Mark Euro Rate" shall mean (a) (i) the rate per annum that appears on page 3750/3740 of the Dow Jones Telerate Screen (or any successor page) for Deutsche Mark deposits with maturities comparable to the Interest Period applicable to the Deutsche Mark Loans subject to the respective Borrowing, determined as of 11:00 A.M. (London time) on the date which is three Business Days prior to the commencement of such Interest Period or, if such a rate does not appear on page 3750/3740 of the Dow Jones Telerate Screen (or any successor page), (ii) the offered quotation to first-class banks in the London interbank Eurodollar market by BTCo for Deutsche Mark deposits of amounts in immediately available funds comparable to the outstanding principal amount of the Deutsche Mark Loan of BTCo with maturities comparable to the Interest Period applicable to such Deutsche Mark Loan commencing two Business Days thereafter as of 11:00 a.m. (London time) on the date which is two Business Days prior to the commencement of such Interest Period, in either case divided (and rounded off to the nearest 1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D) to the extent Applicable; provided, in the event that the Agent has made any determination pursuant to Section 2.10(a)(i) in respect of Deutsche Mark Loans, the Deutsche Mark Euro Rate determined pursuant to clause (a) of this definition shall instead be the rate determined by BTCo as the all-in cost of funds for BTCo to fund such Deutsche Mark Loan with maturities comparable to the Interest Period applicable thereto. "Deutsche Mark Loan" shall mean a Deutsche Mark Revolving Loan. "Deutsche Mark Revolving Loan" shall have the meaning provided in Section 2.1(b). "Deutsche Mark Revolving Note" shall have the meaning provided in Section 2.5(a). "Deutsche Marks" shall mean freely transferable lawful money of Germany. "Dividends" shall mean any dividends declared or paid on the shares of capital stock of the Company (other than stock dividends), any cash distribution to the stockholders of the Company or any funds set aside for any such purpose and the excess of the cost of redemption or purchase by the Company of any of its shares of capital stock of any class over any cash proceeds from the sale of other shares of the Company's capital stock of any class used for the purpose of such redemption or purchase. "Dollar Equivalent" shall mean, at any time for the determination thereof, the amount of Dollars which could be purchased with the amount of Deutsche Marks involved in such computation at the spot exchange rate therefor as quoted by BTCo as of 11:00 a.m. (London time) on the date two Business Days prior to the date of any determination thereof for purchase on such date. "Dollar Loan" shall mean each Dollar Revolving Loan. "Dollar Revolving Loan" shall have the meaning provided in Section 2.1(b). "Dollar Revolving Note" shall have the meaning provided in Section 2.5(a). "Dollars" and the symbol "$" shall each mean freely transferable lawful money of the United States. "Domestic Office" shall mean the office of each Lender set forth opposite its name on the signature pages of this Agreement under such heading, or if only one office is set forth opposite its name, then such office. "Domestic Subsidiary" shall mean a Subsidiary whose jurisdiction of incorporation is within the United States that is not a Foreign Subsidiary. "Effective Date" shall mean November 30, 1998. "Eligible Assignee" shall have the meaning assigned to such term in Section 11.4(c). "Eligible Transferee" shall mean and include a commercial bank, financial institution or other accredited investor" (as defined in Regulation D of the Securities Act). "EMU" shall have the meaning provided in Section 2.18. "Environmental Laws" shall mean the common law and all Federal, state, local and foreign laws or regulations, guidance or standards codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder now or hereafter in effect, including, without limitation, CERCLA, RCRA, FWPCA, FCAA and TSCA, relating to pollution or protection of human health and the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of and exposure to pollutants, constituents, hazardous or toxic substances or wastes, including, without limitation, asbestos or asbestos containing material, petroleum, including crude oil or any fraction thereof, or any petroleum product (collectively referred to as "Hazardous Materials") into the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or (ii) relating to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of Hazardous Materials, and (iii) underground storage tanks, as defined by any law regulating Hazardous Materials, and emissions, discharges, releases or threatened releases therefrom. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) that is a member of any group of persons described in Section 414(b) or (c) of the Code of which the Company is a member; provided, however, that for purposes of those provisions of Sections 5.7, 6.5, 7.8 and 8.8 hereof relating to Section 412 of the Code or Section 302 of ERISA, the term "ERISA Affiliate" shall also mean any such person that is a member of any group of persons described in Section 414(m) or (o) of the Code of which the Company is a member. "Euro" shall have the meaning provided in Section 2.18. "Eurodollar Loan" or "Eurodollar Loans" shall mean any Revolving Loan or Revolving Loans during any period during which such Revolving Loan or Revolving Loans are maintained in Eurodollars or otherwise are bearing interest at the rates provided for in Section 2.8(b). "Eurodollar Office" shall mean the office of each Lender set forth opposite its name on the signature pages of this Agreement under such heading, or if only one office is set forth opposite its name, then such office, or such other office as such Lender may specify from time to time. "Eurodollar Rate" shall mean (a) the offered quotation to first-class banks in the Interbank Eurodollar market by BTCo for Dollar deposits of amounts in immediately available funds comparable to the outstanding principal amount of the Eurodollar Loan of BTCo with maturities comparable to the Interest Period applicable to such Eurodollar Loan commencing two Business Days thereafter as of 10:00 a.m. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period, divided (and rounded off to the nearest 1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Event of Default" shall mean each of the Events of Default provided in Section 7. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Existing Credit Agreement" shall mean the credit agreement as amended and restated as of December 31, 1994 by and among the Company (formerly Cincinnati Milacron Inc.), CMKE, the lenders listed in Schedule 2.1 thereto and BTCo as Agent and as amended, modified and supplemented in accordance with the terms thereof prior to the Effective Date. "Facility Fee" shall have the meaning assigned to such term in Section 2.13. "Fair Market Value" shall mean, in respect of any property of the Company and its Subsidiaries, the fair market value thereof, determined in the good faith judgment of the chief financial officer of the Company on the basis of an assumed arms-length sale of such property to an independent Person not affiliated with the Company or its Subsidiaries, assuming neither party is under any compulsion to buy or sell and that each has knowledge of all relevant facts and circumstances. "FCAA" shall mean the Federal Clean Air Act, as amended. "FDIC" shall mean the Federal Deposit Insurance Corporation and any successor entity. "Federal Funds Rate" shall mean on any one day 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 as of such day by the Federal Reserve Lender of New York; provided that if such day is not a Business Day, the Federal Funds Rate shall be measured as of the immediately preceding Business Day. "Fees" shall mean the fees and commissions payable pursuant to Sections 2.13 and 2.14(f)(1)(ii), (2) and (3). "Final Maturity Date" means January 31, 2002 unless such date is extended for one year; provided, however, that the Company gives the Agent written notice no later than January 15, 2001 of its desire to extend the Final Maturity Date, which extension shall be subject to the consent of each Lender (other than a Defaulting Lender). "Fixed CD Rate" shall mean with respect to each Interest Period in respect of a Fixed CD Rate Loan the sum (rounded upward to the next whole multiple of 1/100 of 1%) of (A) the Certificate of Deposit Rate for the Interest Period in respect of a Fixed CD Rate Loan plus (B) the then daily net annual assessment rate as estimated by the Agent on the first day of such Interest Period for determining the current annual assessment payable by the Agent to the FDIC for insuring a negotiable certificate of deposit of at least $100,000 with a maturity equal to such Interest Period of any member bank of the Federal Reserve System. "Fixed CD Rate Loan" or "Fixed CD Rate Loans" shall mean any Revolving Loan or Revolving Loans during any period during which such Revolving Loan or Revolving Loans are bearing interest at the rates provided for in Section 2.7(c). "Fixed Charges" of a Person for any period shall mean, without duplication, the sum of (i) Interest Expense plus (ii) Dividends. "Fixed Rate" shall mean and include the Fixed CD Rate, the Eurodollar Rate and the Deutsche Mark Euro Rate. "Fixed Rate Loan" shall mean any Fixed CD Rate Loan, any Eurodollar Loan and any Deutsche Mark Loan. "Foreign Subsidiary" shall mean any Subsidiary of the Company, wherever incorporated, which operates and owns or leases assets principally outside the United States. "Funding Date" shall mean the date of the funding of a Revolving Loan. "FWPCA" shall mean the Federal Water Pollution Control Act, as amended. "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such accounting profession, which are applicable to the circumstances as of the date of determination. "German Borrower" shall mean CMKE. "Government Acts" shall have the meaning assigned to such term in Section 2.14. "Governmental Authority" shall mean any federal, state, local, foreign or other governmental or administrative (including self-regulatory) body, instrumentality, department or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body including, without limitation, those governing the regulation and protection of the environment. "Guarantor" shall mean the Company in respect of Obligations of the German Borrower hereunder. "Indebtedness" of any Person shall mean, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed by such first Person, (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations and (vii) all Contingent Obligations of such Person; provided that Indebtedness shall not include trade payables, accrued expenses, accrued dividends and accrued income taxes, in each case arising in the ordinary course of business. "Information Systems and Equipment" shall mean all computer hardware, firmware and software, as well as other information processing systems, or any equipment containing embedded microchips, whether directly owned, licensed, leased, operated or otherwise controlled by the Company or any of its Subsidiaries, including through third-party service providers, and which, in whole or in part, are used, operated, relied upon, or integral to, the Company's or any of its Subsidiaries' conduct of their business. "Interest Determination Date" shall mean, with respect to any Fixed Rate Loan, the second Business Day prior to the commencement of any Interest Period relating to such Fixed Rate Loan. "Interest Expense" of the Company for any period shall mean the total interest expense, whether paid in cash or accrued as a liability, less any interest income of the Company and its Consolidated Subsidiaries for such period determined in accordance with GAAP; provided that Interest Expense shall be deemed to be $1 if the above calculation would otherwise result in zero or a negative number; and provided, further, that Interest Expense shall include without duplication (i) any payment or accrual of interest on a obligation held by an entity that is a pass-through entity for Federal income tax purposes and is not a Consolidated Subsidiary and (ii) any payment of fees and expenses under the Receivables Purchase Agreement. "Interest Payment Date" shall mean, with respect to any Fixed Rate Loan, the last day of the Interest Period applicable thereto; provided that in the case of any Eurodollar Loan or Alternate Currency Loan having an Interest Period of six months or any Fixed CD Rate Loan having an Interest Period of 180 days, "Interest Payment Date" shall also include each Interest Period Anniversary Date for such Interest Period. "Interest Period" with respect to any Revolving Loan shall mean the interest period applicable thereto, as determined pursuant to Section 2.9. "Interest Period Anniversary Date" shall mean, for any Interest Period applicable to a Eurodollar Loan or Alternate Currency Loan that is six months and for any Interest Period applicable to a Fixed CD Rate Loan that is 180 days, the three-month anniversary or 90-day anniversary, respectively, of the commencement of that Interest Period with respect to such Eurodollar Loan or Alternate Currency Loan or Fixed CD Rate Loan. "Investment" shall mean, as applied to any Person, any direct or indirect purchase or other acquisition by that Person of, or a beneficial interest in, stock or other Securities of any other Person or any direct or indirect loan, advance or capital contribution by that Person to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets, do not constitute a Consolidated Capital Expenditure or did not arise from sales to that other Person in the ordinary course of business, or any payment in respect of a Contingent Obligation in respect of an obligation of any other Person. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment; provided, however, that Investments made with or in exchange for intangible assets of the Company or its Subsidiaries (or the portion of the value of such Investment that is reasonably attributable to the value of any such intangible assets) shall be deemed to be valued at $1.00 for purposes of Section 6.11. "Issuing Lender" shall mean the Lender that agrees to issue a Letter of Credit, determined as provided in Section 2.14. "Lender" shall have the meaning provided in the preamble of this Agreement. "Letter of Credit" or "Letters of Credit" means any standby letter or letters of credit or similar instrument (which shall be denominated in Dollars) issued or to be issued by an Issuing Lender for the account of the Company pursuant to Section 2.14 for the purpose of supporting (i) workers' compensation liabilities of the Company, (ii) the obligations of third party insurers of the Company arising by virtue of the laws of any jurisdiction requiring third party insurers to obtain such letters of credit, (iii) obligations with respect to Capital Leases or Operating Leases of the Company, or (iv) performance, payment, deposit or surety obligations of the Company if required by law or governmental rule or regulation or in accordance with custom and practice in the industry in which the Company and its Subsidiaries are engaged. "Letter of Credit Participation" has the meaning assigned to that term in Section 2.14(a). "Letters of Credit Usage" means, as at any date of determination, the sum of (i) the maximum aggregate amount that is, or, with respect to any Letter of Credit that by its terms provides for increases over time in the maximum amount available to be drawn thereunder, may become at any given time, available under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under Letters of Credit honored by all Issuing Lenders and not theretofore reimbursed by the Company; provided, however, the Letters of Credit Usage of an Issuing Lender shall be deemed to be only such portion of the Letters of Credit Usage of such Issuing Lender that is not subject to participation pursuant to Section 2.14(a). "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security interest or agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing). "Loan" shall have the meaning assigned to such term in Section 2.1(a). "Loan Documents" shall mean this Agreement, the Company Guarantee, the Notes, if any, and the Letters of Credit. "Loan Facility" shall mean the credit facility evidenced by the Total Revolving Loan Commitment. "Margin Stock" shall have the meaning provided in 12 C.F.R. 221.3(v) or in any successor provision thereto. "Material Adverse Effect" shall mean (i) any material adverse change with respect to the business, operations, assets, liabilities (contingent or otherwise), condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole or (ii) any fact or circumstance (net of available insurance coverage from financially sound insurers), including any pending or threatened litigation or proceeding, arising as to which singly or in the aggregate there is a reasonable likelihood of (x) a material adverse change described in clause (i) occurring or (y) the Company failing to perform in any material respect its respective material Obligations hereunder or under any of the other Loan Documents or the Lenders and the Agent becoming unable to enforce in any material respect their rights taken as a whole purported to be granted hereunder and under the other Loan Documents. "Moody's" shall mean Moody's Investors Service, Inc., or any successor to its rating business. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA with respect to which the Company or any of its ERISA Affiliates is or has, within any of the preceding six years, been required to contribute. "Notes Receivable" shall mean promissory notes evidencing the obligations of purchasers of inventory consisting of equipment of the Company originally representing that portion of the purchase price of such inventory not paid to the Company in cash at the time of purchase. "Notice of Borrowing" shall have the meaning assigned to such term in Section 2.3. "Notice of Conversion/Continuation" shall have the meaning assigned to such term in Section 2.6. "Notice Office" shall mean the office of the Agent located at 130 Liberty Street, Commercial Loan Division, l4th Floor, New York, New York 10006, Attention: Loan Department, or such other office as the Agent may hereafter designate in writing as such to the other parties hereto. "Obligations" shall mean all obligations of every nature of the Company and the German Borrower, as the case may be, from time to time owed to the Agent and the Lenders or any of them under any of the Loan Documents. "OCC" shall mean the Office of the Comptroller of the Currency and any successor agency or other entity. "Officers' Certificate" shall mean, as applied to any corporation, a certificate executed on behalf of such corporation by an Authorized Officer; provided that every Officers' Certificate with respect to compliance with a condition precedent to the making of any Revolving Loan hereunder shall include (i) a statement that the officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signers, they have made or have caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been satisfied, and (iii) a statement as to whether, in the opinion of the signers, such condition has been satisfied. "Operating Lease" of any Person shall mean any lease (including, without limitation, leases which may be terminated by the lessee at any time) of any property (whether real, personal or mixed) by such Person as Lessee which is not a Capital Lease. "Original Dollar Equivalent" shall mean, in respect of any Alternate Currency Revolving Loan, the Dollar Equivalent thereof at the time of the incurrence of such Alternate Currency Revolving Loan. "OTS" shall mean the Office of Thrift Supervision and any of its successors or assigns. "Payment Office" shall mean (i) in respect of Dollar Loans, Letters of Credit, Fees and, except as provided in clause (ii) of this definition, all other amounts owing under this Agreement, the office of the Agent located at 130 Liberty Street, New York, New York 10006, ABA Number: 021-001-003, Account Name: Commercial Loan Division, Account Number: 99401268, Attention: Loan Department, Reference: Milacron Inc., (ii) in respect of Deutsche Mark Loans, the Agent's account located at Bankers Trust Company, Frankfurt, Germany in Favor of Bankers Trust Company New York, Account #70000036. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Acquisition" shall mean (a) the merger or consolidation of any Person into or with the Company or into or with any wholly-owned Subsidiary of the Company or (b) the acquisition by the Company or any of its wholly-owned Subsidiaries of all or substantially all of the assets of any Person (or all or substantially all of the assets of a product line or division of any Person) not already a Subsidiary of the Company or 90% or more of the capital stock of any such Person; provided that any such merger, consolidation or acquisition shall only be a Permitted Acquisition so long as (i) no Default or Event of Default exists (or will result from such acquisition) and (ii) the total consideration payable (whether in cash, securities, property, evidence of indebtedness or otherwise) is $100,000,000 or less. "Permitted Liens" shall mean those Liens permitted pursuant to Section 6.1. "Person" shall mean and include any person, firm, corporation, association, trust or other enterprise or any governmental or political subdivision or agency, department or instrumentality thereof including either Borrower, any Lender or the Agent. "Plan" shall mean any employee plan that is subject to the provisions of Title IV of ERISA and that is maintained by or contributed to, or at any time during the five calendar years preceding the date of this Agreement was maintained or contributed to, by the Company or any of its ERISA Affiliates, other than a Multiemployer Plan. "Prime Lending Rate" shall mean the rate that the Agent announces from time to time at its principal office as its prime lending rate for domestic commercial loans; any change of interest resulting from a change in the Prime Lending Rate shall be effective on the effective date of each change therein. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Agent may make commercial or other loans at rates of interest at, above or below the Prime Lending Rate. "Pro Rata Share" shall mean, with respect to each of the Commitments of, or Obligations owed to, each Lender, the percentage designated by dividing such Lender's Commitment or Obligation by all of the Lenders' Commitments or all such Obligations owed to such Lenders, as such Pro Rata Share may change from time to time as a result of assignments made pursuant to Section 11.4 and as a result of Section 11.16; with respect to any obligations or amounts owing or potentially owing by any Lender, Pro Rata Share means the percentage designated by dividing the sum of such Lender's Revolving Loan Commitment by the Total Revolving Loan Commitment as such Pro Rata Share may change from time to time as a result of assignments made pursuant to Section 11.4 and as a result of Section 11.16. "RCRA" shall mean the Resource, Conservation and Recovery Act, as amended from time to time, and any successor statute. "Receivables Purchase Agreement" shall mean the Amended and Restated Receivables Purchase Agreement, as amended, dated as of January 26, 1996 among the Company, Cincinnati Milacron Marketing Company, Cincinnati Milacron Commercial Corp., Valenite Inc., DME Company, Market Street Funding Corporation and PNC Bank, National Association or as the same may be amended to include the sale of the Borrower's subsidiaries' domestic Notes Receivable, as the same may be amended, supplemented or modified from time to time in accordance with its terms and Section 6.7 hereof. "Reference Lender" shall mean BTCo and any one or more other Lenders that may be designated from time to time by BTCo. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect or any successor to all or a portion thereof establishing reserve requirements. "Reportable Event" shall mean an event described in Section 4043(b) of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by regulation by the PBGC (provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in connection with Section 412(d) of the Code). "Request for Issuance" shall mean a request substantially in the form of Exhibit B-3 annexed hereto with respect to a proposed issuance of a Letter of Credit. "Requisite Lenders" shall mean Lenders whose Commitments constitute greater than 50% of the Total Revolving Loan Commitment. "Restricted Payment", with respect to any specified Indebtedness or equity Securities, shall mean, whether in cash, additional securities or property of any kind, any prepayment of principal of, or premium, if any, or interest on, or any similar redemption, purchase, retirement, defeasance, sinking fund or similar payment (other than, in the case of Certain Existing Indebtedness only, any of the foregoing in respect of mandatory scheduled payment obligations or any payment at the regularly scheduled final maturity thereof). "Revolving Loan" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Loan Commitment" shall have the meaning assigned to such term in Section 2.1(a). "RTC" shall mean the Resolution Trust Corporation and any successor entity. "S&P" shall mean Standard & Poor's Corporation or any successor to its rating business. "Sale-leaseback" shall mean any Capital Lease of the Company or any of its Subsidiaries whereby the Company or any of its Subsidiaries, directly or indirectly, becomes or remains liable as lessee or as guarantor or other surety, of any property (whether real or personal or mixed) whether now owned or hereafter acquired, (i) that the Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than the Company), or (ii) that the Company or any of its Subsidiaries intends to use for substantially the same purpose as any other property that has been or is to be sold or transferred by the Company or any of its Subsidiaries to any person (other than the Company) in connection with such lease. "Sale-leaseback Agreement" shall mean any Sale-leaseback agreement entered into prior to the Effective Date by the Company or any of its Subsidiaries and any replacement thereof, in each case as the same may be amended, amended and restated, supplemented or modified from time to time in accordance with its terms and Section 6.7 hereof. "Securities" shall mean any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Significant Subsidiary" shall mean, at any time, in the case of the Company each Subsidiary of the Company now existing or hereafter acquired or formed by the Company which (x)(i) accounted for more than $100,000,000 in revenues of the Company or (ii) $5,000,000 of Consolidated EBIT of the Company, in each case on the date of the most recent consolidated financials of the Company delivered to the Lenders pursuant to Section 5.1, (y) was the owner of more than $10,000,000 of the consolidated total assets of Company during the twelve-month period ending on the date of the most recent consolidated balance sheet of the Company delivered to the Lenders pursuant to Section 5.1 or (z) is CMKE; provided, however, that any special purpose Subsidiary of the Company formed or used in connection with the transactions contemplated by the Receivables Purchase Agreement (or any similar "bankruptcy remote" subsidiary) shall be deemed not to be a Significant Subsidiary. "Stated Maturity" means, with respect to any Indebtedness, the date specified therein as the fixed date on which the then outstanding principal amount of such Indebtedness is due and payable, including (if applicable) pursuant to any mandatory redemption provision. "Subsidiary" of any Person means (i) a corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned or controlled by such Person, directly or indirectly through Subsidiaries, and (ii) any partnership, association, joint venture or other entity in which such Person, directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time. A wholly-owned Subsidiary of any Person shall mean (i) any Domestic Subsidiary, with "99%" being substituted for "50%" in the prior sentence each time it appears and (ii) any Foreign Subsidiary, with "95%" being substituted for "50%" in the prior sentence each time it appears. "Subsidiary Borrower" shall mean the German Borrower. "Taxes" shall have the meaning assigned to such term in Section 3.5. "Total Indebtedness" shall mean, for any Person, the sum of (i) short term debt, (ii) the current portion of long term debt, (iii) long term debt, (iv) rental obligations under Capital Leases, (v) all contingent obligations in support of indebtedness and (vi) outstanding letters of credit, which in the case of clauses (i)-(vi) are required to be set forth on the balance sheet (including the notes thereto) as debt of such Person as determined in accordance with GAAP. "Total Modified Revolving Commitment" shall mean the Total Revolving Loan Commitment then in effect plus, in the event that any Alternate Currency Revolving Loans are outstanding at such time, the amount (not to exceed 10%) by which the Dollar Equivalent of the principal amount of such Alternate Currency Revolving Loan has increased from the Original Dollar Equivalent thereof; provided, however, that at no time shall the Total Modified Revolving Commitment exceed the Total Revolving Loan Commitment. "Total Revolving Loan Commitment" shall have the meaning assigned to such term in Section 2.1(a). "Treasury Regulations" shall mean the Regulations promulgated by the Secretary of the Treasury from time to time pursuant to the Code. "TSCA" shall mean the Toxic Substances Control Act. "Type" shall mean the type of Revolving Loan determined with regard to the interest option applicable thereto, i.e., whether a Base Rate Loan, a Fixed CD Rate Loan, a Eurodollar Loan or a Deutsche Mark Loan. "UCC" shall mean the Uniform Commercial Code, as in effect in each applicable jurisdiction. "Unfunded Current Liability" of any Plan shall mean an amount equal to the "amount of unfunded benefit liabilities" for such Plan, as defined in Section 4001(a)(18) of ERISA. "Year 2000 Compliant" shall mean that all Information Systems and Equipment accurately process date data (including, but not limited to, calculating, comparing and sequencing), before, during and after the year 2000, as well as same and multi-century dates, or between the years 1999 and 2000, taking into account all leap years, and further, that when used in combination with, or interfacing with, other Information Systems and Equipment, shall accurately accept, release and exchange date data, and shall in all material respects continue to function in the same manner as it performs today and shall not otherwise impair the accuracy or functionality of Information Systems and Equipment. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, schedule, exhibit and like references are to this Agreement unless otherwise specified. 1.2 Accounting Principles. Except as otherwise specifically provided herein, all statements (other than the financial statements to be provided pursuant to Section 5.1) to be prepared and determinations to be made under this Agreement, including (without limitation) those pursuant to Sections 5, 6 and 8 shall be prepared and made in accordance with GAAP applied on a basis consistent with the accounting principles reflected in the consolidated financial statements of the Company and its Subsidiaries for the fiscal quarter ended September 30, 1998 referred to in Section 8.1. All accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. 1.3 Other Definitional Provisions. References to "Sections," "clauses" or "subclauses" shall be to Sections, clauses and subclauses, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. 1.4 Closing Date. This Agreement shall close on the date (the "Closing Date") on which (i) each party hereto shall have returned an executed copy hereof to the Agent at the address designated on its signature page hereto or, in the case of the Lenders, shall have given the Agent written notice (actually received) at such office or such other office as the Agent may designate that the same has been signed and sent by it to the Agent, (ii) each of the conditions specified in Section 10.1 will have been satisfied or waived by the Requisite Lenders and (iii) the Agent shall have given the Company and each Lender notice that the foregoing has occurred. SECTION 2. AMOUNT AND TERMS OF LOANS. 2.1 The Revolving Loans. (a) Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties of the Borrowers set forth herein and in the other Loan Documents, each Lender hereby severally agrees to lend to the Company or to the German Borrower, as the case may be, at any time and from time to time, during the period from and including the Closing Date to but excluding the date that is one day before the Final Maturity Date, its Pro Rata Share of the Total Revolving Loan Commitment, by making loans to the Company or to the German Borrower, as the case may be (each, a "Loan" or "Revolving Loan"), to be used for the purposes identified in Section 2.12. Each Lender's commitment to make Revolving Loans to the Borrowers pursuant to this Section 2.1 is herein called its "Revolving Loan Commitment" and such commitments of all Lenders in the aggregate are herein called the "Total Revolving Loan Commitment." The initial amount of each Lender's Revolving Loan Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the initial amount of the Total Revolving Loan Commitment is $375,000,000. The amount of the Total Revolving Loan Commitment shall be reduced by the amount of all reductions thereof made pursuant to Section 3.1 through the date of determination. At any time the Total Revolving Loan Commitment is reduced pursuant to the terms of this Agreement, each Lender's Revolving Loan Commitment shall be reduced by an amount equal to its Pro Rata Share of such reduction. Each Lender's Revolving Loan Commitment shall expire on the Final Maturity Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans shall be paid in full no later than that date. No Revolving Loans may be borrowed by the Company or the German Borrower, as the case may be, if the sum of (i) the aggregate principal amount of Revolving Loans then outstanding, after giving effect to the making of all Revolving Loans then requested by all outstanding but unfunded Notices of Borrowing, plus (ii) the then outstanding Letters of Credit Usage, after giving effect to the issuance of all Letters of Credit subject to outstanding Requests for Issuance, would exceed the Total Revolving Loan Commitment then in effect. In no event shall the sum of (i) the aggregate principal amount of the Revolving Loans from any Lender outstanding at any time plus (ii) such Lender's Pro Rata Share of the then outstanding Letters of Credit Usage exceed such Lender's Revolving Loan Commitment then in effect. Subject to Sections 2.10 and 11.16, all Revolving Loans under this Agreement shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make Revolving Loans hereunder nor shall the Revolving Loan Commitment of any Lender be increased or decreased as a result of the default by any other Lender in that other Lender's obligation to make Revolving Loans hereunder. (b) Each Revolving Loan (i) shall, in the case of Revolving Loans made to the Company, be made and maintained in Dollars (each a "Dollar Revolving Loan" and, collectively, the "Dollar Revolving Loans"), which Dollar Revolving Loans shall, at the option of the Company, be either Base Rate Loans, Fixed CD Rate Loans or Eurodollar Loans, provided that all Dollar Revolving Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, be of the same Type, (ii) shall, in the case of Revolving Loans made to the German Borrower, be made and maintained in Deutsche Marks (each a "Deutsche Mark Revolving Loan" and, collectively, the "Deutsche Mark Revolving Loans"), (iii) may be repaid and reborrowed in accordance with the provisions hereof, and (iv) shall not exceed for any Lender at the time of the making of any such Revolving Loans, that aggregate principal amount (or the Dollar Equivalent of each outstanding Deutsche Mark Revolving Loan) which, when added to the sum of (I) the aggregate principal amount of all other Dollar Revolving Loans then outstanding from such Lender (or the Dollar Equivalent of each Deutsche Mark Revolving Loan then outstanding) and (II) the product of (A) such Lender's Pro Rata Share of the Total Revolving Loan Commitment and (B) the aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective Dollar Revolving Loans) at such time, equals the Revolving Loan Commitment of such Lender at such time; provided, however, that no Deutsche Mark Revolving Loan shall be made if the Dollar Equivalent thereof, when added to the Dollar Equivalent of all other outstanding Deutsche Mark Revolving Loans, would exceed $125,000,000 (the "Alternate Currency Sublimit"). (c) Deutsche Mark Loans shall be made by the Lenders only to the German Borrower and, further, the German Borrower may only incur Deutsche Mark Loans pursuant to this Section 2.1. 2.2 Minimum Amount of Each Borrowing. Each Borrowing of Revolving Loans shall be in an integral multiple of $500,000 and, if a Base Rate Loan, shall be in a minimum amount of $1,000,000 and, if a Fixed CD Rate Loan or a Eurodollar Loan, shall be in a minimum amount of $5,000,000 (or the respective Alternate Currency Equivalent thereof in the case of a Borrowing of Alternate Currency Revolving Loans). 2.3 Notice of Borrowing. (a) Whenever the Company or the German Borrower, as the case may be, desires to incur Revolving Loans hereunder, it shall give the Agent at its Notice Office at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Base Rate Loan, at least two Business Days' prior written notice (or telephonic notice confirmed in writing) in the case of each Fixed CD Rate Loan to be made hereunder, at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Eurodollar Loan and at least five Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Alternate Currency Loan to be made hereunder, provided that any such notice shall be deemed to have been given on a certain day only if given before 11:00 A.M. (New York time) on such day. Each such written notice or written confirmation of telephonic notice (each a "Notice of Borrowing") shall be written in English, irrevocable and shall be given by the Company or the German Borrower, as the case may be, in the form of Exhibit B- 1, appropriately completed to specify (i) the name of such Borrower, (ii) the date of such incurrence (which shall be a Business Day), (iii) that the Loans being made shall constitute Revolving Loans and the Applicable Currency for such Revolving Loans, (iv) the aggregate principal amount of the Loans to be made (stated in the Applicable Currency), (v) in the case of Dollar Loans, whether such Dollar Loans being made are to be initially maintained as Base Rate Loans, Fixed CD Rate Loans or Eurodollar Loans and (vi) in the case of Fixed Rate Loans, the initial Interest Period to be applicable thereto. The Agent shall promptly give each Lender notice of such proposed incurrence, of such Lender's proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing. (b) Without in any way limiting the obligation of any Borrower to confirm in writing any telephonic notice of any incurrence of Revolving Loans, the Agent may act without liability upon the basis of telephonic notice of such incurrence, believed by the Agent in good faith to be from an Authorized Officer of such Borrower prior to receipt of written confirmation. In each such case, each Borrower hereby waives the right to dispute the Agent's record of the terms of such telephonic notice of such incurrence of Loans absent manifest error. (c) Notwithstanding any other provision to the contrary in the Loan Documents, (i) an Authorized Officer of the Company may request the advance of a Revolving Loan to the German Borrower in the same manner as may an Authorized Officer of the German Borrower and (ii) no Revolving Loan shall be advanced to the German Borrower without the prior written consent of an Authorized Officer of the Company. 2.4 Disbursement of Funds. (a) No later than 12:00 Noon (local time in the city in which the proceeds of such Revolving Loans are to be made available in accordance with the terms hereof) on the date specified in each Notice of Borrowing, each Lender with a Commitment will make available its Pro Rata Share of each Borrowing of Revolving Loans requested to be made on such date, in Dollars or in the relevant Alternate Currency, as the case may be, and in immediately available funds at the appropriate Payment Office of the Agent. All such amounts shall be made available in immediately available funds at the appropriate Payment Office of the Agent, and the Agent will make available to the Company or the German Borrower, as the case may be, at such Payment Office, in Dollars or the relevant Alternate Currency, as the case may be, and in immediately available funds, the aggregate of the amounts so made available by the Lenders (prior to 1:00 P.M. (local time in the city in which the proceeds of such Revolving Loans are to be made available in accordance with the terms hereof) on such day), to the extent of funds actually received by the Agent. (b) Unless the Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the Agent such Lender's portion of any Borrowing to be made on such date, the Agent may assume that such Lender has made such amount available to the Agent on such date of Borrowing and the Agent may, in reliance upon such assumption, make available to the relevant Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Lender, the Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Company or the German Borrower, as the case may be, and the Company or the German Borrower, as the case may be, shall immediately pay such corresponding amount to the Agent. The Agent shall also be entitled to recover on demand from such Lender or the Company or the German Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to such Borrower until the date such corresponding amount is recovered by the Agent, at a rate per annum equal to (i) if recovered from such Lender, at the overnight Federal Funds Rate and (ii) if recovered from the Company or the German Borrower, as the case may be, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 2.8. Nothing in this Section 2.4 shall be deemed to relieve any Lender from its obligation to make Revolving Loans hereunder or to prejudice any rights which the Company or the German Borrower, as the case may be, may have against any Lender as a result of any failure by such Lender to make Revolving Loans hereunder. 2.5 Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Company and the German Borrower to such Lender resulting from the Loans made by such Lender including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (b) The Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Company or the German Borrower, as the case may be, to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder for the account of the Lenders and each Lender's share thereof. (c) The entries made in the accounts maintained pursuant to paragraph (a) or (b) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Company or the German Borrower, as the case may be, to repay the Loans in accordance with the terms of this Agreement. (d) Any Lender may request that Loans of any Type made by it be evidenced by a promissory note. In such event, the Company or the German Borrower, as the case may be, shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in accordance with the terms of this Agreement; and substantially in the form of Exhibit A-1 or Exhibit A-2, as the case may be, and approved by the Agent. Thereafter, the Loans evidenced by such promissory note(s) and interest thereon shall at all times be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note(s) is a registered note, to such payee and its registered assigns). 2.6 Conversion or Continuation of Revolving Loans. Provided that no Default or Event of Default is then in existence, the Company shall have the option (i) to convert (pro rata with respect to each Lender) at any time all or any part of its outstanding Dollar Revolving Loans equal to $5,000,000 ($1,000,000 in the case of conversion into Base Rate Loans and Fixed CD Rate Loans) and integral multiples of $1,000,000 in excess of that amount from Dollar Revolving Loans of one Type to Dollar Revolving Loans of another Type or (ii) upon the expiration of any Interest Period applicable to a Fixed CD Rate Loan or Eurodollar Loan, to continue all or any portion of such Fixed CD Rate Loan or Eurodollar Loan equal to $5,000,000 in the case of any Eurodollar Loan ($1,000,000 in the case of any Fixed CD Rate Loan) and integral multiples of $1,000,000 in excess of that amount as a Fixed CD Rate Loan or Eurodollar Loan of the same Type, and the succeeding Interest Period(s) of such continued Revolving Loan shall commence on the last day of the Interest Period of the Dollar Revolving Loan to be continued; provided, however, that a Fixed CD Rate Loan or Eurodollar Loan may only be converted into a Dollar Revolving Loan of another Type on the expiration date of the Interest Period applicable thereto. The Company shall deliver a Notice of Conversion/Continuation to the Agent, substantially in the form of Exhibit B-2 annexed hereto, no later than 12:00 Noon (New York time) at least three Business Days in advance of the proposed conversion/continuation date in the case of a conversion to, or a continuation of, a Eurodollar Loan and two Business Days in advance of the proposed conversion/continuation date in the case of a conversion to, or a continuation of, a Fixed CD Rate Loan. The Agent shall give each Lender notice as promptly as practicable of any such proposed conversion or continuation affecting any of its Dollar Revolving Loans. A Notice of Conversion/Continuation shall, in the case of a conversion to, or continuation of, a Fixed CD Rate Loan or Eurodollar Loan, be irrevocable and shall specify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount of the Dollar Revolving Loan to be converted/continued, (iii) (A) whether the Dollar Revolving Loan to be converted/continued is a Base Rate Loan, Fixed CD Rate Loan or a Eurodollar Loan and (B) whether the Dollar Revolving Loan into which such Dollar Revolving Loan is converted/continued is to be a Base Rate Loan, Fixed CD Rate Loan or a Eurodollar Loan, and (iv) in the case of a conversion to, or a continuation of, a Fixed CD Loan or Eurodollar Loan, the requested Interest Period. In lieu of delivering the above-described Notice of Conversion/Continuation, the Company may give the Agent telephonic notice by the required time of any proposed conversion/continuation under this Section 2.6; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to the Agent on or before the proposed conversion/continuation date. If the Company has failed to timely deliver a Notice of Conversion/Continuation or give such telephonic notice with respect to a Fixed CD Rate Loan or Eurodollar Loan the Company shall be deemed to have delivered to the Agent a Notice of Conversion/Continuation to convert such Fixed CD Rate Loan or Eurodollar Loan, into a Base Rate Loan. Except as provided in Section 2.10, a Notice of Conversion/Continuation pursuant to this Section 2.6 (or telephonic notice in lieu thereof) shall be irrevocable on and after the date of delivery thereof to the Agent, and the Company shall be bound to convert or continue in accordance therewith. 2.7 Pro Rata Borrowings and Issuances. All Revolving Loans under this Agreement shall be made by the Lenders simultaneously and in such amount as necessary so that after giving effect thereto, to the extent possible, the outstanding Revolving Loans of each Lender shall be such Lender's Pro Rata Share thereof. It is understood that no Lender shall be responsible for any default by any other Lender in its obligation to make Revolving Loans hereunder or participate in the issuance of each Letter of Credit as provided for by Section 2.14(a) nor shall the Commitment of any Lender be increased as a result of the default by any other Lender in its obligation to make Revolving Loans hereunder or participate in the issuance of each Letter of Credit as provided for by Section 2.14(a) and that each Lender shall be obligated to make the Revolving Loans provided to be made by it hereunder or participate in the issuance of each Letter of Credit as provided for by Section 2.14(a), regardless of the failure of any other Lender to fulfill its Commitment hereunder or pursuant to Section 2.14(a). 2.8 Interest. (a) The Company agrees to pay interest in respect of the unpaid principal amount of each Base Rate Loan incurred by the Company from the date the proceeds thereof are made available to the Company until maturity thereof (whether by acceleration or otherwise) at a rate per annum which shall be equal to the Base Rate. Such interest rates shall be adjusted automatically on and as of the effective date of any change in the Base Rate. (b) The Company agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan incurred by the Company from the date the proceeds thereof are made available to the Company until maturity thereof (whether by acceleration or otherwise) at a rate per annum which shall, during each Interest Period applicable thereto, be the relevant Eurodollar Rate plus the Applicable Borrowing Margin. (c) The Company agrees to pay interest in respect of the unpaid principal amount of each Fixed CD Rate Loan incurred by the Company from the date the proceeds thereof are made available to the Company until maturity thereof (whether by acceleration or otherwise) at a rate per annum which shall, during each Interest Period applicable thereto, be the relevant Fixed CD Rate plus the Applicable Borrowing Margin. (d) The German Borrower agrees to pay interest in respect of the unpaid principal amount of each Deutsche Mark Loan from the date the proceeds thereof are made available to the German Borrower until the maturity (whether by acceleration or otherwise) of such Deutsche Mark Loan at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the sum of the Deutsche Mark Euro Rate plus the Applicable Borrowing Margin for such Interest Period. (e) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Revolving Loan shall bear interest at a rate per annum equal to the greater of (i) 2% in excess of the rate of interest then payable in respect of such Revolving Loan and (ii) 1-1/4% per annum in excess of the Base Rate in effect from time to time. (f) Interest on each Loan shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (x) on the last day of each April, July, October and January of each year, commencing January 31, 1999, in the case of Base Rate Loans and on each Interest Payment Date applicable thereto, in the case of Fixed Rate Loans and (y) in all cases, on any prepayment (on the amount prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (g) All computations of interest hereunder in respect of Revolving Loans shall be made on the basis of the actual number of days elapsed in a 360-day year comprised of twelve 30-day months. (h) Upon each Interest Determination Date, the Agent shall determine the respective interest rate for each Interest Period applicable to the Fixed Rate Loans for which such determination is being made and shall promptly notify the Company or the German Borrower, as the case may be, and the Lenders thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. 2.9 Interest Periods. (a) At the time it gives any Notice of Borrowing as provided for in Section 2.3 or Notice of Conversion/Continuation as provided for in Section 2.6 in respect of the making of, continuation of or conversion into, any Fixed CD Rate Loan or Eurodollar Loan (in the case of the initial Interest Period applicable thereto) or on the second Business Day, in the case of any Fixed CD Rate Loan, and on the third Business Day, in the case of any Eurodollar Loan, and on the Fifth Business Day in the case of Alternate Currency Loans prior to the expiration of an Interest Period applicable to such Fixed Rate Loan (in the case of any subsequent Interest Period), the Company or the German Borrower, as the case may be, shall have the right to elect, by giving the Agent notice thereof, the interest period (each an "Interest Period") applicable to such Revolving Loan. If the Agent shall not have received timely notice of a designation of an Interest Period as herein provided upon the expiration of an Interest Period with respect to a Fixed Rate Loan, the Company or the German Borrower, as the case may be, shall be deemed to have elected (x) if Fixed CD Rate Loans or Eurodollar Loans, to convert such Fixed CD Rate Loans or Eurodollar Loans to which such expiring Interest Period is applicable into Base Rate Loans and (y) if Alternate Currency Loans, to select a one-month Interest Period for such Alternate Currency Loans, in either case effective on the last day of such current Interest Period. (b) The determination of Interest Periods with respect to all Fixed Rate Loans shall be subject to the following provisions: (i) each Interest Period shall at the option of the Borrower (x) in the case of a Fixed CD Rate Loan, be either a 30, 60, 90 or 180-day period, and (y) in the case of a Eurodollar Loan, be either a one, two, three or six-month period; (ii) each Interest Period shall at the option of the German Borrower in the case of an Alternate Currency Loan be either a one, two, three or six month period; (iii) all Fixed Rate Loans comprising a Borrowing shall at all times have the same Interest Period except as otherwise required by Section 2.10(b); (iv) the initial Interest Period for any Fixed Rate Loan shall commence on the date of Borrowing of such Revolving Loan (including the date of any conversion thereof into a Dollar Revolving Loan of a different Type Dollar Loan) and each Interest Period occurring thereafter in respect of such Revolving Loan shall commence on the day on which the next preceding Interest Period applicable thereto expires; (v) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period for a Eurodollar Loan or Alternate Currency Loan (other than a Eurodollar Loan made pursuant to Section 2.10(b)) would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (vi) any Interest Period in respect of a Eurodollar Loan or Alternate Currency Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to subsection (vii) below, end on the last Business Day of a calendar month; (vii) the Interest Period for a Revolving Loan that is converted pursuant to Section 2.10(b) shall commence on the date of such conversion and shall expire on the date on which the Interest Periods for the Revolving Loans of the other Lenders that were not converted expire; (viii) no Interest Period shall extend beyond the Final Maturity Date; and (ix) there shall be no more than 15 Interest Periods outstanding at any time. 2.10 Increased Costs, Illegality, etc. (a) In the event that any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clauses (i) and (iv) below, may be made only by the Agent): (i) on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the London interbank market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of the respective Eurodollar Rate or Deutsche Mark Euro Rate; or (ii) at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loan or Deutsche Mark Loan because of (x) any change since the date of this Agreement in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order, guideline or request, such as, for example, but not limited to: (A) a change in the basis of taxation of payment to any Lender of the principal of or interest on such Eurodollar Loan or Deutsche Mark Loan or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or profits of such Lender, pursuant to the laws of the jurisdiction in which such Lender is organized or in which such Lender's principal office or applicable lending office is located or any subdivision thereof or therein), or (B) a change in official reserve requirements (except to the extent covered by Section 2.10(d) in respect of Alternate Currency Loans or included in the computation of the respective Eurodollar Rate or Deutsche Mark Euro Rate) or any special deposit, assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (or its applicable lending office) and/or (y) other circumstances since the date of this Agreement affecting such Lender or the London interbank market or the position of such Lender in such market; or (iii) at any time, that the making or continuance of any Eurodollar Loan or Deutsche Mark Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by any Lender in good faith with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the London interbank market; or (iv) at any time that any Alternate Currency is not available in sufficient amounts, as determined in good faith by the Agent, to fund any Borrowing of Alternate Currency Revolving Loans; then, and in any such event, such Lender (or the Agent, in the case of clause (i) or (iv) above) shall promptly give notice (by telephone confirmed in writing) to the Company and the German Borrower, as the case may be, and, except in the case of clause (i) or (iv) above, to the Agent of such determination (which notice the Agent shall promptly transmit to each of the other Lenders). Thereafter (w) in the case of clause (i) above, (A) in the event that Eurodollar Loans are so affected, Eurodollar Loans shall no longer be available until such time as the Agent notifies the Company and the Lenders that the circumstances giving rise to such notice by the Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Company with respect to Eurodollar Loans which have not yet been incurred (including by way of conversion/continuation) shall be deemed rescinded by the Company and (B) in the event that any Alternate Currency Loan is so affected, the interest rate for such Alternate Currency Loan shall be determined on the basis provided in the proviso to the definition of the respective Fixed Rate applicable to such Alternate Currency Loan, (x) in the case of clause (ii) above, the Company or the German Borrower, as the case may be, shall pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its reasonable discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing the basis for the calculation thereof, submitted to the Company or the German Borrower, as the case may be, by such Lender in good faith shall, absent manifest error, be final and conclusive and binding on all the parties hereto), (y) in the case of clause (iii) above, the Company or the German Borrower, as the case may be, shall take one of the actions specified in Section 2.10(b) as promptly as possible and, in any event, within the time period required by law and (z) in the case of clause (iv) above, Alternate Currency Revolving Loans in the affected Alternate Currency shall no longer be available until such time as the Agent notifies the Company, the German Borrower and the Lenders that the circumstances giving rise to such notice by the Agent no longer exists, and any Notice of Borrowing given by the German Borrower with respect to such Alternate Currency Revolving Loans which have not yet been incurred shall be deemed rescinded by the German Borrower. Each of the Agent and each Lender agrees that if it gives notice to the Company or the German Borrower of any of the events described in clause (i), (iii) or (iv) above, it shall promptly notify the Company and the German Borrower and, in the case of any such Lender, the Agent, if such event ceases to exist. If any such event described in clause (iii) above ceases to exist as to a Lender, the obligations of such Lender to make Eurodollar Loans or Deutsche Mark Loans and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions contained herein shall be reinstated. (b) At any time that any Eurodollar Loan or Deutsche Mark Loan is affected by the circumstances described in Section 2.10(a)(ii) or (iii), the Company or the German Borrower, as the case may be, may (and in the case of a Eurodollar Loan or Deutsche Mark Loan affected by the circumstances described in Section 2.10(a)(iii) shall) either (x) if the affected Eurodollar Loan or Deutsche Mark Loan is then being made initially or pursuant to a conversion, cancel the respective Borrowing by giving the Agent telephonic notice (confirmed in writing) on the same date that such Borrower was notified by the affected Lender or the Agent pursuant to Section 2.10(a)(ii) or (iii) or (y) if the affected Fixed Rate Loan is then outstanding, upon at least three Business Days' written notice to the Agent and the affected Lender, (A) in the case of a Eurodollar Loan, require the affected Lender to convert such Eurodollar Loan into a Base Rate Loan and (B) in the case of any Alternate Currency Loan, repay such Alternate Currency Loan in full, provided that, if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 2.10(b). (c) If any Lender determines that after the Effective Date the introduction of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency, will have the effect of increasing the amount of capital required to be maintained by such Lender or any corporation controlling such Lender based on the existence of such Lender's Commitments hereunder or its obligations hereunder, then the Company and the German Borrower jointly and severally agree to pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable; provided that such Lender's reasonable good faith determination of compensation owing under this Section 2.10(c) shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 2.10(c), will give prompt written notice thereof to the Company and the German Borrower, which notice shall show the basis for calculation of such additional amounts. (d) In the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding on all parties hereto) at any time that such Lender is required to maintain reserves (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) which have been established by any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body with jurisdiction over such Lender (including any branch, Affiliate or funding office thereof) in respect of any Alternate Currency Loans or any category of liabilities which includes deposits by reference to which the interest rate on any Alternate Currency Loan is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to non-United States residents, then, unless such reserves are included in the calculation of the interest rate applicable to such Alternate Currency Loans or in Section 2.10(a)(ii), such Lender shall promptly notify the Company and the German Borrower in writing specifying the additional amounts required to indemnify such Lender against the cost of maintaining such reserves (such written notice to provide in reasonable detail a computation of such additional amounts) and the German Borrower shall pay to such Lender such specified amounts as additional interest at the time that the German Borrower is otherwise required to pay interest in respect of such Alternate Currency Loan or, if later, on written demand therefor by such Lender. (e) If any Lender requests compensation under this Section 2.10, or if the Company or the German Borrower, as the case may be, is required to pay any additional amount to any Lender pursuant to this Section 2.10, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to this Section in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Company and the German Borrower hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (f) If any Lender requests compensation under this Section 2.10, or if the Company or the German Borrower, as the case may be, is required to pay any additional amount to any Lender pursuant to this Section 2.10, or if any Lender defaults in its obligation to fund Loans hereunder, then the Company or the German Borrower, as the case may be, may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.4), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment, or any other party); provided that (i) the Company or the German Borrower, as the case may be, shall have received the prior written consent of the Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and Letter of Credit Participation, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company of the German Borrower, as the case may be (in the case of all other amounts), and (iii) in the case of any such assignment resulting from a claim for compensation under this Section, such assignment will result in a reductions in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Company or the German Borrower, as the case may be, to require such assignment and delegation cease to apply. 2.11 Compensation. The Company and the German Borrower, as the case may be, shall compensate each Lender, upon its written request (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by such Lender to lenders of funds borrowed by it to make or carry its Fixed Rate Loans to the extent not recovered by such Lender in connection with the re-employment of such funds), which such Lender may sustain (including, without limitation, in the case of payments made pursuant to Sections 3.2 and 3.3): (i) if for any reason (other than a default by such Lender) a Borrowing of Fixed Rate Loans or conversion from Fixed CD Rate Loans or Eurodollar Loans or into Fixed CD Rate Loans or Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation (whether or not withdrawn or deemed withdrawn pursuant to Section 2.10(a)), (ii) if any repayment (including any repayment pursuant to Section 2.4(b) or Section 2.10(b)) or conversion of any of its Fixed CD Rate Loans or Eurodollar Loans or Deutsche Mark Loans occurs on a date that is not the last day of an Interest Period applicable thereto, (iii) if any prepayment of any of its Fixed Rate Loans is not made on any date specified in a notice of prepayment given by the Company or the German Borrower, or (iv) as a consequence of (x) any other default by the Company or the German Borrower to repay its Fixed Rate Loans when required by the terms of this Agreement or the Note of such Lender or (y) an election made by the Company or the German Borrower pursuant to Section 2.10(b). 2.12 Proceeds of Revolving Loans. The Borrowers shall use the proceeds of any Revolving Loan made hereunder for general corporate purposes (including to finance Permitted Acquisitions pursuant to Section 6.11(v)) of the Borrowers and their respective Subsidiaries. 2.13 Fees and Commissions. The Company agrees to pay to the Agent, for pro rata distribution to the Lenders, to the extent not previously paid, a facility fee (the "Facility Fee") accruing any day on or prior to the day before the Effective Date at the rate set forth in the Existing Credit Agreement and from and including the Effective Date to and including the Final Maturity Date (or, in the case of each Lender, such earlier date as each such Lender's Commitment shall have been terminated) computed at a rate per annum equal to the Applicable Fee Percentage multiplied by the daily average of the Total Revolving Loan Commitments under the Loan Facility, regardless of usage, on the basis of the actual number of days elapsed in a 360-day year comprised of twelve 30- day months. The Facility Fee shall be payable quarterly in arrears on each January 31, April 30, July 31 and October 31, commencing on the first such date to occur after the Effective Date. The Company agrees to pay to the Agent certain fees in such amount at times previously agreed upon in writing. 2.14 Letters of Credit. (a) Letters of Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Company set forth herein and in the other Loan Documents, in addition to requesting that the Lenders make Revolving Loans pursuant to Section 2.1, the Company may request, in accordance with the provisions of this Section 2.14(a), that one or more Issuing Lenders issue Letters of Credit for the account of the Company or its Subsidiaries; provided that (i) the Company shall not request that any Lender issue any Letter of Credit if, after giving effect to such issuance the sum of (a) the then outstanding Letters of Credit Usage, after giving effect to the issuance of all Letters of Credit subject to outstanding Requests for Issuance plus (b) the aggregate principal amount of Revolving Loans then outstanding, after giving effect to the making of all Revolving Loans then requested by all outstanding but unfunded Notices of Borrowing, would exceed the Total Revolving Loan Commitment then in effect, (ii) in no event shall any Issuing Lender issue any Letter of Credit (x) having an expiration date later than the Final Maturity Date, (y) as to which a drawing can be made in a location other than in the United States of America, or (z) which is denominated in a currency other than Dollars and (iii) the Company shall not request that any Issuing Lender issue and no Issuing Lender shall issue any Letter of Credit if, after giving effect to such issuance, the then outstanding Letters of Credit Usage in respect of all Letters of Credit would exceed $20,000,000. Notwithstanding clause (x) in the preceding sentence, an Issuing Lender may issue any Letter of Credit (I) having an expiration date later than the Final Maturity Date or (II) having an expiration date prior to the Final Maturity Date, but containing a provision to the effect that such Letter of Credit in the case of this clause (II) will automatically be extended for a single period not to exceed the initial period of such Letter of Credit, (A) so long as in the case of Letters of Credit referred to in either clauses (I) or (II) above the expiration date for any such Letter of Credit is no more than 18 months beyond the Final Maturity Date and (B) at the time any such Letter of Credit is issued or extended, as the case may be, the Borrower shall cash collateralize such Letter of Credit in an amount equal to 102% of the face amount of such Letter of Credit. The issuance of any Letter of Credit in accordance with the provisions of this Section 2.14 shall be given effect in the calculation of the Letters of Credit Usage and shall require the satisfaction of each condition set forth in Section 4.2. Immediately upon the issuance of each Letter of Credit, each Lender other than the Issuing Lender or Lenders shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation (such participation of each Lender in each Letter of Credit being hereinafter referred to as its "Letter of Credit Participation") in such Letter of Credit and any drawings thereunder in an amount equal to such Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. Each Letter of Credit may provide that the Issuing Lender may (but shall not be required to) pay the beneficiary thereof upon the occurrence of an Event of Default and the acceleration of the maturity of the Revolving Loans or, if payment is not then due to the beneficiary, provide for the deposit of funds in an account to secure payment to the beneficiary and that any funds so deposited shall be paid to the beneficiary of the Letter of Credit if conditions to such payment are satisfied or returned to the Issuing Lender for distribution to the Lenders (or, if all Obligations shall have been indefeasibly paid in full, to the Company) if no payment to the beneficiary has been made and the final date available for drawings under the Letter of Credit has passed. Each payment or deposit of funds by an Issuing Lender as provided in this paragraph shall be treated for all purposes of this Agreement as a drawing duly honored by such Issuing Lender under the related Letter of Credit. (b) Request for Issuance. Whenever the Company desires the issuance of a Letter of Credit, it shall deliver to the Issuing Lender a Request for Issuance in the form of Exhibit B-3 annexed hereto no later than 1:00 P.M. (New York time) at least five Business Days, or such shorter period as may be agreed to by any Issuing Lender in any particular instance, in advance of the proposed date of issuance. Such Issuing Lender shall immediately notify the Agent of such Request for Issuance. The Request for Issuance with respect to any Letter of Credit shall specify (i) the proposed date of issuance (which shall be a business day under the laws of the jurisdiction of the Issuing Lender) of such Letter of Credit, (ii) the face amount of such Letter of Credit, (iii) the expiration date of such Letter of Credit and (iv) the name and address of the beneficiary of such Letter of Credit. As soon as practicable after delivery of such Request for Issuance, the Issuing Lender for such Letter of Credit shall be determined as provided in Section 2.14(c). Prior to the date of issuance, the Company shall specify a precise description of the documents and the verbatim text of any certificate to be presented by the beneficiary of such Letter of Credit which, if presented by such beneficiary on or before the expiration date of the Letter of Credit, would require the Issuing Lender to make payment under the Letter of Credit; provided that the Issuing Lender, in its sole judgment, may require changes in any such documents and certificates; and provided, further, that no Letter of Credit shall require payment against a conforming draft to be made thereunder earlier than 1:00 P.M. in the time zone of the Issuing Lender on the Business Day (which shall be a business day under the laws of the jurisdiction of the Issuing Lender) next succeeding the Business Day (which shall be a business day under the laws of the jurisdiction of the Issuing Lender) that such draft or other form of demand for payment is presented. In determining whether to pay under any Letter of Credit, the Issuing Lender shall be responsible only to determine that the documents and certificates required to be delivered under that Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit. (c) Determination of Issuing Lender. (1) The Company may request any Lender to issue a Letter of Credit, it being expressly understood that no Lender will have any obligation to issue any Letter of Credit. The Lender that elects to issue a Letter of Credit shall be the Issuing Lender with respect thereto. (2) Each Issuing Lender that elects to issue or amend a Letter of Credit shall immediately give written notice to each Lender and the Agent of such issuance and/or amendment accompanied by a copy of such issuance and/or amendment. (3) Each Issuing Lender shall keep each Lender and the Agent advised of the status of each Letter of Credit issued by it and will provide to each Lender and the Agent a calculation quarterly of all fees owed to them with respect to any Letter of Credit issued by such Issuing Lender. (d) Payment of Amounts Drawn Under Letters of Credit. In the event of a drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall notify the Company and the Agent reasonably promptly following the receipt of the drawing but in any event at or before 10:00 A.M. on the date on which the Issuing Lender intends to honor the drawing. The Company shall reimburse the Issuing Lender on the day which such drawing is honored in an amount in immediately available funds equal to the drawing amount. It being further provided that, anything contained in this Agreement to the contrary notwithstanding, (i) unless the Company shall have notified the Agent and the Issuing Lender prior to 11:00 A.M. (New York Time) on the drawing payment date that the Company intends to reimburse the Issuing Lender for the amount of the payment with funds other than the proceeds of Revolving Loans, the Company shall be deemed to have given a timely Notice of Borrowing to the Agent requesting Lenders to make Revolving Loans that are Base Rate Loans on the drawing payment date in an amount equal to the payment amount, and (ii) subject to the satisfaction or waiver of the conditions specified in Section 4.1, the Lenders shall, on the drawing payment date, make Base Rate Revolving Loans equal to the payment amount. The proceeds of such Loans shall be applied directly by the Agent to reimburse the Issuing Lender for the amount of the payment. If for any reason, proceeds of Revolving Loans are not received by the Issuing Lender, on such date in amount equal to the payment amount, the Company shall reimburse the Issuing Lender, on the Business Day (which shall be a business day under the laws of the jurisdiction of the Issuing Lender) immediately following the drawing payment date, in immediately available funds the amount which equals the excess of the payment amount over the amount of Revolving Loans, if any, so received, plus interest on such amount at the rate set forth in Section 2.14(f)(1)(i). (e) Payment by Lenders. In the event that the Company shall fail to reimburse an Issuing Lender as provided in Section 2.14(d) in an amount equal to the amount of any drawing honored by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly notify the Agent and the Agent shall promptly notify each Lender of the unreimbursed amount of such drawing so honored and of such Lender's respective participation therein. Each Lender shall make available to the Agent an amount equal to its Pro Rata Share of the aggregate participation in such Letter of Credit in immediately available funds, at the office of the Agent specified in such notice, not later than 1:00 P.M. (New York time) on the Business Day (which shall be a business day under the laws of the jurisdiction of such Issuing Lender) after the date notified by the Agent. In the event that any Lender fails to make available to the Agent the amount of such Lender's participation in such Letter of Credit as provided in this Section 2.14(e), an Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest at the customary rate set by the Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Each Issuing Lender shall distribute to each Lender which has paid all amounts payable by it under this Section 2.14(e) with respect to any Letter of Credit issued by such Issuing Lender such Lender's Pro Rata Share of all payments received by such Issuing Lender from the Company in reimbursement of drawings honored by such Issuing Lender under such Letter of Credit when such payments are received. Nothing in this Section 2.14(e) shall be deemed to relieve any Lender from its obligation to pay all amounts payable by it under this Section 2.14(e) with respect to any Letter of Credit issued by an Issuing Lender or to prejudice any rights that the Company, the Agent, the Issuing Lender or any other Lender may have against a Lender as a result of any default by such Lender hereunder. (f) Compensation. (1) The Company agrees to pay the following amount with respect to all Letters of Credit: (i) with respect to drawings made under any Letter of Credit, interest, payable on demand, on the amount paid by such Issuing Lender in respect of each such drawing from and including the drawing payment date through the date such amount is reimbursed by the Company (including any such reimbursement out of the proceeds of Revolving Loans pursuant to Section 2.14(d)) at the relevant Eurodollar Rate plus if the ratio of Consolidated Total Indebtedness to Consolidated EBITDA is (x) greater than 3.25 to 1.0, 2.125% per annum, (y) equal to or less than 3.25 to 1.00 but greater than 2.75 to 1.0, 1.500% per annum, (z) equal to or less than 2.75 to 1.0 but greater than 2.50 to 1.0, 1.250% per annum, (xx) equal to or less than 2.50 to 1.0 but greater than 2.25 to 1.0, 1.000% per annum, (yy) equal to or less than 2.25 to 1.0 but greater than 2.00 to 1.0, .750% per annum and (zz) equal to or less than 2.00 to 1.0 but greater than 1.50 to 1.0, .550% per annum and (xxx) equal to or less than 1.50 to 1.0, .350% per annum; provided that amounts reimbursed after 1:00 p.m. (New York time) on any date shall be deemed to be reimbursed on the next succeeding Business Day); and (ii) with respect to the issuance, amendment or transfer of each Letter of Credit and each payment of a drawing made thereunder, documentary and processing charges in accordance with such Issuing Lender's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or payment, as the case may be. (2) The Company agrees to pay to the Issuing Lender for distribution to each Lender in respect of all Letters of Credit outstanding such Lender's Pro Rata Share of a commission equal to the Applicable Borrowing Margin with respect to Eurodollar Loans multiplied by the average maximum amount available from time to time to be drawn under such outstanding Letters of Credit, in respect of the quarterly period through the last day of each January, April, July and October and payable on the first Business Day following each such last day of the aforesaid months and calculated on the basis of a 360- day year and the actual number of days elapsed. Upon the happening and during the continuance of an Event of Default described in Section 7.1, the commission referred to in the preceding sentence shall be the Applicable Borrowing Margin with respect to Eurodollar Loans plus 2%. (3) The Company agrees to pay to each Issuing Lender in respect to all Letters of Credit outstanding issued by each such Issuing Lender a facing fee at such time and in the amount or amounts agreed to in writing by the Company and such Issuing Lender. Amounts payable under this Section 2.14(f) shall be paid to the Issuing Lender. Subject to the provisions of Section 11.16, the Issuing Lender shall distribute to each Lender its Pro Rata Share of such amount. Amounts payable under clauses (1)(ii) and (3) of this Section 2.14(f) shall be paid directly to the Issuing Lender. (g) Obligations Absolute. The obligation of the Company to reimburse each Issuing Lender for drawings made under the Letters of Credit issued by it and the obligations of the Lenders under Section 2.14(d) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances: (1) any lack of validity or enforceability of any Letter of Credit; (2) the existence of any claim, setoff, defense or other right that the Company or any Affiliate of the Company or any other Person may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or transferee may be acting), such Issuing Lender, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction; (3) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (4) payment by such Issuing Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document that does not comply with the terms of such Letter of Credit; (5) any other circumstances or happening whatsoever that is similar to any of the foregoing; or (6) the fact that an Event of Default or Default shall have occurred and be continuing. (h) Additional Payments. If by reason of (i) any change in applicable law, regulation, rule, decree or regulatory requirement or any change in the interpretation or application by any judicial or regulatory authority of any law, regulation, rule, decree or regulatory requirement (except for changes in the rate of tax on, or determined by reference to, the net income or profits of such Lender or its Applicable Lending Office imposed by the jurisdiction in which it is organized or in which its principal office or Applicable Lending Office is located) or (ii) compliance by any Issuing Lender or any Lender with any direction, request or requirement (whether or not having the force of law) of any governmental or monetary authority including, without limitation, Regulation D: (A) such Issuing Lender or any Lender shall be subject to any tax, levy, charge or withholding of any nature or to any variation thereof or to any penalty or interest with respect to the maintenance or fulfillment of its obligations under this Section 2.14, whether directly or by such being imposed on or suffered by such Issuing Lender or any Lender; (B) any reserve, deposit or similar requirement is or shall be applicable, imposed or modified in respect of any Letter of Credit issued by such Issuing Lender or participations therein purchased by any Lender; or (C) there shall be imposed on such Issuing Lender or any Lender any other condition regarding this Section 2.14, any Letter of Credit or any participation therein; and the result of the foregoing is to directly or indirectly increase the cost to such Issuing Lender or any Lender of issuing, making or maintaining any Letter of Credit or of purchasing or maintaining any participation therein, or to reduce the amount receivable in respect thereof by such Issuing Lender or any Lender, then and in any such case such Issuing Lender or such Lender may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify the Company and the Company shall pay on demand such amounts as such Issuing Lender or such Lender may specify to be necessary to compensate such Issuing Lender or such Lender on a net after-tax basis for such additional cost or reduced receipt, together with interest on such amount from the date demanded until payment in full thereof at a rate per annum equal at all times to the rate applicable to Base Rate Loans then in effect. A certificate in reasonable detail as to the amount of such increased cost or reduced receipt, submitted to the Company and the Agent by that Issuing Lender or any Lender, as the case may be, shall, except for manifest error, be final, conclusive and binding for all purposes. (i) Indemnification; Nature of Issuing Lender's Duties. In addition to amounts payable as elsewhere provided in this Section 2.14 (but in the case of Section 2.14(h), only in accordance therewith), without duplication, the Company hereby agrees to protect, indemnify, pay and save each Issuing Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees and expenses) which such Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of the Letters of Credit or (ii) the failure of such Issuing Lender to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority (all such acts or omissions herein called "Governmental Acts"). As between the Company and each Issuing Lender, the Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, such Issuing Lender shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effects of any document submitted by any party in connection with the application for and issuance of such Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any such Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they are in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delays in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of such Issuing Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of any of such Issuing Lender's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Issuing Lender or in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to the Company. Notwithstanding anything to the contrary contained in this Section 2.14(i), the Company shall have no obligation to indemnify any Issuing Lender in respect of any liability incurred by such Issuing Lender arising solely out of the gross negligence or willful misconduct of such Issuing Lender. (j) Computation of Interest. Interest payable pursuant to this Section 2.14 shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. 2.15 Replacement Lender. In the event the Company or the German Borrower, as the case may be, becomes obligated to pay any additional material amounts to any Lender pursuant to Section 2.10, 2.14(h) or 3.5 (which amounts are generally not due or payable to all Lenders generally under such Sections) or such Lender is not able to make Eurodollar Loans or Deutsche Mark Loans pursuant to Section 2.10, as a result of any event or condition described in any of such Sections, then, unless such Lender has theretofore taken steps to remove or cure, and has removed or cured, the conditions creating the cause of such obligation to pay such additional amounts, the Company may designate a substitute lender reasonably acceptable to the Agent (such lender herein called a "Replacement Lender") to purchase such Lender's rights and obligations with respect to its entire Pro Rata Share hereunder, without recourse to or warranty by, or expense to, such Lender for a purchase price equal to the outstanding principal amount payable to such Lender with respect to its Pro Rata Share hereunder, plus any accrued and unpaid interest and accrued and unpaid fees in respect of such Lender's Pro Rata Share and on other terms reasonably satisfactory to the Agent. Upon such purchase by the Replacement Lender and payment of all other amounts owing to the Lender being replaced hereunder, such Lender shall no longer be a party hereto or have any rights or obligations hereunder, and the Replacement Lender shall succeed to the rights and obligations of such Lender with respect to its Pro Rata Share hereunder; provided that the rights of such replaced Lender pursuant to Sections 2.10, 2.14(h), 3.5 and 11.3, and the rights and obligations of such Lender pursuant to Section 11.3, shall survive any substitution described in this Section 2.15. 2.16 Certain Computations. All interest, fees and other amounts accruing under the Existing Credit Agreement on or prior to, or determined in respect of any day accruing on or prior to the day before the Effective Date shall be computed and determined as provided in the Existing Credit Agreement before giving effect to this Agreement. 2.17 Change of Lending Office. (a) No Lender may designate another lending office for any Loans or Letters of Credit which would have the effect of causing any event giving rise to the operation of Section 2.10(a)(ii) or (iii), Section 2.10(c), Section 2.10(d), Section 2.14(h) or Section 3.5 with respect to such Lender without the prior written consent of the Borrowers. (b) Each Lender agrees that on the occurrence of any event giving rise to the operation of Section 2.10(a)(ii) or (iii), Section 2.10(c), Section 2.10(d), Section 2.14(h) or Section 3.5 with respect to such Lender, it will, if requested by the Company, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans or Letters of Credit affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. (c) Nothing in this Section 2.17 shall affect or postpone any of the obligations of the Company or the German Borrower or the right of any Lender provided in Sections 2.10, 2.14(h) or 3.5. 2.18 EURO Provisions. (a) If, as a result of the implementation of the European economic and monetary union ("EMU"), (i) any currency available for borrowing under this Agreement (a "national currency") ceases to be lawful currency of the state issuing the same and is replaced by a European single or common currency (the "Euro") or (ii) any national currency and the Euro are at the same time both recognized by the central bank or comparable governmental authority of the state issuing such currency as lawful currency of such state, then any amount payable hereunder by any party hereto in such national currency shall instead be payable in the Euro and the amount so payable shall be determined by denominating or converting such amount into the Euro at the exchange rate officially fixed by the European Central Bank of the purpose of implementing the EMU, provided that to the extent any EMU legislation provides that an amount denominated either in the Euro or in the applicable national currency can be paid either in Euros or in the applicable national currency, each party to this Agreement shall be entitled to pay or repay such amount in Euros or in the applicable national currency. Prior to the occurrence of the event or events described in clause (i) or (ii) of the preceding sentence, each amount payable hereunder in any such national currency will, except as otherwise provided herein, continue to be payable only in that national currency. (b) If the basis of accrual of interest or fees expressed in this Agreement with respect to the currency of any state that becomes a participating state shall be inconsistent with any convention or practice in the London interbank market for the basis of accrual of interest or fees in respect of the euro, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a participating member state. (c) Except as expressly provided in this Section 2.18 and Section 2.10, this Agreement will be amended to the extent determined by the Agent (acting reasonably and in consultation with the Company) to be necessary to reflect such implementation of the EMU and change in currency and to put the Lenders and the Borrowers in the same position, so far as possible, that they would have been in if such implementation and change in currency had not occurred; provided that any such amendment shall be made in accordance with the customary practices of the market. Except as provided in the foregoing provisions of this Section 2.18, no such implementation or change in currency nor any economic consequences resulting therefrom shall (i) give rise to any right to terminate prematurely, contest, cancel or rescind, the provisions of this Agreement or (ii) discharge, excuse or otherwise affect the performance of any obligations of the German Borrower under this Agreement or any other Loan Document. SECTION 3. REDUCTIONS IN COMMITMENTS; PREPAYMENTS AND PAYMENTS. 3.1 Voluntary Reductions in Total Revolving Loan Commitment. The Company shall have the right, at any time and from time to time upon at least three Business Days' prior written notice to the Agent at its Notice Office (which notice the Agent shall promptly endeavor to notify each Lender), without premium or penalty, to reduce the Total Revolving Loan Commitment in whole or in part in integral multiples of $5,000,000 or integral multiples of $1,000,000 above such amount; provided that (a) all such reductions shall apply proportionately to the Revolving Loan Commitment of each Lender, as the case may be, and (b) any such reduction shall be permanent. 3.2 Voluntary Prepayments. The Company and the German Borrower shall have the right to prepay any Borrowing of any Revolving Loans, at any time, in whole or in part, without premium or penalty, pursuant to this Section 3.2 on the following terms and conditions: (i) the Company or the German Borrower, as the case may be, shall give the Agent at its Payment Office at least three Business Days' prior written notice or telephone notice (confirmed in writing) of its intent to prepay such Revolving Loans, the amount of such prepayment and the specific Borrowing to be prepaid, which notice the Agent shall promptly transmit to each of the Lenders; (ii) each prepayment shall be in an integral multiple of $500,000 and, with respect to the voluntary prepayment of Base Rate Loans, in a minimum principal amount of $1,000,000 (or the Alternate Currency Equivalent thereof in the case of Alternate Currency Loans) or, with respect to the voluntary prepayment of Fixed Rate Loans, in a minimum principal amount of $5,000,000 (or, if less, with respect to any of the Revolving Loans referred to above, the amount then remaining outstanding in respect of such Borrowing); (iii) the Company or the German Borrower, as the case may be, shall not have the right to make a partial prepayment of any Fixed Rate Loan if the principal amount outstanding of the Fixed Rate Loans made as part of the Borrowing to which such prepayment relates after such partial prepayment shall be less than $5,000,000 (or the Alternate Currency Equivalent thereof in the case of Alternate Currency Loans); and (iv) at the time of any prepayment, the Company or the German Borrower, as the case may be, shall pay all interest accrued on the principal amount of such prepayment. 3.3 Mandatory Prepayments. (a) The Company or the German Borrower, as the case may be, shall make prepayments of Revolving Loans to the extent necessary so that the sum of (i) the outstanding principal amount of Revolving Loans (including the Dollar Equivalent thereof in the case of outstanding Alternate Currency Revolving Loans) at any time, after giving effect to the making of all Revolving Loans then requested by all outstanding but unfunded Notices of Borrowing, plus (ii) the then outstanding Letters of Credit Usage, after giving effect to the issuance of all Letters of Credit subject to outstanding Requests for Issuance does not exceed the Total Modified Revolving Commitment then in effect (after giving effect to all reductions made pursuant to Section 3.1). Such prepayment shall be paid within two Business Days of receiving written notice from the Agent of the excess over the Total Modified Revolving Commitment as then in effect. Prepayments in an amount equal to such excess are to be allocated among Dollar Revolving Loans first and then Deutsche Mark Revolving Loans. (b) Any mandatory prepayment shall be applied first to Base Rate Loans to the full extent thereof, second to Fixed CD Rate Loans to the full extent thereof, third to Eurodollar Loans to the full extent thereof and fourth to Deutsche Mark Loans, as determined by the Agent. (c) If, after giving effect to the repayment of all Revolving Loans, the outstanding Letters of Credit Usage exceeds the Total Revolving Loan Commitment then in effect, the Company shall be required to cash collateralize in Dollars outstanding Letters of Credit in an amount such that, after giving effect thereto, the aggregate Letters of Credit Usage not supported by cash collateral is equal to or less than the Total Revolving Loan Commitment then in effect. 3.4 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Agent for the account of the Lender or Lenders entitled thereto no later than 12:00 Noon (local time in the city in which such payments are to be made) on the date when due and shall be made in (i) Dollars in immediately available funds at the appropriate Payment Office of the Agent in respect of Dollar Loans and Letters of Credit if such payment is made in respect of any obligation of the Company under this Agreement except as otherwise provided in the immediately following clause (ii) and (ii) the appropriate Alternate Currency in immediately available funds at the appropriate Payment Office of the Agent if such payment is made in respect of principal of or interest on any Alternate Currency Loan and otherwise in Dollars in immediately available funds at the Payment Office of the Agent described in clause (i) above in respect of any obligation in respect of an Alternate Currency Loan. The principal of and interest on each Alternate Currency Loan shall be paid only in the applicable Alternate Currency. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. 3.5 Net Payments. Except as provided below, all payments made by the Company or the German Borrower hereunder or under any of the Loan Documents will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (but excluding, except as provided below, (a) any withholding taxes or backup withholding taxes imposed by the United States or any political subdivision thereof as a result of the failure of the Lender to comply with the provisions of Section 11.14, (b) any backup withholding tax imposed as a result of a failure to provide proper certification or a notice by the Internal Revenue Service regarding a failure to report all dividends and interest payments and (c) any tax imposed on or measured by the net income of a Lender pursuant to the laws of the jurisdiction (or any political subdivision or taxing authority thereof or therein) in which such Lender is organized or in which the principal office or Applicable Lending Office of such Lender is located and all interest, penalties or similar liabilities with respect thereto) (collectively, "Taxes"). The Company and the German Borrower, as the case may be, shall also reimburse each Lender, upon the written request of such Lender, for taxes imposed on or measured by the net income of such Lender pursuant to the laws of the jurisdiction (or any political subdivision or taxing authority thereof or therein) in which the Lender is organized or in which the principal office or Applicable Lending Office of such Lender is located as such Lender shall determine are payable by such Lender in respect of amounts paid to or on behalf of such Lender pursuant to this Section 3.5. If any Taxes are so levied or imposed, the Company and the German Borrower agree to pay the full amount of such Taxes and such additional amounts as may be necessary so that every payment of all amounts due hereunder or under any of the Loan Documents, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Loan Documents. The Company and the German Borrower will furnish to the Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Company or the German Borrower, as the case may be. The Company and the German Borrower, as the case may be, will indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender. SECTION 4. CONDITIONS TO REVOLVING LOANS AND LETTERS OF CREDIT. 4.1 Conditions to All Revolving Loans. The obligations of the Lenders to make any and all Revolving Loans are subject to the prior or concurrent satisfaction or waiver of each of the following conditions precedent: (a) Required Documentation. The Agent shall have received in accordance with the provisions of Section 2.3 before the applicable Funding Date an originally executed Notice of Borrowing, signed by the chief executive officer, the chief financial officer, the treasurer, assistant treasurer or Authorized Officer of the Company or the German Borrower, as the case may be, requesting a Revolving Loan to be made on any such Funding Date (the furnishing by the Company or the German Borrower of each such Notice of Borrowing shall be deemed to constitute a representation and warranty of the Company or the German Borrower, as the case may be, to the effect that the conditions set forth in Section 4.1(b) are satisfied as of the date of delivery and will be satisfied on the relevant Funding Date). (b) As of that Funding Date: (i) Representations and Warranties. The representations and warranties contained herein shall be true, correct and accurate in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except that with respect to Revolving Loans made after the Effective Date the representations and warranties need not be true and correct to the extent that changes in the facts and conditions on which such representations and warranties are based are required or permitted under this Agreement or such changes arise out of events not prohibited by the covenants set forth in Sections 5 and 6. (ii) No Default. No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing or the application of the proceeds thereof that would constitute (a) an Event of Default, or (b) a Default. (iii) Agreements and Conditions. The Company and the German Borrower shall have performed in all material respects all agreements and satisfied all conditions that this Agreement and each other Loan Document provides shall be performed by each of them on or before such Funding Date. (iv) Compliance with Laws. No order, judgment or decree of any court, arbitrator or Governmental Authority shall purport to enjoin or restrain any Lender from making that Revolving Loan. The making of the Revolving Loans requested on such Funding Date shall not violate Regulation G, T, U, or X of the Federal Reserve Board. (c) As of the first Funding Date after the Effective Date there shall not exist any judgment order, injunction, decree or other restraint or a hearing seeking injunctive or other relief pending or noticed with respect to the making of the Revolving Loans or the issuance of any Notes or Letters of Credit or the other transactions contemplated by any of the Loan Documents. 4.2 Conditions to All Letters of Credit. The right of the Company to obtain the issuance of any Letter of Credit that the relevant Issuing Lender determines to issue in its sole discretion hereunder is subject to prior or concurrent satisfaction of all of the following conditions: (a) Required Documentation. On or prior to the date of issuance of a Letter of Credit, the Agent shall have received in accordance with the provisions of Section 2.14(b) a Request for Issuance with respect to such Letter of Credit (the furnishing by the Company of each such Request for Issuance shall be deemed to constitute a representation and warranty of the Company to the effect that the conditions set forth in Section 4.1(b) are satisfied as of the date of delivery and will be satisfied on the relevant date of issuance), all other information specified in Section 2.14(b), and such other documents as the Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. (b) Conditions. On the date of issuance of each such Letter of Credit, all conditions precedent described in Section 4.1(b) shall be satisfied to the same extent as though the issuance of such Letter of Credit were the making of a Revolving Loan and the date of issuance of such Letter of Credit were a Funding Date. On or prior to the date of issuance of the initial Letter of Credit, unless previously satisfied in connection with the making of the initial Revolving Loan, each of the conditions set forth in Section 4.1 shall have been satisfied or waived. SECTION 5. AFFIRMATIVE COVENANTS. The Company covenants and agrees that, so long as any of the Commitments hereunder shall be in effect and until payment in full of all of the Revolving Loans and unreimbursed drawings, if any, under any Letters of Credit and the cancellation or expiration of all outstanding Letters of Credit, the Company agrees that it will perform all covenants in this Section 5: 5.1 Furnish Financial Statements and Information, etc. The Company shall furnish to each Lender: (a) within 90 days after the close of each of the fiscal years of the Company, audit reports of independent certified public accountants, including consolidated balance sheets of the Company and its Consolidated Subsidiaries as of the end of such period and related consolidated statements of earnings and statements of cash flow, each in comparative form for such year and the preceding year; (b) within 60 days after the close of each of the first three quarters of the fiscal years of the Company, similar unaudited consolidated balance sheets of the Company and its Consolidated Subsidiaries as of the last day of such quarter, and related consolidated statements of earnings and statements of cash flows for such quarter, likewise in reasonable detail and in comparative form for the corresponding quarterly period in the preceding fiscal year, all of which shall be prepared, and certified, by an Authorized Officer of the Company; (c) as soon as available, copies of all proxy statements and other information and reports, if any, filed by the Company with the Securities and Exchange Commission (or any governmental agency substituted therefor); (d) within 60 days after the close of each of the first three fiscal quarters of the Company, and within 90 days after the close of the fourth fiscal quarter of the Company, of each of the fiscal years of the Company, (i) a statement, certified by an Authorized Officer of the Company to the effect that a review of the activities of the Company and all Subsidiaries of the Company during the period covered by such statement has been made and that such officer obtained no knowledge of any Default or Event of Default or, if any Default or Event of Default does exist, specifying the nature and extent thereof and (ii) a Compliance Certificate demonstrating in reasonable detail compliance with the restrictions set forth in Sections 5.6, 5.11, 6.1(i) and (l), 6.3(b), 6.4, 6.8(b)(ii) and 6.11(vii); and (e) such other information as any Lender may from time to time reasonably request; all financial statements of the Company furnished pursuant to this Section 5.1 shall be prepared on a consolidated basis in accordance with GAAP. 5.2 Inspection. The Company shall permit, and cause each of its Significant Subsidiaries to permit, the duly authorized representatives of any Lender at all reasonable times to examine the books and records of the Company and any of its Significant Subsidiaries, and take memoranda and extracts therefrom. 5.3 Taxes, Charges, etc. The Company shall duly pay and discharge, or cause to be paid and discharged, when due, all taxes, assessments and other governmental charges imposed upon it or any of its Subsidiaries and its and their properties or assets, or any part thereof or upon the income therefrom, as well as all claims (including, without limitation, claims for labor, materials or supplies) which if unpaid might by law become a lien or charge upon any property of the Company or any of its Significant Subsidiaries, except each of such items as are being appropriately contested in good faith by appropriate proceedings promptly instituted and diligently conducted and as to which such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor by the Company or any such Subsidiary. 5.4 Corporate Existence, etc. Except as permitted by Section 6.2, the Company shall maintain, and cause its Significant Subsidiaries to maintain, their respective corporate existence and their respective material rights, franchises, licenses and patents, if any, and cause each of its Significant Subsidiaries to comply in all material respects with all valid and applicable statutes, rules and regulations. 5.5 Notice of Default. The Company shall immediately, upon the chief executive officer, chief financial officer, treasurer, controller or general counsel of the Company becoming aware of the occurrence of any Default or Event of Default, give oral notice, promptly confirmed in writing, to each Lender of the occurrence of such Default or Event of Default. 5.6 Consolidated Net Worth. The Company shall maintain, at all times, Consolidated Net Worth of at least $400,000,000 plus an amount (if positive) equal to 50% of Consolidated Net Income (excluding net income of any person acquired by the Company or any of its Subsidiaries prior to such acquisition) of the Company and its Subsidiaries for each full fiscal quarter occurring during the period commencing December 28, 1997 and ending on the date of determination. 5.7 ERISA. As soon as possible and, in any event, within 10 days after the Company or any ERISA Affiliate knows or has reason to know of any of the following, the Company shall deliver to each of the Lenders a certificate of an Authorized Officer of the Company setting forth details as to such occurrence and such action, if any, which the Company or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Company, the ERISA Affiliate, the PBGC, a Plan participant or the plan administrator with respect thereto: that a Reportable Event has occurred; that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a Multiemployer Plan has been or will be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the Code; that proceedings have been or are reasonably likely to be instituted to terminate a Plan under Section 4041(c) or Section 4042 of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a material delinquent contribution to a Multiemployer Plan; the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in a loss of tax- exempt status of the trust of which such Plan is a part if the Company or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; or that the Company or any ERISA Affiliate will or is reasonably likely to incur any material liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan or Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA. 5.8 Insurance. The Company shall maintain or cause to be maintained, and cause each of its Subsidiaries to maintain or cause to be maintained, with financially sound and reputable insurance companies, insurance with respect to its properties and business (including, without limitation, all buildings, machinery, plants, equipment, fixtures and inventories of raw materials, goods in process and completed goods) against loss or damage of the kind customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations; provided, however, that the Company and any of its Subsidiaries may maintain self-insurance in connection with the above insurance requirements to the extent, and only to the extent, reasonably prudent and not to exceed at any time 25% of the Fair Market Value of the Company's assets on a consolidated basis. 5.9 Maintenance of Property. The Company shall in all material respects maintain, preserve and keep, and cause each of its Significant Subsidiaries to maintain, preserve and keep, all property material to their respective businesses in good repair, working order and condition (ordinary wear and tear excepted) and from time to time make all needful and proper repairs, renewals, replacements, additions, betterments and improvements thereto in accordance with industry standards. 5.10 Compliance with Laws, etc. The Company shall comply, and cause each of its Subsidiaries to comply, with all applicable laws, statutes, rules, permits, licenses, franchises, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, including, without limitation, Environmental Laws, in respect of the conduct of its business and the use, ownership or occupancy of its property, except such noncompliances as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.11 Consolidated Total Indebtedness to Consolidated EBITDA. The Company shall maintain, at all times during the respective periods indicated below, a ratio of Consolidated Total Indebtedness to Consolidated EBITDA not to exceed the respective ratio indicated during such period: Period Ratio 12/28/97 - 12/31/99 3.75 to 1.00 01/01/00 - 12/31/00 3.00 to 1.00 01/01/2001 and thereafter 2.50 to 1.00 5.12 Environmental Events. The Company shall promptly give notice to the Lenders upon becoming aware of any of the following events which could reasonably be expected to result in a material liability to the Company or any of its Subsidiaries: (a) any violation of any Environmental Law, (b) any inquiry, proceeding, investigation or other action relating to any Environmental Law, including a request for information or a notice of any actual or purported potential environmental liability from any Person, and (c) the discovery of the release of any Hazardous Materials at, on, under or from any of the Company's or its Subsidiaries' real property or any facility or equipment thereat in excess of reportable or allowable standards or levels under any Environmental Law, or in a manner and/or amount reasonably likely to result in material liability under any Environmental Law. In the event of the presence of any Hazardous Material on any of the Company's or its Subsidiaries' real property which is in violation of or which results in liability under any Environmental Law, or any event, condition, circumstance, thing or fact which results in liability under any Environmental Law, the Company shall expeditiously take all reasonable steps to correct any such violation or respond to such circumstances, conditions or things which would give rise to such liability, in compliance with Environmental Laws (it being understood that such steps shall not be required to be taken while the Company is contesting, in good faith before the appropriate Governmental Authority, its obligation to take such steps), and reasonably mitigate attendant health and environmental risks. 5.13 Year 2000. The Borrowers will ensure that their Information Systems and Equipment are at all times after September 30, 1999 Year 2000 Compliant, except insofar as the failure to do so will not result in a Material Adverse Effect, and shall notify the Agent promptly upon detecting any such failure of the Information Systems and Equipment to be Year 2000 Compliant if such failure to be Year 2000 Compliant would result in a Material Adverse Effect. In addition, the Borrowers shall provide the Agent with such information about their year 2000 computer readiness (including, without limitation, information as to contingency plans, budgets and testing results) as the Agent shall reasonably request. SECTION 6. NEGATIVE COVENANTS. The Company covenants and agrees that, so long as any of the Commitments hereunder shall be in effect and until payment in full of all of the Revolving Loans and unreimbursed drawings, if any, under any Letters of Credit and the cancellation or expiration of all outstanding Letters of Credit, the Company agrees that it will perform all covenants in this Section 6: 6.1 Liens. The Company shall not, and shall not permit any of its Domestic Subsidiaries or the German Borrower or any of the German Borrower's Subsidiaries to, contract, create, incur, assume or suffer to exist any Lien upon or with respect to any of its or their assets or property (real or personal, tangible or intangible) now or hereafter owned, or of or upon the income or profits thereof, except: (a) Liens existing on the Effective Date and any extension, renewal or replacement thereof; provided, however that no such Lien shall be permitted under this clause (a) if such extension, renewal or replacement extends to any assets or property other than the assets or property originally pledged or increases the indebtedness secured thereby; (b) deposits or pledges in connection with or to secure payment of worker's compensation, unemployment insurance or in connection with the good faith contest of any tax lien; (c) any Subsidiary may create Liens in favor of the Company or another Subsidiary to secure borrowings from the Company or another Subsidiary; (d) Liens securing the performance of any contract, undertaking or obligation or Liens for partial, progress, advance or other payments pursuant to any contract or provision of any statute, in any such case not incurred, created or assumed directly or indirectly in connection with the borrowing of money, the obtaining of advances or credits or the securing of any indebtedness (including rental obligations required to be capitalized) of, or guaranteed by, the Company which by its terms or at the option of the debtor may mature more than 12 months from the date the Lien is granted, and if made and continuing in the ordinary course of business; (e) the Company or any of its Subsidiaries may acquire property subject to a Lien (whether or not assumed) or, in connection with the acquisition of property hereafter acquired, may, within 180 days of the date such property is acquired, subject such property to a Lien, or may assume indebtedness secured by a Lien covering the same, in each case up to an amount not to exceed the lesser of (i) 100% of the cost thereof to the Company or such Subsidiary and (ii) the fair value thereof, and the Company or any of its Subsidiaries may acquire a Subsidiary which, at the time of such acquisition, has a Lien existing on its property; provided that the Indebtedness secured by such Lien does not exceed the fair value of the assets subject to such Lien; (f) encumbrances consisting of zoning restrictions, easements, rights of way, survey exceptions, leases and subleases and other similar restrictions on the use of real property, or minor irregularities in titles thereto, which do not materially impair the use of such property in the operation of the business of the Company or any of its Subsidiaries; (g) the Company and any of its Subsidiaries may incur (i) Liens arising under or in connection with the Receivables Purchase Agreement; provided that such Liens do not extend to any assets beyond those contemplated by the Receivables Purchase Agreement or (ii) similar Liens incurred in similar financing arrangements (to the extent otherwise permitted hereunder); (h) the Company and any of its Subsidiaries may incur Liens in connection with Sale-leaseback transactions made in compliance with Section 6.8; provided that such Liens do not extend to any assets other than the assets subject to the applicable Sale-leaseback transaction; (i) the Company and its Subsidiaries may incur Liens (a) in connection with the issuance of letters of credit (and reimbursement obligations relating thereto) other than the Letters of Credit; provided that the aggregate face amount of all such letters of credit at any one time outstanding shall not exceed $15,000,000; and provided, further, that the value of the property subject to Liens permitted by this clause (a) shall not exceed the aggregate face amount of letters of credit then outstanding and (b) on Notes Receivable incurred in connection with the sale or financing of Notes Receivable; provided, however, that at no time shall each of the U.S. and non-U.S. purchasers of such Notes Receivable have recourse to the Company and its Subsidiaries in respect of the amounts outstanding on such Notes Receivable in an amount in excess of $25,000,000 in the aggregate as provided for in Section 6.2(iv); (j) Liens arising out of Capital Leases or Operating Leases; (k) Liens on property or assets acquired pursuant to a Permitted Acquisition; provided that (i) any Domestic Subsidiary Indebtedness that is secured by such Liens is permitted to exist under Section 6.3(a) and (ii) such Liens are not incurred in connection with or in contemplation or anticipation of such Permitted Acquisition and do not attach to any other asset of the Company or any of its Subsidiaries; and (l) other encumbrances to secure Indebtedness in the aggregate for the Company and all of its Subsidiaries not in excess of 5% of the Company's Consolidated Net Worth at any time. 6.2 Restrictions on Fundamental Changes. Neither the Company nor any of its Significant Subsidiaries shall wind up, liquidate or dissolve its respective affairs or enter into any transaction or series of related transactions of merger or consolidation or convey, sell, lease or otherwise dispose of its property or assets in one transaction or a series of related transactions in an aggregate amount equal to or greater than 10% of the total consolidated assets of the Company (whether now owned or hereafter acquired), except that (i) any Subsidiary of the Company may merge into the Company; provided that the Company shall at all times be the continuing corporation; (ii) any Subsidiary may merge into or consolidate with another wholly-owned Subsidiary of the Company; (iii) the Company may merge or consolidate with any Person; provided that (a) the Company shall at all times be the continuing or surviving corporation and (b) no Default or Event of Default shall have occurred and be continuing or shall occur as a result of such merger or consolidation; and (iv) the Company may sell Notes Receivable; provided that at no time shall the purchasers of such Notes Receivable have recourse to the Company in respect of amounts outstanding on such Notes Receivable in an amount in excess of $25,000,000 in the aggregate with respect to U.S. purchasers and $25,000,000 in the aggregate with respect to non-U.S. purchasers. Nothing set forth in this Section 6.2 shall prohibit the Company from reincorporating itself under the laws of another state (by way of merger, dissolution or otherwise); provided that no Default or Event of Default shall have occurred and be continuing or shall occur as a result of such reincorporation and provided, further, that such reincorporation would not reasonably be expected to have a Material Adverse Effect. 6.3 Domestic Subsidiary Indebtedness. The Company shall not permit any of its Domestic Subsidiaries to contract, create, incur, assume or suffer to exist any Indebtedness (which shall be determined for the purpose of this Section 6.3 solely in accordance with clauses (i) and (v) of the definition of the term "Indebtedness"), except: (a) Indebtedness of a Domestic Subsidiary acquired as a result of a Permitted Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition of an asset securing such Indebtedness); provided that (i) such Indebtedness was not incurred in connection with, or in anticipation or contemplation of, such Permitted Acquisition, (ii) at the time of such Permitted Acquisition such Indebtedness does not exceed 25% of the total then Fair Market Value of the assets of the Subsidiary so acquired, or of the asset so acquired, as the case may be, (iii) so long as, before and after giving effect to such Permitted Acquisition, no Default or Event of Default shall have occurred or would result therefrom and (iv) such Indebtedness is not recourse to any assets of the Company or its Subsidiaries other than the Subsidiary and assets so acquired; and (b) additional Indebtedness of the Company's Domestic Subsidiaries not otherwise permitted hereunder not exceeding $25,000,000 in aggregate principal amount at any time outstanding; provided such Domestic Subsidiary Indebtedness shall not prohibit or restrict such Domestic Subsidiary's ability to pay dividends or make any other distributions on or in respect of its capital stock to the Company. 6.4 Fixed Charge Coverage Ratio. The Company shall not permit at any time the ratio of (i) (a) Consolidated EBITDA of the Company minus (b) Consolidated Capital Expenditures minus (c) any amounts expended by the Company and its Consolidated Subsidiaries to redeem or purchase indebtedness (including current maturities of long-term indebtedness but excluding in all cases redemptions or repurchases funded from other sources such as permitted refinancings or the issuance of Securities) (in the case of each of clauses (b) and (c) only expenditures actually made and expenses charged against earnings when determining Consolidated EBITDA during the applicable four-quarter period shall be included) to (ii) Fixed Charges of the Company and its Consolidated Subsidiaries to be less than 1.50 to 1.00. 6.5 ERISA. The Company shall not, and shall not permit any of its ERISA Affiliates to: (i) engage in any transaction in connection with which the Company or any of its ERISA Affiliates could be reasonably expected to be subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code in excess of $500,000; (ii) fail to make full payment when due of all amounts which, under the provisions of any Plan or under ERISA and the Code, the Company or any of its ERISA Affiliates is required to pay as contributions thereto, except where the failure to make such payment would not give rise to a lien under Section 412 of the Code or Section 302 of ERISA; or (iii) fail to make any payments to any Multiemployer Plan that the Company or any of its ERISA Affiliates is required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto, in excess of $500,000. 6.6 Sale or Discount of Notes Receivables. The Company shall not and shall not permit any of its Subsidiaries to sell, with or without recourse, or discount or otherwise sell for less than the Fair Market Value thereof, Notes Receivable except in the ordinary course of business in accordance with past collection practices of the Company and its Subsidiaries; provided, however, that the Company and its Subsidiaries shall be permitted to, directly or indirectly, sell Notes Receivable as contemplated by the Receivables Purchase Agreement. 6.7 Amendments or Waivers of Charter or By-laws or of Certain Documents Relating to Certain Indebtedness. The Company shall not make or agree to make any (i) amendment to or other change to its certificate of incorporation or by-laws or (ii) amendment to, or waiver of any of its rights under, any of the Certain Existing Indebtedness, the Receivables Purchase Agreement or the Sale-leaseback Agreement, in each case, without obtaining the prior written consent of the Requisite Lenders to such amendment or waiver if such amendment or other change would reasonably be expected to (a) have a material adverse effect on the Lenders or on the Company's ability to perform any of its obligations under any of the Loan Documents or (b) materially increase the existing, or add a material amount of new, financial or other material obligations of the Company. 6.8 Sale-leaseback Transactions. The Company shall not and shall not permit any of its Subsidiaries to become or remain liable as a lessee, guarantor or other surety with respect to any Capital Lease of the Company or any of its Subsidiaries of any property (whether real or personal or mixed), whether now owned or hereafter acquired, (a) which the Company or such Subsidiary, as the case may be, has sold or transferred after the Effective Date or is to sell or transfer after the Effective Date to any other Person other than to the Company or a wholly-owned Subsidiary of the Company, as the case may be, or (b) which the Company or such Subsidiary, as the case may be, intends to use for substantially the same purpose as any other property which after the Effective Date has been or is to be sold or transferred by the Company or a wholly-owned Subsidiary of Company, as the case may be, to any Person in connection with such lease; provided that the Company and its Subsidiaries may engage in (i) the Sale-leaseback transactions contemplated by the Sale-leaseback Agreement and (ii) Sale-leaseback transactions with respect to assets acquired not more than 270 days prior to the consummation of such transactions, but only to the extent in the case of clause (ii) that the proceeds from such Sale-leaseback transactions (net of taxes and expenses) shall not exceed $25,000,000 in the aggregate. 6.9 No Further Negative Pledges. Except (a) with respect to specific property encumbered to secure payment of particular Indebtedness and (b) as otherwise provided in Section 6.1, the Company shall not and shall not permit any of its Subsidiaries to enter into or assume any agreement prohibiting the creation or assumption of any Lien upon its respective properties or assets, whether now owned or hereafter acquired. 6.10 Refinancing Indebtedness. The Company shall not and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay or make, or set apart any sum for any Restricted Payments with respect to Certain Existing Indebtedness out of the proceeds of any Indebtedness ("Refinancing Indebtedness") unless such Refinancing Indebtedness: (i) has a Stated Maturity not less than the Stated Maturity of the Certain Existing Indebtedness to be refinanced, (ii) has an Average Life not less than the Average Life of the Certain Existing Indebtedness to be refinanced, (iii) has an aggregate principal amount not less than the aggregate principal amount of the Certain Existing Indebtedness to be refinanced and (iv) contains terms no more materially adverse to the Company than the terms of the certain Existing Indebtedness to be refinanced. 6.11 Investments. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make any Investment in any Person except: (i) the Company and its Subsidiaries may make Investments in cash and Cash Equivalents; provided that any such Investments, including in cash, other than Investments denominated in Dollars, shall only be made to the extent necessary to fund the local operations of the Foreign Subsidiaries; (ii) Investments in existence on the Effective Date which to the extent exceeding $250,000 on such date are described in Schedule 6.11 annexed hereto; (iii) the Company may make Investments in any Person that is a wholly-owned Subsidiary and any of the Company's Subsidiaries may make Investments in the Company or any other Subsidiary of the Company; (iv) the Company may make Investments made by or in respect of any employee benefit plan or any other employee benefits (including, without limitation, life insurance) granted in the ordinary course of business; (v) the Company and its wholly-owned Subsidiaries may make Permitted Acquisitions; (vi) the Company may purchase shares of its outstanding common stock through open market purchases or otherwise; and (vii) the Company and its Subsidiaries may make other Investments in an amount not to exceed $25,000,000 outstanding at any one time. 6.12 Sale, Transfer, etc. of Assets. The Company shall not and shall not permit any of its Domestic Subsidiaries to sell, convey, transfer or otherwise dispose of any material assets to any Foreign Subsidiary of the Company except in the ordinary course of business in accordance with past business practices of the Company and its Subsidiaries or as otherwise provided under this Agreement. SECTION 7. EVENTS OF DEFAULT. If any of the following conditions or events ("Events of Default") shall occur and be continuing: 7.1 Failure To Make Payments When Due. (i) Failure to pay any installment of principal of any Revolving Loan when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise; or failure to reimburse an Issuing Lender for any drawing under any Letter of Credit pursuant to Section 2.14 or (ii) failure to pay within five (5) days after the due date any interest on any Revolving Loan or interest on any reimbursement obligation with respect to any Letter of Credit or any Fees or other amounts owing under this Agreement or any of the other Loan Documents; or 7.2 Breach of Certain Covenants. Failure to observe or perform any covenant or condition required to be kept or performed by the Company pursuant to (i) Sections 5.4, 5.5, 5.6, 5.11 or 6 herein or (ii) Section 10 and such failure continues for a period of five Business Days after receipt of notice by the Company from the Agent, of such failure; or 7.3 Breach of Warranty. Any representation or warranty made herein, in any other Loan Document (as defined herein and in the Existing Credit Agreement) or any writing delivered pursuant hereto or thereto or in connection herewith or therewith shall prove to have been incorrect in any material respect when made; or 7.4 Default in Other Agreements. An event of default shall occur under the provisions of any instrument evidencing outstanding indebtedness for borrowed money in a principal amount in excess of $5,000,000, either direct or indirect, of the Company or any of its Subsidiaries the holder or holders of which are Persons other than the Company or any of its Subsidiaries, but only in such cases where the effect of such event of default is to permit the holder or holders of such instrument, or a trustee or agent on behalf of such holder or holders, to cause the outstanding indebtedness evidenced by such instrument to become due prior to its stated maturity; or any obligation of the Company or any Subsidiary for the payment of such indebtedness shall become or be declared to be due and payable prior to its stated maturity, or shall not be paid when due; or 7.5 Judgments. A judgment or judgments for the payment of money in excess of the sum of $5,000,000 in the aggregate shall be entered against the Company or any of its Subsidiaries, and such judgment or judgments shall remain unsatisfied or unstayed for a period of 30 days; or 7.6 Other Defaults Under Agreement or Loan Documents. The Company or the German Borrower shall default in any material respect in the performance of or compliance with any term contained in this Agreement or the other Loan Documents other than those referred to above in Section 7.1 or 7.2 and such default shall not have been remedied or waived within 30 days of such default; or 7.7 Bankruptcy; Appointment of Receiver, Dissolution, etc. The Company or any of its Significant Subsidiaries shall commence a voluntary case concerning itself under the Bankruptcy Code; or an involuntary case is commenced against the Company or any of its Significant Subsidiaries, and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Company or any of its Significant Subsidiaries; or the Company or any of its Significant Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any of its Significant Subsidiaries; or there is commenced against the Company or any of its Significant Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or the Company or any of its Significant Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any of its Significant Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Company or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Company or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 7.8 Unfunded ERISA Liabilities. Any Plan shall fail to maintain the minimum funding standard required for any plan year or part thereof or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code; any Plan having an Unfunded Current Liability in excess of $5,000,000 is, shall have been or is reasonably likely to be terminated or the subject of termination proceedings under ERISA; or the Company or any ERISA Affiliate has incurred or is likely to incur a liability to or on account of a Plan or a Multiemployer Plan under Section 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA, and there shall result from any such event or events the imposition of a Lien upon the assets of the Company or any ERISA Affiliate, the granting of a security interest by the Company or an ERISA Affiliate, or a liability or a material risk of incurring a liability to the PBGC or the Internal Revenue Service or a Plan or a penalty under Section 4971 of the Code, which liability, in the opinion of the Requisite Lenders, will have a Material Adverse Effect; or 7.9 Change in Control. Any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) (but excluding any Excluded Person (as defined in the next sentence)) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities Exchange Commission under such Act) of issued and outstanding shares of capital stock of the Company entitled (without regard to the occurrence of any contingency) to vote for the election of members of the board of directors of the Company having a then present right to exercise 20% or more of the voting power for the election of members of the board of directors of the Company attached to all such outstanding shares of capital stock of the Company. For purposes of this Section, "Excluded Persons" shall mean (i) any employee stock ownership plan or other employee benefit plan and (ii) each officer and director of the Company as of the date of this Agreement and members of the extended families of such officers and directors; THEN (i) upon the occurrence of any Event of Default described in the foregoing subsection 7.7, each of (x) the unpaid principal amount of and accrued interest on the Revolving Loans and (y) an amount equal to the maximum amount which may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts of other documents required to draw under such Letter of Credit) shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Company and the German Borrower, and the obligation of each Lender to make any Revolving Loan and the obligation of any Issuing Lender to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence of any other Event of Default, the Requisite Lenders may, by written notice to the Company and the German Borrower, declare all of the Revolving Loans and an amount equal to the amounts described in clauses (x) and (y) above to be, and the same shall forthwith become, due and payable, together with accrued interest thereon, and the obligation of each Lender to make any Revolving Loan and the obligation of any Issuing Lender to issue any Letter of Credit hereunder shall thereupon terminate; provided that the foregoing shall not affect in any way the obligations of the Lenders to purchase from the Issuing Lenders participations in the unreimbursed amount of any drawings under any Letters of Credit as provided in Section 2.14(e). So long as any Letter of Credit shall remain outstanding, any amounts described in clause (y) above with respect to any such Letter of Credit, when received by the Agent, shall be held by the Agent as cash collateral for the obligation of the Company to reimburse the respective Issuing Lender in the event of any drawing under such Letter of Credit, and upon any drawing under any outstanding Letter of Credit in respect of which the Agent holds any amounts described in clause (y) above, the Agent shall apply such amounts held by the Agent to reimburse the Issuing Lender for the amount of such drawing. In the event any Letter of Credit in respect of which the Agent holds any amounts described in clause (y) above is cancelled or expires or in the event of any reduction in the maximum amount available at any time for drawing under such Letter of Credit ("Maximum Available Amount"), the Agent shall apply the amount then so held designated to reimburse the Issuing Lender for any drawings under such Letter of Credit less the Maximum Available Amount immediately after such cancellation, expiration or reduction, if any, first to the cash collateralization of any outstanding Letter of Credit in respect of which the Company has failed to pay all or a portion of the amounts described in clause (y) above, as the case may be, second, to the payment in full of the outstanding Obligations, and third, to the extent of any excess, to the Company. Nevertheless, if at any time within 60 days after acceleration of the maturity of any Revolving Loan the Company or the German Borrower shall pay all arrears of interest and all payments on account of the principal which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement or the Notes) and all Events of Default and Defaults (other than non- payment of principal of and accrued interest on the Revolving Loans and the Notes, and payments of amounts referred to in clause (y) above, in each case due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 11.2, then the Requisite Lenders by written notice to the Company and the German Borrower may rescind and annul the acceleration and its consequences; and the Agent shall return to the Company any amounts held by the Agent as cash collateral in respect of amounts described in clause (y) above; but such action shall not affect any subsequent Event of Default or Default or impair any right consequent thereon. SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to induce the Lenders to enter into this Agreement and to make the Revolving Loans and to issue the Letters of Credit provided for herein, the Company makes the following representations and warranties to, and covenants with, the Lenders as of the Effective Date, all of which shall survive the execution and delivery of this Agreement, the making of the Revolving Loans and the issuance of Letters of Credit: 8.1 Financial Information; Undisclosed Liabilities. The Company has furnished to each Lender (i) a copy of its Annual Report on Form 10-K for the fiscal year ended December 27, 1997 and a copy of its Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 1998, June 30, 1998 and September 30, 1998 and (ii) its audited consolidated balance sheet as at December 27, 1997 and its unaudited consolidated balance sheet as at September 30, 1998, and the related consolidated statement of earnings and statement of cash flows of the Company and its Consolidated Subsidiaries, if any, for the fiscal year or nine months period, as the case may be, then ended, accompanied in the case of the audited consolidated balance sheet as at December 27, 1997 by the report on examination thereof by its independent auditors; said statements fairly present the consolidated financial condition of the Company and its Consolidated Subsidiaries and the results of their operations for the respective periods then ended. 8.2 Adverse Changes. Except as set forth in the documents furnished pursuant to Section 8.1 herein, the net changes in circumstances affecting the Company and/or the German Borrower have not resulted in a cumulative effect since December 27, 1997 that would reasonably be expected to result in a Material Adverse Effect. 8.3 Litigation. There is no action, suit, proceeding, litigation or governmental investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries which, in the reasonable opinion of the Company, is expected to have a Material Adverse Effect. 8.4 Authorization, etc. (a) Authorization. The execution, delivery and performance of this Agreement, the issuance, delivery and payment of the Notes, the issuance of the Letters of Credit, and the other transactions contemplated hereby or thereby or related hereto or thereto have each been duly authorized by all necessary corporate action by the Company and the German Borrower, as the case may be. (b) No Conflict. The execution, delivery and performance by the Company and the German Borrower of this Agreement, the issuance, delivery and performance of the Notes by the Company and the German Borrower, the issuance of the Letters of Credit, and the other transactions contemplated hereby or thereby or related hereto or thereto do not and will not (i) violate (x) any provision of law applicable to the Company or the German Borrower, or (y) any order, judgment or decree of any court or other agency of government binding, or purporting to be binding, on the Company or the German Borrower or being applicable to, or purporting to be applicable to, any of its assets, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of either the Company or the German Borrower, (iii) result in or require the creation or imposition of any Lien upon any of their respective properties or assets, or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of either the Company or the German Borrower, except for (x) such approvals or consents that the absence of which, singly or in the aggregate, would not have a Material Adverse Effect or (y) such violations (other than any violation of the Certificate of Incorporation or By-laws of the Company), conflicts, breaches, Liens and defaults that would not have, singly or in the aggregate, a Material Adverse Effect. (c) Government Consents. The execution, delivery and performance by the Company and the German Borrower of this Agreement, the application of the proceeds of the Loans, the issuance, delivery and performance by the Company and the German Borrower of the Notes, the issuance of the Letters of Credit and the other transactions contemplated hereby or thereby or related hereto or thereto do not and will not require any registration with, consent or approval of, any Governmental Authority. (d) Binding Obligation. This Agreement is, and the Notes, when executed and delivered by the Company and the German Borrower will be, the legally valid and binding obligations of each of them, as the case may be, enforceable against each of them, as the case may be, in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. 8.5 Corporate Status. The Company and its Subsidiaries and the German Borrower are each a duly organized and validly existing corporation in good standing under the laws of the jurisdiction where they are incorporated and are licensed or qualified as a foreign corporation and in good standing in all jurisdictions where the nature of its business or the ownership or leasing of property makes such licensing or qualification necessary, except where the absence of any such license, qualification or good standing does not result in a Material Adverse Effect. 8.6 Title; Insurance. (a) The Company and its Subsidiaries (including the German Borrower) have good title to their respective properties, subject only to the Liens permitted by Section 6.1 hereof. (b) Schedule 8.6(b) hereto sets forth in reasonable detail the insurance program of the Company as of the Effective Date, including limit, terms, conditions and deductibles and types of insurance carried by the Company. All insurance policies are outstanding and in force, and all premiums due with respect to such policies have been paid. 8.7 Taxes, etc. All material taxes, assessments, fees and other governmental charges (other than those presently payable without penalty or interest) upon the Company and any of its Subsidiaries (including the German Borrower) or upon any property of any thereof, which are due and payable, have been paid. Except as set forth in Schedule 8.3 hereto, no material claims are being asserted in writing (in a Form 5701, 30 day letter or other official written communications by the relevant governmental entity) with respect to any past due taxes, assessments, fees or other governmental charges against the Company or any of its Subsidiaries (including the German Borrower) (other than any such claims which are being contested in good faith and for which an adequate reserve, in the reasonable judgment of the Company, has been established on the books of the Company and its Consolidated Subsidiaries). 8.8 ERISA. Each Plan is in substantial compliance with ERISA and the Code; no Multiemployer Plan is insolvent (within the meaning of Section 4245 of ERISA) or in reorganization (under the meaning of Section 4241 of ERISA); the present value of the accrued benefits under each Plan did not as of the date of the most recently completed annual actuarial valuation applicable thereto, exceed by more than $500,000 the fair market value of the assets of such Plan, determined in accordance with Section 412 of the Code; no Plan has an accumulated or waived funding deficiency or permitted decreases in its funding standard account within the meaning of Section 412 of the Code; neither the Company nor any ERISA Affiliate has incurred any material liability to or on account of a Plan or a Multiemployer Plan pursuant to Section 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or expects to incur any material liability under any of the foregoing Sections on account of the termination of participation in or contributions to any such Plan or Multiemployer Plan; no proceedings have been instituted to terminate any Plan under Section 4041(c) or Section 4042 of ERISA; no condition exists that presents a material risk to the Company or any ERISA Affiliate of incurring a liability to or on account of a Plan or Multiemployer Plan pursuant to the foregoing provisions of ERISA and the Code; no lien imposed under the Code or ERISA on the assets of the Company or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Company and its ERISA Affiliates may terminate contributions to any other employee benefit plans maintained by them without incurring any material liability to any person interested therein, other than liability for benefits then due and payable. 8.9 Margin Regulations. The proceeds of the Revolving Loans made to the Company and the German Borrower may be used for general corporate purposes, which may include the purchasing or carrying of Margin Stock (provided that the Company and the German Borrower give each of the Lenders prior written or telephonic notice confirmed in writing of such intended use); and no part of the proceeds of any such Revolving Loans to the Company and the German Borrower will be used to purchase or carry any Margin Stock in violation of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. Neither the Company nor the German Borrower is engaged, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock (within the meaning of Regulation U of said Board of Governors). As of the date of this Agreement, after utilizing the full amount of the Total Revolving Loan Commitment to purchase Margin Stock on such date, no more than 25% of the value of the assets of the Company and its Subsidiaries that are subject to the provisions of Section 6.1 or Section 6.9 or the German Borrower and its Subsidiaries that are so subject would constitute Margin Stock. 8.10 Disclosure. The representations, warranties and disclosures contained in this Agreement, or any other document, certificate or written statement furnished to the Lenders by or on behalf of any such Person for use in connection with the transactions contemplated by this Agreement and in the Company's filings made under the Securities Exchange Act of 1934, as amended, taken as a whole and to the extent not updated or superseded in later documents, certificates or written statements furnished to the Lenders or in later filings under the Securities Exchange Act of 1934, as amended, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein not misleading at such time and in light of the circumstances under which such information was furnished. 8.11 Patents, Trademarks, etc. The Company and its Significant Subsidiaries own, or are licensed or permitted to use, all patents, trademarks, trade names, copyrights, licenses, technology, know-how, processes, service marks and rights with respect to any of the foregoing used in and necessary or material to the conduct of their respective businesses as currently conducted. To the best of the Company's knowledge, the use of such patents, trademarks, trade names, copyrights, licenses, technology, know-how, processes and rights by the Company and its Significant Subsidiaries does not infringe on the rights of any Person, except for such infringement which would not reasonably be expected to result in a Material Adverse Effect. The rights of the Company and each of its Significant Subsidiaries to so sell, franchise or license under such patents, trademarks, trade names, copyrights, technology, know-how and processes owned by them and then being used may be transferred in connection with any sale of assets and goodwill or stock of the related business by the Company or such Subsidiaries. 8.12 Environmental Matters. (a) The Company and each of its Significant Subsidiaries have obtained all permits, licenses and other authorizations relating to or used in connection with the ownership and operation of its respective business and its respective real properties that are required under the Environmental Laws and are in compliance with all terms and conditions of such required permits, licenses and authorizations, except where failure to so obtain or to so comply would not reasonably be expected to result in a Material Adverse Effect. (b) The Company and, to the knowledge of the Company, each of its Significant Subsidiaries are in compliance with all Environmental Laws, including, without limitation, all limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws except where non-compliance would not reasonably be expected to result in a Material Adverse Effect. (c) There is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation or deficiency, investigation, proceeding, notice or demand letter pending or, to the knowledge of the Company, threatened against the Company or any of its Significant Subsidiaries under the Environmental Laws which could reasonably be expected to result in a fine, penalty or other cost or expense in excess of $5,000,000. (d) To the Company's knowledge, there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance in all material respects by the Company or any of its Significant Subsidiaries with the Environmental Laws, or which may give rise to any common law or legal liability, including, without limitation, liability under CERCLA, or similar state, local or foreign laws, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Material which could reasonably be expected to result in a fine, penalty or other cost or expense in excess of $5,000,000. (e) To the Company's knowledge, there is no real property ever owned, operated, used or controlled by the Company or any of its Significant Subsidiaries listed or proposed for listing on the National Priorities List or the Comprehensive Environmental Response, Compensation, and Liability Information System, both promulgated under CERCLA, or on any comparable state or local list, and neither the Company nor any of its Significant Subsidiaries has received any notification of potential or actual liability or request for information under CERCLA or any comparable state or local law which could reasonably be expected to result in a fine, penalty or other cost or expense in excess of $5,000,000. (f) Except in compliance with the Environmental Laws, (i) no real property ever owned, operated, used or controlled by the Company or any of its Significant Subsidiaries has been used for the handling, processing, generation, treatment, storage or disposal of any Hazardous Materials, and no underground storage tank or other underground storage receptacle, or related piping, is located on such properties; (ii) there have been no releases (i.e., any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) of Hazardous Materials by the Company or any of its Significant Subsidiaries or any of their respective predecessors in interest at, on, under, from or into any of the real property owned, operated or controlled by them; and (iii) there are no polychlorinated biphenyls or asbestos located in, at, on or under any facility or real property owned, operated or controlled by the Company or any of its Significant Subsidiaries, in any case set forth in clauses (i)- (iii) above, in such amounts, conditions or concentrations that could reasonably be expected to require removal or remedial or corrective action, or to result in liability under the Environmental Laws in excess of $5,000,000. 8.13. Year 2000. Any reprogramming and/or replacement of equipment required to permit the proper functioning, in and following the year 2000, of (i) all Information Systems and Equipment and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or, to the extent practicable and commercially reasonable, with which the systems of the Company and its Subsidiaries interface) and the testing of all such systems and equipment, as so reprogrammed, will be substantially completed by September 30, 1999, except where failure to do so could not reasonably be expected to result in a Material Adverse Effect. The cost to the Company and its Subsidiaries (including reprogramming errors and the failure of others' systems or equipment) will not result in Default or a Material Adverse Effect. Except for such of the reprogramming and/or replacement of equipment referred to in the two preceding sentences as may be necessary, all Information Systems and Equipment are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be, sufficient to permit the company to conduct its business without a Material Adverse Effect. SECTION 9. AGENT. 9.1 Appointment. The Lenders hereby appoint BTCo as Agent hereunder and under the Loan Documents and each Lender hereby authorizes the Agent to act as herein or therein specified, and each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Agent to take such action on its behalf under the provisions of this Agreement, the Notes, and any other instruments, documents and agreements referred to herein or therein and to exercise such powers hereunder and thereunder as are specifically delegated to the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder, or under the Loan Documents, by or through its agents or employees. 9.2 Nature of Duties. The Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement. The duties of the Agent shall be mechanical and administrative in nature. The Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Nothing in this Agreement or any of the Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement or any of the Loan Documents except as expressly set forth herein or therein. Each Lender shall make its own independent investigation of the financial condition and affairs of the Company and its Subsidiaries as well as that of the German Borrower in connection with the making and the continuance of the Revolving Loans hereunder and shall make its own appraisal of the creditworthiness of the Company and its Subsidiaries as well as that of the German Borrower; and the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Revolving Loans or at any time or times thereafter. 9.3 Rights, Exculpation, etc. The Agent and any of the officers, directors, employees or agents of the Agent shall not be liable to any Lender for any action taken or omitted by them hereunder or under any of the Loan Documents, or in connection herewith or therewith, unless caused by its gross negligence or willful misconduct. The Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, or sufficiency of this Agreement or any of the other Loan Documents or the financial condition of the Company and its Subsidiaries or of the German Borrower. The Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the other Loan Documents or the financial condition of the Company or any of its Subsidiaries or of the German Borrower, or the existence or possible existence of any Default or Event of Default. The Agent may at any time request instructions from the Lenders with respect to any actions or approvals which by the terms of this Agreement or any of the other Loan Documents the Agent is permitted or required to take or to grant, and if such instructions are requested, the Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under this Agreement or any of the other Loan Documents until it shall have received such instructions from the Requisite Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder or under any of the other Loan Documents in accordance with the instructions of the Requisite Lenders. 9.4 Reliance. The Agent shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person, and, with respect to all legal matters pertaining to this Agreement or any of the other Loan Documents and its duties hereunder or thereunder, upon advice of counsel selected by it. 9.5 Indemnification. To the extent that the Agent is not reimbursed and indemnified by the Company or the German Borrower, the Lenders will reimburse and indemnify the Agent for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent, acting pursuant hereto, in any way relating to or arising out of this Agreement or any of the other Loan Documents or any action taken or omitted by the Agent under this Agreement or any of the other Loan Documents, in proportion to their respective Commitments hereunder; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Agent. The obligations of the Lenders under this Section 9.5 shall survive the payment in full of the Notes and the termination of this Agreement and any other Loan Document. 9.6 The Agent, Individually. With respect to its Commitment hereunder, the Revolving Loans made by it and any Notes issued to or held by it, the Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or holder of a Note. The terms "Lenders", "Requisite Lenders" or "holders of Notes" or any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity as a Lender, one of the Requisite Lenders or a noteholder. The Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Company or the German Borrower or any of their Subsidiaries as if they were not acting pursuant hereto. 9.7 Holders of Notes. The Agent may deem and treat the named payee (or any subsequent holder, transferee, assignee or payee of which the Agent has received written notice) of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been received by the Agent. Any request, authority or consent of any Person, who at the time of making such request or of giving such authority or consent is the named payee (or any subsequent holder, transferee, assignee or payee of which such Agent has received written notice) of any Note, shall be conclusive and binding on any subsequent holder, transferee, assignee or payee of such Note or of any Note or Notes issued in exchange therefor. 9.8 Resignation by the Agent. The Agent may resign from the performance of all of its functions and duties hereunder at any time by giving 15 Business Days' prior written notice to the Company and the Lenders. Such resignation shall take effect upon the expiration of such 15 Business Day period or upon the earlier appointment of a successor. Upon any such resignation, the Requisite Lenders shall appoint a successor Agent who shall be satisfactory to the Company and shall be an incorporated bank or trust company. In the event no such successor shall have been so appointed, then any notification, demand or other communication required or permitted to be given by the Agent on behalf of the Lenders to the Company hereunder shall be sufficiently given if given by the Requisite Lenders, and any notification, demand, other communication, document, statement or other paper or payment required to be made, given or furnished by the Company to the Agent for distribution to the Lenders shall be sufficiently made, given or furnished if made, given or furnished by the Company directly to each Lender entitled thereto and, in the case of payments, in the amount to which each such Lender is entitled. All powers specifically delegated to the Agent by the terms hereof may be exercised by the Requisite Lenders. 9.9 Removal. The Agent may be removed from the performance of all its functions and duties hereunder at any time with or without cause by an instrument delivered in writing to the Company and signed by the Requisite Lenders. Upon any such removal, the Requisite Lenders shall appoint a successor Agent who shall be satisfactory to the Company and shall be an incorporated bank or trust company. In the event no such successor shall have been so appointed, then any notification, demand or other communication required or permitted to be given by the Agent on behalf of the Lenders to the Company hereunder shall be sufficiently given if given by the Requisite Lenders, and any notification, demand, other communication, document, statement or other paper or payment required to be made, given or furnished by the Company to the Agent for distribution to the Lenders shall be sufficiently made, given or furnished if made, given or furnished by the Company directly to each Lender entitled thereto and, in the case of payments, in the amount to which each such Lender is entitled. All powers specifically delegated to the Agent by the terms hereof may be exercised by the Requisite Lenders. SECTION 10. CONDITIONS PRECEDENT. 10.1 Conditions to Effectiveness. The effectiveness of this Agreement is subject to the prior or concurrent satisfaction of the following conditions by the Company and the German Borrower, as the case may be: (a) Closing Documents. The Company and the German Borrower shall have delivered to the Lenders (or to the Agent for the Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following (each, unless otherwise noted, dated the Closing Date): 1. Board Resolutions. Resolutions of the Company's Board of Directors in form and substance satisfactory to the Agent approving and authorizing the execution, delivery and performance by it of the Loan Documents and any other documents, instruments and certificates as are contemplated hereby and thereby, certified as of the Closing Date by an appropriate respective corporate officer as being true and complete and in full force and effect without modification or amendment. 2. Signature and Incumbency Certificates. (i) Signature and incumbency certificates of the officers of the Company and (ii) a signature certificate of the persons authorized by the German Borrower to execute any of the Loan Documents. 3. By-Laws. Copies of the By-laws of the Company. 4. German Corporate Documents. A recently issued certified copy of the German Borrower's entry in the commercial register of Emmendingen Lower District Court. 5. Opinions. Originally executed copies of one or more written opinions of (i) Cravath, Swaine & Moore, counsel for the Company, in the form of Exhibit C-1 hereto and, (ii) Wayne F. Taylor, general counsel for the Company, in the form of Exhibit C-2 hereto, and (iii) from Hengeler Mueller Weitzel Wirtz, special German counsel to the German Borrower, in the form of Exhibit C-3 hereto, each of which opinions shall be dated as of the Closing Date, and shall cover such other matters and include such changes as shall be reasonably requested or approved by the Agent. 6. Opinion. Originally executed copies of the favorably written opinion of Cahill Gordon & Reindel, special counsel to the Agent and Lenders, substantially in the form of Exhibit D. 7. Officers' Certificate. Originally executed Officers' Certificate of the Company in the form of Exhibit E hereto stating that all conditions set forth in Sections 4.1(b)(i), 4.1(b)(ii) and 4.1(b)(iii), have been satisfied, in each case, without taking into account whether any circumstance or event which must be satisfactory to any Person (other than the Company) is in fact satisfactory to such Person. 8. Guarantee. On the Closing Date the Company shall have duly authorized, executed and delivered a guarantee agreement, dated as of the Effective Date, pursuant to which the Company guarantees the obligations of the German Borrower owing to the Lenders, in substantially the form of Exhibit F hereto (as modified, supplemented or amended from time to time, the "Company Guarantee") in accordance with the terms hereof and thereof. (b) Corporate Proceedings. All corporate and other proceedings taken or to be taken by the Company and the German Borrower in connection with the transactions contemplated by each of the Loan Documents on or prior to the Effective Date and all documents incidental thereto not previously found acceptable by the Requisite Lenders shall be reasonably satisfactory in form and substance to such Lenders, and such Lenders shall have received from the Company and the German Borrower all such counterpart originals or certified copies of such documents as such Lenders may reasonably request. SECTION 11. MISCELLANEOUS. 11.1 Exercise of Rights. Neither the failure nor delay on the part of any of the Lenders or any holder of a Note to exercise any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Lenders and the holders of the Notes would otherwise have. No notice to or demand on the Company or the German Borrower in any case shall entitle either the Company or the German Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Lenders and the holders of the Notes to any other or further action in any circumstances without notice or demand. 11.2 Amendment and Waiver, etc. (a) Neither this Agreement nor any other Loan Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Borrowers party thereto and the Requisite Lenders; provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender), (i) extend the final scheduled maturity of any Loan or Note or extend the stated expiration date of any Letter of Credit beyond the Final Maturity Date, or reduce the rate or extend the time of payment of interest or Fees thereon, or reduce the principal amount thereof (except to the extent repaid in cash) (it being understood that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest or Fees for the purposes of this clause (i)), (ii) release the Company Guarantee, (iii) amend, modify or waive any provision of this Section 11.2, (iv) reduce the percentage specified in the definition of Requisite Lenders (it being understood that, with the consent of the Requisite Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Requisite Lenders on substantially the same basis as the Revolving Loan Commitments are included on the Effective Date) or (v) consent to the assignment or transfer by a Borrower of any of its rights and obligations under this Agreement; provided, further, that no such change, waiver, discharge or termination shall (v) increase the Revolving Loan Commitment of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Revolving Loan Commitment shall not constitute an increase of the Revolving Loan Commitment of any Lender, and that an increase in the available portion of any Revolving Loan Commitment of any Lender shall not constitute an increase of the Revolving Loan Commitment of such Lender), (x) without the consent of any Issuing Lender, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit, or (y) without the consent of the Agent, amend, modify or waive any provision of Section 9 or any other provision as same relates to the rights or obligations of the Agent. (b) If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first proviso to Section 11.2(a), the consent of the Requisite Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clauses (A) or (B) below, to either (A) replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to Section 2.15 so long as at the time of such replacement, each such Replacement Bank consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Lender's Revolving Loan Commitment and/or repay the outstanding Revolving Loans of such Lender and cash collateralize its applicable Pro Rata share of the Letter of Credit Outstandings; provided that, unless the Revolving Loan Commitment that is terminated, and Revolving Loans repaid, pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Banks or the increase of the Revolving Loan Commitments and/or outstanding Revolving Loans of existing Banks (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Requisite Lenders (determined after giving effect to the proposed action) shall specifically consent thereto; provided, further, that in any event a Borrower shall not have the right to replace a Lender, terminate its Revolving Loan Commitment or repay its Revolving Loans solely as a result of the exercise of such Lender's rights (and the withholding of any required consent by such Lender) pursuant to the second proviso to Section 11.2(a). 11.3 Expenses and Indemnification. (a) The Borrowers agree to pay all reasonable out-of-pocket expenses (x) of the Agent incurred in connection with the development, preparation, execution, delivery, enforcement, assignment, participation and administration of this Agreement, and the other Loan Documents and any and all amendments, supplements or waivers hereto or thereto and the Notes and the making and repayment of the Revolving Loans and the issuance of Letters of Credit and the payment of interest, including, without limitation, the reasonable fees and expenses of Cahill Gordon & Reindel, special counsel for the Lenders and the Agent and of Hasche Eschenlohr Peltzer Riesenkampff Fischotter, special German counsel for the Lenders and the Agent in each case reasonably promptly upon being furnished an invoice and (y) of each Lender incurred in connection with the enforcement of any of the foregoing, including, without limitation, the reasonable fees and expenses of any counsel for any of the Lenders and the Agent. In addition, the Company agrees to pay, and to save the Agent and the Lenders harmless from all liability for, any stamp or other documentary taxes that may be payable in connection with the Company's or the German Borrower's execution, delivery or performance of this Agreement, its borrowings hereunder, or its issuance of the Notes or of any other instruments or documents provided for herein or delivered or to be delivered by either of them hereunder or any other Loan Document or in connection herewith or thereunder. All obligations provided for in this Section 11.3 shall survive any termination of this Agreement. The Company agrees to indemnify, defend and hold the Agent and each of the Lenders harmless from and against any and all liability (including, without limitation, excise tax, interest, penalties and all reasonable attorneys' fees) to which the Agent or any of the Lenders may become subject insofar as such excise tax or liability arises out of or is based upon a suit or proceeding or governmental action brought or taken in connection with the use of the proceeds of the Revolving Loans made to the Borrower, whether the Agent or such Lender is a party thereto or is otherwise required to respond thereto; provided that the Company shall not be liable hereunder with respect to claims directly arising out of (i) any settlement made without its consent, which consent will not unreasonably be withheld or delayed, (ii) any proceeding brought against the Agent or such Lender by a security holder of the Agent or such Lender based upon rights afforded such security holder solely in its capacity as such, and (iii) the gross negligence or willful misconduct of the Agent or such Lender. (b) The foregoing indemnity set forth in this Section 11.3 shall include, without limitation, indemnification by the Company to each Indemnitee for any and all expenses and costs (including, without limitation, remedial, removal, response, abatement, clean-up, investigative, closure and monitoring costs), losses, claims (including claims for contribution or indemnity and including the costs of investigating or defending any claim and whether or not such claim is ultimately defeated, and whether the conditions creating such claim arose before, during or after ownership, operation, possession or control of the business, property or facilities of the Company or any of its Subsidiaries, or before, on or after the date hereof, and including any amounts paid incidental to any compromise or settlement by the Indemnitees or any Indemnitee to the holders of any such claim), lawsuits, liabilities, obligations, actions, judgments, disbursements, encumbrances, liens, damages (including, without limitation, damages for contamination or destruction of natural resources), penalties and fines of any nature (including, without limitation, in all cases the reasonable fees and disbursements of counsel in connection therewith) incurred, suffered or sustained by that Indemnitee based upon, arising under or relating to Environmental Laws, based on, arising out of or relating to, in whole or in part, the exercise and/or enforcement of any rights or remedies by any Indemnitee under this Agreement, any other Loan Document or any related documents and including, but not limited to, taking title to, owning, possessing, operating, controlling, managing or taking any action in respect of any real property. 11.4 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Agent, the Company, the German Borrower, the Lenders, and, to the extent permitted hereunder, all future holders of the Notes and their respective successors and assigns, except that neither the Company nor the German Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may at any time sell to one or more commercial banks, insurance companies, savings and loan associations, savings banks or other financial institutions, pension funds or mutual funds or other entities ("Participants") participating interests in its Revolving Loan Commitment, Revolving Loans and Letters of Credit, or any other interest of such Lender hereunder or thereunder (in respect of any such Lender, its "Credit Exposure"); provided, however, that such Lender shall remain fully liable for its entire Credit Exposure without regard to any such participation and no Participant shall be in privity with either the Company or the German Borrower or acquire any right vis-a-vis either the Company or the German Borrower except as expressly set forth in this paragraph. The Borrowers agree that if amounts outstanding under this Agreement or the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or any Note; provided that such right of set-off shall be subject to the obligation of such Participant to share with Lenders, and Lenders agree to share with such Participant, as provided in Section 11.11 hereof. The Company and the German Borrower each also agree that each Participant shall be entitled to the benefits of Section 2.10 hereof with respect to its participation in the Revolving Loans outstanding from time to time; provided that no Participant shall be entitled to receive any greater payment under such Section than the relevant Lender would have been entitled to receive with respect to the relevant Revolving Loans. Each Lender agrees that any agreement between such Lender and any such Participant in respect of such participating interest shall not restrict such Lender's right to agree to any amendment, supplement or modification to this Agreement or any of the Loan Documents except to extend the final maturity of any Note other than in accordance with the definition of "Final Maturity Date" as in effect on the date hereof or reduce the rate or extend the time of payment of interest thereon or reduce the principal amount thereof or reduce the fees payable pursuant to Section 2.13 or clauses (1)(i) or (2) of Section 2.14(f). (c) With the prior written consent of the Agent, which consent shall not be unreasonably withheld, any Lender ("Assignor") may at any time assign to any Lender or any affiliate thereof, and to one or more Eligible Assignees ("Assignees"), all or any part of its Credit Exposure pursuant to a Assignment and Assumption Agreement substantially in the form of Exhibit G hereto, executed by such Purchasing Lender, such Assignor, the Agent and, in the event such assignment is of an interest in a Letter of Credit Participation, the Issuing Lender; provided that unless such assignment is to a Lender, all such assignments shall be in aggregate minimum amounts of $3,000,000 and shall be made only with the prior written consent of the Company, such consent not to be unreasonably withheld; and provided, further, that no Lender may assign any Revolving Loan or Letter of Credit Participation without a corresponding assignment of such Lender's Revolving Loan Commitment. Upon (i) such execution of such Assignment and Assumption Agreement, (ii) delivery of an executed copy thereof to the Company and the German Borrower, (iii) payment by such Assignee to such Assignor of an amount equal to the purchase price agreed between such Assignor and such Assignee, and (iv) payment by such Assignee or Assignor (as they shall mutually agree) to the Agent of a non-refundable fee of $3,500 to cover administrative and other expenses which may be incurred in connection with such assignment, such Assignee shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement to the same extent as if it were an original party hereto and thereto with the Pro Rata Share of the applicable Commitment(s) set forth in such Assignment and Assumption Agreement or such counterpart, and subject to the preceding sentence no further consent or action by the Borrowers, Lenders or the Agent shall be required. As used in this Section 11.4(c), "Eligible Assignee" means (a) the Agent; (b) any Affiliate of any Lender otherwise meeting the requirements of (c), (d), (e) or (f) of this subclause (c); (c) a commercial bank, savings and loan association or savings bank organized under the laws of the United States, or any State thereof; (d) a commercial bank organized under the laws of any other country that is a member of the OECD or a political subdivision of any such country, so long as such bank is acting through a branch or agency located in the United States; (e) a finance company, pension fund, mutual fund, insurance company, or other financial institution (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans providing for revolving credit in the ordinary course of its business and meets the definition of "accredited investor" as defined in Regulation D under the Securities Act of 1933, as amended; and (f) any other Person approved by the Agent and the Company, such approval not to be unreasonably withheld. Such Assignment and Assumption Agreement or such counterpart shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Assignee and the resulting adjustment of Pro Rata Shares arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such Assignor under this Agreement, the Commitments and the Notes. Upon the consummation of any transfer to an Assignee pursuant to this Section 11.4(c), the Assignor, the Agent, the Company and the German Borrower shall make appropriate arrangements so that, if required, a replacement Note is issued to such Assignor and a new Note or, as appropriate, a replacement Note, issued to such Assignee, in each case in principal amounts reflecting their Pro Rata Shares or, as appropriate, their outstanding Revolving Loans, as adjusted pursuant to such Assignment and Assumption Agreement. (d) The Company and the German Borrower authorize each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Company and the German Borrower and any of their respective Subsidiaries which has been delivered to such Lender by or on behalf of the Company or the German Borrower pursuant to this Agreement or which has been delivered to such Lender by the Company or the German Borrower in connection with such Lender's credit evaluation of the Company and the German Borrower prior to entering into this Agreement; provided that if such information is confidential information as contemplated by Section 11.18, such Lender may so disclose such information only if such Transferee or prospective Transferee previously agrees in writing to be bound by the terms of Section 11.18. (e) Except pursuant to an assignment but only to the extent set forth in the Assignment and Assumption Agreement related to such assignment, no Lender shall, as between the Company and the German Borrower and the Lender, be relieved of any of its obligations hereunder as a result of any sale, transfer or negotiation of, or granting of participations in, all or any part of its Credit Exposure. (f) Each Eligible Assignee organized under the laws of any jurisdiction other than the United States or any State thereof (including the District of Columbia) shall make the representations and certifications and provide the relevant forms, as if it were a Lender, on or before the Settlement Date (as defined in the Assignment and Assumption Agreement) and thereafter as required by Section 11.14 with respect to such assignment. (g) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank. 11.5 Notices, Requests, Demands. All notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been given or made five days after deposit in the mails, postage prepaid, or, in the case of telex or telegraphic notice, when delivered to the telex or telegraph company, or in the case of telex or telecopier notice sent over a telex or a telecopier machine owned or operated by a party hereto, when sent, addressed to the Company, the German Borrower, the Agent or the Lenders, as the case may be, at their respective addresses shown opposite their signatures hereto or at such other address as any of the parties hereto may hereafter specify in writing to the others, except that any communication with respect to a change of address shall be deemed to be given or made when received by the party to whom such communication was sent. No other method of giving notice is hereby precluded. 11.6 Determination of Dollar Equivalent. For purposes of this Agreement, the Dollar Equivalent of Deutsche Mark Loans shall be calculated on the last Business Day of each month. The Dollar Equivalent for Deutsche Mark Loans shall remain in effect until the same is recalculated by BTCo as provided above and notice of such recalculation is received by the Company and the German Borrower, it being understood that until such notice is received, the Dollar Equivalent shall be that Dollar Equivalent as last reported to the Company and the German Borrower by BTCo. BTCo shall promptly notify the Company and the German Borrower and the Lenders of each determination of the Dollar Equivalent for Deutsche Mark Loans. 11.7 Survival of Representations and Warranties. All representations and warranties contained herein or otherwise made in writing by the Company or the German Borrower in connection herewith shall survive the execution and delivery of this Agreement, the Notes and each of the Loan Documents. 11.8 Governing Law. This Agreement and the rights and obligations of the parties under this Agreement and under the Notes shall be governed by and construed and interpreted in accordance with the internal laws of the State of New York without regard to principles of conflict of laws. 11.9 Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all such counterparts taken together shall constitute but one and the same instrument. Complete counterparts of this Agreement shall be lodged with the Company and the Agent. 11.10 Set-Off. In addition to any rights now or hereafter granted under applicable law (including, but not limited to, Section 151 of the New York Debtor and Creditor Law) and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is hereby authorized at any time or from time to time, without notice to the Company or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender to or for the credit or the account of the Company against and on account of the obligations and liabilities of the Company to such Lender under this Agreement and the Notes, including, without limitation, all claims of any nature or description arising out of or connected with this Agreement and/or any of the Notes and/or any of the other Loan Documents, irrespective of whether or not such Lender shall have made any demand hereunder and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured and irrespective of the currency in which such claims are made and further each Lender is hereby authorized at any time or from time to time, without notice to the Company or the German Borrower or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender to or for the credit or the account of either the Company or the German Borrower against and on account of the obligations and liabilities of the German Borrower to such Lender under this Agreement and the Notes, including, without limitation, all claims of any nature or description arising out of or connected with this Agreement and/or any of the Notes and/or any of the other Loan Documents, irrespective of whether or not such Lender shall have made any demand hereunder and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured and irrespective of the currency in which such claims are made. Each Lender agrees to give either the Company or the German Borrower or both, as the case may be, notice after the exercise of its right of set-off as provided above; provided that the failure to give such notice shall not result in any liability on the part of any Lender or any such holder or otherwise limit the rights of any Lender or any such holder under this Section 11.10. 11.11 Proration of Excess Payments. The Lenders agree among themselves that, with respect to all amounts received by them that are applicable to the payment of principal of or interest on the Notes, equitable adjustment will be made so that, in effect, all such amounts will be shared ratably among the Lenders on the basis of the amounts then owed each of them in respect of such obligation, whether received by voluntary payment, by realization upon security, by the exercise of the right of set-off or bankers' lien, by counterclaim or cross action, under or pursuant to this Agreement, the Notes, any other Loan Document or otherwise. Each Lender agrees that if it should receive any payment on its Notes of a sum or sums in excess of its pro rata portion, then it shall purchase for cash from the other Lenders an interest in the Notes of such Lenders in such amount as shall result in a ratable participation by each of the Lenders in the aggregate unpaid amount of all outstanding Notes then held by all of the Lenders. If all or any portion of such excess payment is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 11.12 Submission to Jurisdiction; Venue; Waiver of Jury Trial. (a) Any legal action or proceeding against either the Company or the German Borrower with respect to this Agreement or any other Loan Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, each of the Company and the German Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each of the Company and the German Borrower hereby irrevocably designates, appoints and empowers CT Corporation System, with offices on the date hereof at 1633 Broadway, New York, New York 10019, as its designee, appointee and agent to receive for and on their behalf, and in respect of its property, service of any and all legal process, summons, notices and documents that may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such, each of the Company and the German Borrower agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Agent. Each of the Company and the German Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Company or the German Borrower, as the case may be, at the address set forth opposite its respective signatures below, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Agent, any Lender or the holder of any Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against either the Company or the German Borrower in any other jurisdiction. (b) Each of the Company and the German Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Loan Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) Each of the Company and the German Borrower and each of the Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or related to any of the Loan Documents or the actions of any Lender in the negotiation, administration, performance or enforcement thereof. 11.13 Survival. All indemnities set forth herein including, without limitation, in Sections 2.10, 2.11, 2.14, 9.5 and 11.3 shall survive the execution and delivery of this Agreement and the Notes and each of the other Loan Documents and the indemnities set forth in Sections 2.14, 9.5 and 11.3 shall survive the making and repayment of the Revolving Loans and the issuance and expiration or termination of the Letters of Credit. 11.14 Lender's Representation and Certain Agreements. Each Lender represents that, as of the date hereof, either (i) it is a corporation or other entity organized in or under the laws of the United States or any State thereof or (ii) (A) in the case of a Borrowing by the Company it is entitled to complete exemption from United States withholding tax imposed on or with respect to any payments, including fees, to be made to it pursuant to any of the Loan Documents (x) under an applicable provision of a tax convention to which the United States is a party or (y) because it is acting through a branch, agency or office in the United States and any payment to be received by it hereunder is effectively connected with a trade or business in the United States or (B) in the case of a Borrowing by the German Borrower, that it is entitled to a full exemption from any Taxes in relation to which additional payments may be required pursuant to Section 3.5. Each Lender agrees to provide to the Company and the Agent on the Effective Date (to the extent not previously provided), in the case of each Lender that is an original signatory hereto, and within 10 days of the date of the assignment pursuant to which it became a Lender in the case of any assignee Lender, and at such other times as required by United States law or as the Company or the Agent shall reasonably request, (i) if the Lender is a corporation or other entity organized in or under the laws of the United States or any State thereof it shall deliver a Form W-9 (or any successor form thereof) and (ii) if the Lender is not a corporation or other entity organized in or under the laws of the United States or any State thereof it shall deliver two accurate and complete original signed copies of either (x) Internal Revenue Service Form 4224 (or successor form) certifying that all payments to be made to it hereunder will be effectively connected to a United States trade or business (the "Form 4224 Certification") or (y) Internal Revenue Service Form 1001 (or successor form) certifying that it is entitled to the benefits of a provision of a tax convention to which the United States is a party which completely exempts from United States withholding tax all payments to be made to it hereunder (the "Form 1001 Certification"). In addition, each Lender agrees that if it previously filed a Form 1001 Certification it will deliver to the Company and the Agent a new Form 1001 Certification prior to the first payment date falling in the third year following the previous filing of such certification; and if it previously filed a Form 4224 Certification it will deliver to the Company and the Agent a new Form 4224 Certification prior to the first payment date occurring in each of its subsequent taxable years. Each Lender also agrees to deliver to the Company and the Agent such other or supplemental forms as may at any time be required as a result of changes in applicable law or regulation in order to confirm or maintain in effect its entitlement to exemption from United States withholding tax on any payments hereunder; provided that the circumstances of the Lender at the relevant time and applicable laws permit it to do so. If a Lender determines, as a result of any change in either (i) applicable law, regulation or treaty, or in any official interpretation or application thereof, or (ii) its circumstances that it is unable to submit any form or certificate that it is obligated to submit pursuant to this Section 11.14, or that it is required to withdraw or cancel any such form or certificate previously submitted, it shall promptly notify the Company and the Agent of such fact and such Lender will not be considered to have failed to comply with the provisions of this Section 11.14. If a Lender fails to submit the Form W-9 (or successor form) (in the case of a Lender organized under the laws of the United States or any State thereof) or fails to submit either a Form 1001 Certification or a Form 4224 Certification (in the case of a Lender organized under the laws of a jurisdiction outside the United States) in each such case satisfactory to the Agent and the Company indicating that all payments to be made to such Lender hereunder are not subject to United States withholding or backup withholding tax, the Company or the Agent shall withhold taxes from such payments at the applicable statutory rate. Each Lender agrees to indemnify and hold the Company, the German Borrower and the Agent harmless from any United States taxes, penalties, interest and other expenses, costs and losses incurred or payable by them as a result of either (i) its failure to submit any form or certificate that it is required to provide pursuant to this Section 11.14 or (ii) their reliance on any such form or certificate which it has provided to them pursuant to this Section 11.14. However, the Lender will not indemnify the Company, the German Borrower and the Agent if it determines, as a result of any change in either (i) applicable law, regulation or treaty, or in any official interpretation or application thereof, or (ii) its circumstances (but only those not within its control), that it is unable to submit any form or certificate that it is obligated to submit pursuant to this Section 11.14. 11.15 Headings. The descriptive headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not be deemed to effect the meaning or construction of any of the provisions hereof. 11.16 Change in Accounting Principles. If any preparation of the financial statements referred to in Section 5.1 or 8.1 hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) result in a change in any results, amounts, calculations, ratios, standards or terms found in Section 2, 5 or 6 from those which would be derived or be applicable absent such changes, the Company may reflect such changes in the financial statements required to be delivered pursuant to Section 5.1, but calculations of financial covenants shall be made without giving effect to any such changes. Upon the request of the Company or the Agent the parties hereto agree to enter into negotiations in order to amend the financial covenants and other terms of this Agreement if there occur any changes in GAAP that have a material effect on the financial statements of the Company, so as to equitably reflect such changes with the desired result that the criteria for evaluating the Company's financial condition and such other terms shall be the same in all material respects after such changes as if the changes had not been made. 11.17 Defaulting Lender. (a) Upon any Lender becoming a Defaulting Lender, (i) the Agent or, in the case of clause (iv) of the definition of "Defaulting Lender", the Issuing Lender of any relevant Letter of Credit shall endeavor to promptly notify each other Lender of the amount owed or potentially owed, as the case may be, by such Defaulting Lender and (ii) the Total Revolving Loan Commitment shall be reduced by an amount equal to the unutilized portion of such Defaulting Lender's Pro Rata Share thereof then in effect (the "Unutilized Portion"); provided, however, that, with the prior written consent of the Agent, the Company and the German Borrower may request a non-defaulting Lender to, whereupon such non-defaulting Lender may (in its sole discretion and without the consent of any other Lender), by promptly notifying the Company and the German Borrower and the Agent, increase its Revolving Loan Commitment in an amount equal to the Unutilized Portion, in which case, upon receipt by the Company and the German Borrower and the Agent of such notice, (x) the Revolving Loan Commitment of such non-defaulting Lender shall be so increased and (y) the amount of the Total Revolving Loan Commitment then in effect shall be equal to the amount of the Total Revolving Loan Commitment in effect immediately prior to the time such Defaulting Lender became a Defaulting Lender and (iii) the Pro Rata Share of such Defaulting Lender shall be reduced to zero. (b) No Defaulting Lender shall be entitled to be an Issuing Lender hereunder or to receive any fees accrued on and after the date such Lender became a Defaulting Lender. (c) Notwithstanding anything contained herein to the contrary, no Defaulting Lender shall be entitled to receive any payments hereunder on account of any Revolving Loans, Notes or Letters of Credit until all amounts that are due and payable with respect to any Revolving Loans or Letters of Credit as to which such Defaulting Lender is not a Lender or a participant shall have been paid in full. (d) Nothing in this Section 11.17 shall be deemed to release any Defaulting Lender from fulfilling its obligations under this Agreement or otherwise or to prejudice the rights which the Company or the German Borrower or any other Lender or the Agent may have against any such Defaulting Lender. Each non-defaulting Lender, upon funding any amount that would otherwise have been funded or required to have been by a Defaulting Lender, shall have a direct claim and right of action against such Defaulting Lender for any and all such amounts funded by such non-defaulting Lender and any expenses (including reasonable fees and expenses of counsel and allocated costs of internal counsel) arising out of or in connection with any such funding or enforcing its rights under this Section 11.17. 11.18 Confidentiality. Subject to Section 11.4(d), Lenders shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as such by the Company in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event, subject to Section 11.4(d), may make disclosure in connection with the contemplated transfer of all or any part of their Credit Exposure or participation therein or as required or requested by any Governmental Authority or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each Lender shall endeavor to notify the Company of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further, that in no event shall any Lender be obligated or required to return any materials furnished by either the Company or the German Borrower. 11.19 Judgment Currency. (a) The Borrowers' obligations hereunder and under the other Loan Documents to make payments in the Applicable Currency (the "Obligation Currency") shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Agent or the respective Lender of the full amount of the Obligation Currency expressed to be payable to the Agent or such Lender under this Agreement or the other Loan Documents. If for the purpose of obtaining or enforcing judgment against either the Company or the German Borrower, as the case may be, in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the "Judgment Currency") an amount due in the Obligation Currency, the conversion shall be made at the Deutsche Mark Equivalent or the Dollar Equivalent thereof, as the case may be, and, in the case of other currencies, the rate of exchange (as quoted by the Agent or if the Agent does not quote a rate of exchange on such currency, by a known dealer in such currency designated by the Agent) determined, in each case, as of the day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the "Judgment Currency Conversion Date"). (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Company and the German Borrower covenant and agree to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate or exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining the Deutsche Mark Equivalent or the Dollar Equivalent or any other rate of exchange for this Section, such amounts shall include any premium and costs payable in connection with the purchase of the Obligation Currency. 11.20 Register. The Borrowers hereby designate the Agent to serve as the Borrowers' agent, solely for purposes of this Section 11.20, to maintain a register (the "Register") on which it will record the Revolving Loan Commitments from time to time of each of the Lenders, the Revolving Loans made by each of the Lenders and each repayment in respect of the principal amount of the Revolving Loans of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Borrowers' obligations in respect of such Revolving Loans. With respect to any Lender, the transfer of the Revolving Loan Commitment of such Lender and the rights to the principal of, and interest on, any Revolving Loan made pursuant to such Revolving Loan Commitment shall not be effective until such transfer is recorded on the Register maintained by the Agent with respect to ownership of such Revolving Loan Commitment and Revolving Loans and prior to such recordation all amounts owing to the transferor with respect to such Revolving Loan Commitment and Revolving Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Revolving Loan Commitments and Revolving Loans shall be recorded by the Agent on the Register only upon the acceptance by the Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 11.4. Coincident with the delivery of such an Assignment Agreement to the Agent for acceptance and registration of assignment or transfer of all or part of a Revolving Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note (if issued) evidencing such Revolving Loan, and thereupon, upon written request, one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender. Each Borrower agrees to indemnify the Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Agent in performing its duties under this Section 11.20. IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. MILACRON INC. By: /s/ Robert P. Lienesch Title: Vice President and Treasurer Notice Address: Milacron Inc. 4701 Marburg Avenue Cincinnati, Ohio 45209 Attention: Treasurer Telephone: (513) 841-8577 Telecopier: (513) 841-7166 MILACRON KUNSTSTOFF-MASCHINEN EUROPA GmbH, By: /s/ Robert P. Lienesch on basis of Power of Attorney dated as of December 15, 1998 Notice Address: c/o Milacron Inc. 4701 Marburg Avenue Cincinnati, Ohio 45209 Attention: Robert P. Lienesch Telephone: (513) 841-8933 Telecopier: (513) 841-8000 BANKERS TRUST COMPANY, as a Lender and as Agent By: /s/ Anthony LoGrippo Title: Vice President Notice Address and Payment Office: Bankers Trust Company 130 Liberty Street New York, New York 10006 Attention: Edward G. Benedict Telephone: (212) 250-3708 Telecopier: (212) 250-7026 ABN AMRO BANK N.V., as a Lender By: /s/ Patrick M. Pastore Title: Vice President By: /s/ Louis K. McLinden, Jr. Title: Vice President Notice Office and Payment Office: 208 South LaSalle Street Chicago, IL 60674 Attention: Loan Administration Telephone: (312) 992-5151 Telecopier: (312) 992-5156 One PPG Place Suite 2950 Pittsburgh, PA 15222 Attention: Pat Pastore Telephone: (412) 566-2297 Telecopier: (412) 566-2266 COMERICA BANK, as a Lender By: /s/ David C. Bird Title: Vice President Notice Office and Payment Office: 500 Woodward Avenue Detroit, Michigan 48226 Attention: Lisa M. Kotula Telephone: (313) 222-9644 Telecopier: (313) 222-9514 CREDIT LYONNAIS CHICAGO BRANCH, as a Lender By: /s/ Mary Ann Klemm Title: Vice President Notice Address and Payment Office: KEYBANK NATIONAL ASSOCIATION, as a Lender By: /s/ Thomas J. Purcell Title: Vice President Notice Address and Payment Office: MELLON BANK, N.A., as a Lender By: /s/ Ryan F. Busch Title: Assistant Vice President Notice Address and Payment Office: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Lender By: /s/ Robert Bottamedi Title: Vice President Notice Address and Payment Office: NATIONSBANK N.A., as a Lender By: /s/ Valerie C. Mills Title: Sr. Vice President Notice Address and Payment Office: NBD BANK, N.A., as a Lender By: /s/ Edward C. Hathaway Title: First Vice President Notice Address and Payment Office: PNC BANK, OHIO, N.A., as a Lender By: /s/ David F. Knuth Title: Vice President Notice Address and Payment Office: STAR BANK, N.A., as a Lender By: /s/ Thomas D. Gibbons Title: Vice President Notice Address and Payment Office: Schedule 2.1 Lenders' Revolving Loan Commitment and Pro Rata Share Revolving Loan Lender Commitment Pro Rata Share Bankers Trust Company $37,051,282.00 9.88034% ABN AMRO Bank N.V. 35,000,000.00 9.33333 Comerica Bank 37,051,281.60 9.88034 Credit Lyonnais Chicago 28,846,155.00 7.69230 Branch Keybank National 37,051,281.60 9.88034 Association Mellon Bank, N.A. 25,000,000.00 6.66666 Morgan Guaranty 35,000,000.00 9.33333 Trust Company of New York NationsBank N.A. 37,051,281.60 9.88034 NBD Bank, N.A. 37,051,281.60 9.88034 PNC Bank, National 37,051,281.60 9.88034 Association Star Bank, N.A. 28,846,155.00 7.69230 Total $375,000,000.00 100% EX-10 13 Exhibit 10.12 MILACRON COMPENSATION DEFERRAL PLAN, As Amended The purpose of the Milacron Compensation Deferral Plan(the "Plan"), originally effective January 1, 1995 and revised and restated as of January 1, 1995, is to aid Milacron Inc. (the "Company") and its subsidiaries in attracting high quality executives and promoting in its executives increased efficiency and an interest in the successful operation of the Company by restoring some of the deferral opportunities and employer-provided benefits that are lost under certain other plans due to legislative limits. The benefits provided under the Plan shall be provided in consideration for services to be performed after the executive has become eligible to participate in the Plan, but prior to the executives retirement. ARTICLE 1 Definitions 1.1 Account shall mean the notional account or accounts established for record keeping purposes for a Participant pursuant to Article 6 of the Plan. 1.2 Administrator shall mean the Personnel and Compensation Committee of the Company's Board of Directors or its delegate. 1.3 Annual Deferral shall mean the amount of Compensation which the Participant actually defers during a Plan Year. The Annual Deferral may differ from Plan Year to Plan Year. 1.4 Annual Deferral Commitment shall mean the amount of Compensation which the Participant elects to defer for a Plan Year pursuant to Articles 2 and 3 of the Plan. 1.5 Base Salary shall mean the Participant's annual basic rate of pay from the Company or its subsidiaries (excluding EVA Awards, commissions, severance pay, and other non-regular forms of compensation) before any reductions for pre-tax deferrals, or deferrals under this Plan. 1.6 Basic Credit shall mean the Employer Basic Contribution under the Savings Plan that is credited to the Participant's Deferral Account as described in Article 4. 1.7 Beneficiary shall mean the person or persons or entity designated as such in accordance with Article 16 of the Plan. 1.8 Change in Control shall be deemed to have occurred if and when (a) any person (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act")), corporation or other entity, which theretofore beneficially owned securities representing less than twenty percent of the voting power of the Company in the election of directors, acquires, in a transaction or series of transactions, outstanding securities of the Company when, added to the voting power previously held, entitles such person to exercise more than twenty percent of the total voting power of the Company in the election of directors (the formation of a syndicate or group of existing shareholders not being deemed to constitute such an acquisition); (b) the Board of Directors (or, if approval of the Board of Directors is not required as a matter of law, the stockholders of the Company) shall approve (1) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (2) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (3) the adoption of any plan or proposal for the liquidation or dissolution of the Company; or (c) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity other than the Company shall make a tender or exchange offer to acquire any Common Stock or securities convertible into Common Stock for cash, securities or any other consideration if, after giving effect to the acquisition of all Common Stock or securities sought pursuant to such offer, such person, corporation or other entity would become the Abeneficial owner@ (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty percent or more of the outstanding Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire Common Stock); provided, that at least 10% of such Common Stock or securities sought pursuant to such offer is acquired. 1.9 Compensation shall mean the sum of the Participant's Base Salary and EVA Awards for a Plan Year before reductions for deferrals under the Plan or the Savings Plan, or other benefit plans sponsored by the Company or its subsidiaries. 1.10 Compensation Deferral Plan shall mean the Milacron Compensation Deferral Plan. 1.11 Crediting Rate shall mean any notional gains or losses equal to those generated as if the Account balances had been invested in one or more of the investment portfolios designated as available by the Administrator, less separate account fees and less applicable investment management and administrative charges determined annually by the Administrator, or gains or losses as otherwise determined by the Administrator. 1.12 Deferral Account shall mean the notional account established for record keeping purposes for a Participant's Annual Deferrals, Matching Credits and Basic Credits pursuant to Article 6 of the Plan. 1.13 Disability shall mean any long-term disability as defined under the Company's or its subsidiaries, long-term disability plan. 1.14 Discretionary Account shall mean the notional account established for record keeping purposes for a Participant's Discretionary Credits pursuant to Article 6 of the Plan. 1.15 Discretionary Credit shall mean the Company's credit to the Participant's Discretionary Account as described in Article 5. 1.16 Early Retirement Date shall mean age 55 with ten or more years of service with the Company or its subsidiaries. 1.17 Eligible Employee shall mean a key employee of the Company or any of its subsidiaries who (i) is subject to U.S. personal income taxes, (ii) is designated by the Administrator as eligible to participate in all or a portion of the Plan (subject to the restriction in Sections 11.2, 12.2.2 and 14.2 of the Plan), and (iii) qualifies as a member of the "select group of management or highly compensated employees" under ERISA. 1.18 ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.19 EVA Awards shall mean amounts paid in cash to the Participant by the Company or its subsidiaries pursuant to the Milacron Short Term Management Incentive Plan or such other bonus plan or program designated by the Administrator, before reductions for deferrals under the Plan or the Savings Plan. 1.20 Financial Hardship shall mean an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence as determined by the Administrator. Cash needs arising from foreseeable events such as the purchase of a residence or education expenses for children shall not, alone, be considered a Financial Hardship. 1.21 Matching Credit shall mean the Employer Matching Contribution or Salary Deferral Matching Contribution under the Savings Plan that is credited to the Participant's Deferral Account as described in Article 4. 1.22 Normal Retirement Date shall mean the date on which a Participant attains age 65. 1.23 Participant shall mean an Eligible Employee who has either elected to participate and has completed a Participation Election pursuant to Article 2 of the Plan or is eligible for Basic Credits pursuant to Article 4 of the Plan or Discretionary Credits pursuant to Article 5 of the Plan. 1.24 Participation Election shall mean the Participant's written election to participate in the Plan. 1.25 Plan Year shall mean the calendar year, with the first Plan Year commencing January 1, 1995. 1.26 Retirement shall mean a termination of employment following Normal or Early Retirement Date. 1.27 Retirement Plan shall mean the Milacron Retirement Plan. 1.28 Savings Plan shall mean the Milacron Performance Dividend and Savings Plan and the Milacron Retirement Savings Plan as they currently exist and as they may subsequently be amended. 1.29 Scheduled Withdrawal shall mean a distribution of all or a portion of the Participant's Deferral Account attributable to Annual Deferrals as elected by the Participant pursuant to the provisions of Article 12 of the Plan. 1.30 Termination of Employment shall mean the Participant's employment with the Company or its subsidiaries ceases for any reason whatsoever, whether voluntary or involuntary, other than Retirement or death. 1.31 Unscheduled Withdrawal shall mean a distribution of all or a portion of the vested amount credited to the Participant's Deferral Account as requested by the Participant pursuant to the provisions of Article 12 of the Plan. 1.32 Valuation Date shall mean the last business day of the month in which Termination of Employment, Retirement, death, Scheduled Withdrawal, or an Unscheduled Withdrawal request occurs. For purposes of calculating installment payments, the Valuation Date shall mean the November 30 of the year preceding the Plan Year in which benefit payments are to be made. ARTICLE 2 Participation - Employee Deferrals 2.1 Participation Election. An Eligible Employee shall become a Participant in the Plan on the first day of the Plan Year coincident with or next following the date the employee becomes an Eligible Employee, provided such Eligible Employee has submitted to the Administrator a Participation Election, or the Eligible Employee has provided the Company with an election to defer Compensation scheduled to be received after the effective date of the Plan, so long as the election was made prior to the calendar year in which services relating to such Compensation were rendered. To be effective, the Eligible Employee must submit the Participation Election to the Administrator prior to the commencement of the period of service for which the Participation Election is made and during the enrollment period designated by the Administrator. 2.2 Annual Deferral Commitment. In the Participation Election, and subject to the restrictions in Article 3, the Eligible Employee shall designate the percentage rate of Compensation as the Annual Deferral Commitment for the covered Plan Year. 2.3 Continuation of Participation. An Eligible Employee who has participated in the Plan by making an Annual Deferral shall continue as a Participant in the Plan until such employee's Termination of Employment or all benefits under the Plan are paid. A Participant shall not be eligible to elect a new Annual Deferral Commitment unless the Participant is an Eligible Employee for the Plan Year for which the election is made. In the event a Participant transfers to a subsidiary of the Company and that subsidiary does not participate in the Plan, the Participant's Annual Deferral shall cease and the Participant's Deferral Account shall remain in effect until such time as the benefits are distributed as originally elected by the Participant in the Participation Election or until the Participant experiences Termination of Employment. ARTICLE 3 Employee Deferrals 3.1 Deferral Election. Employees designated as eligible to participate in the Plan may elect an Annual Deferral Commitment. Such election shall designate a specified percentage of either Base Salary and/or EVA Awards to be deferred. Annual Deferral Commitments under this Plan shall be irrevocable, except as provided under Sections 2.3, 11.2, 12.2.2 and 14.2 of the Plan. 3.2 Minimum Annual Deferral Commitment. The Annual Deferral Commitment must equal or exceed an amount determined by the Administrator. 3.3 Maximum Annual Deferral Commitment. The Annual Deferral Commitment from Base Salary for a Plan Year may not exceed seventy-five percent (75%) of Base Salary. The Annual Deferral Commitment from EVA Awards for a Plan Year may be less than or equal to one hundred percent (100%). Notwithstanding the foregoing, a Participant may not reduce Base Salary after deferrals to this Plan to an amount less than the OASDI Wage Base under FICA. 3.4 Vesting. The Participant's right to receive Compensation deferred under this Article 3 and earnings thereon shall be one hundred percent (100%) vested at all times. ARTICLE 4 Company Matching and Basic Credits 4.1 Amount. In the discretion of the Administrator, in the event a deferral under this Plan or a non-discrimination rule or limitation applicable to the Savings Plan causes a Participant to lose a Matching Credit and/or Basic Credit under the Savings Plan, the amount of the lost Matching Credit and/or Basic Credit will be credited to the Participant's Deferral Account under this Plan in such amounts as determined in accordance with the rules and procedures established by the Administrator. 4.2 Vesting. The Participant's right to receive Matching and/or Basic Credits and earnings thereon earned in any Plan Year shall be one hundred percent (100%) vested at all times. ARTICLE 5 Discretionary Credits 5.1 Eligibility and Amount. An Eligible Employee who is set forth in the attached Schedule A shall become a Participant in the Plan with respect to Discretionary Credits as of the date set forth in Schedule A and shall have Discretionary Credits credited to his Discretionary Account at such times and in such amounts as set forth in Schedule A. 5.2 Vesting. The Participant's right to receive Discretionary Credits under this Article 5 and earnings thereon shall be subject to the vesting schedule set forth in Schedule A that is applicable to such Participant. ARTICLE 6 Accounts 6.1 Accounts. Solely for record keeping purposes, the Company shall maintain a Deferral Account and a Discretionary Account for each Participant, as applicable. 6.2 Timing of Credits -- Pre-Termination. 6.2.1 Annual Deferrals. The Company shall credit to the Deferral Account the Annual Deferrals specified under Article 3, or otherwise allowed as set forth in Article 2.1, at the time the deferrals would otherwise have been paid to the Participant but for the Participation Election. 6.2.2 Matching and Basic Credits. Matching and Basic Credits under Article 4 shall be credited to the Deferral Account as of January 1 of the following Plan Year. 6.2.3 Discretionary Credits. Discretionary Credits under Article 5 shall be credited to the Discretionary Account as of January 1 of the following Plan Year, unless otherwise provided in Schedule A. 6.2.4 Assets. The Company shall be under no obligation to purchase any investments designated by the Participant. The Company shall credit gains or losses to the Accounts based on the Crediting Rate as of the date or dates specified by the Administrator. 6.3 Statement of Accounts. The Administrator shall provide periodically to each Participant a statement setting forth the balance of the Accounts maintained for such Participant. ARTICLE 7 Retirement Benefits 7.1 Amount. Upon Retirement, the Company shall pay to the Participant the amount of his vested Accounts in the form provided in Section 7.2 of the Plan, based on the balance of the vested Accounts as of the Valuation Date. If paid as a lump sum, the retirement benefit shall be equal to such balance. If paid in installments, the installments shall be paid in amounts that will amortize such balance with interest credited at the Crediting Rate over the period of time benefits are to be paid. For purposes of calculating installments, the Account shall be valued as of November 30 each year, and the subsequent installments will be adjusted for the next Plan Year according to procedures established by the Administrator. 7.2 Form of Retirement Benefits. The entire vested Accounts shall be paid monthly over a period of one hundred eighty (180) months or the number of whole months required to result in a monthly benefit of three hundred dollars ($300.00), if less. Notwithstanding anything herein to the contrary, the Participant may elect one of the following alternative forms of payment: (i) In a lump sum, or (ii) In installments paid monthly over a period of sixty (60), one hundred twenty (120), or one hundred eighty (180) months, or (iii)In a lump sum of a portion of the vested Accounts upon Retirement with the balance in installments paid monthly over a period of sixty (60), one hundred twenty (120), or one hundred eighty (180) months, or (iv) In installments paid annually over a period of five (5), ten (10), or fifteen (15) years, or (v) In a lump sum of a portion of the vested Accounts upon Retirement with the balance in installments paid annually over a period of five (5), ten (10), or fifteen (15) years. A Participant's election of an alternative form of payment must be made in the Participation Election or in such other form as designated by the Administrator. A Participant may make a separate election with respect to the Participant's Deferral Account and Discretionary Account. 7.3 Commencement of Benefits. Payments will commence within ninety (90) days following the last business day of the month in which Retirement occurs, unless a later date is otherwise elected by the Participant, which date shall not be later than the earlier of five (5) years after the Plan Year in which Retirement occurs or age seventy (70). Participants may elect an alternative form and time of payment as available under Section 7.2 or 7.3 by written election filed with the Administrator; provided, however, that if the Participant files the election less than thirteen (13) months prior to the date benefit payments are to commence, that portion of the Participant's vested Account that is subject to such election shall be reduced by ten percent (10%). 7.4 Small Benefit Exception. Notwithstanding any of the foregoing, if the sum of all vested benefits payable to the Participant is less than or equal to ten thousand dollars ($10,000), the Company may, in its sole discretion, elect to pay such benefits in a single lump sum. ARTICLE 8 Termination Benefits 8.1 If Termination of Employment occurs prior to Retirement, the Company shall pay to the Participant a termination benefit equal to the balance of the vested Accounts as of the Valuation Date. The Company shall pay the termination benefits in a single lump sum within ninety (90) days following the last business day of the month in which such Termination of Employment occurs. ARTICLE 9 Survivor Benefits 9.1 Pre-Retirement Survivor Benefit. If the Participant dies prior to the date Retirement benefits commence, the Company shall pay to the Participant's Beneficiary within ninety (90) days after the last business day of the month in which the Participant's death occurs, a benefit equal to the balance of the Participant's vested Accounts as of the Valuation Date. 9.2 Post-Retirement Survivor Benefit. If the Participant dies after the time Retirement Benefits have commenced, the Company shall pay to the Participant's Beneficiary an amount equal to the remaining vested benefits payable to the Participant under the Plan over the same period such benefits would have been paid to the Participant, in which event the Company shall credit interest on the unpaid balance of the vested Accounts at the Crediting Rate in effect during such period. 9.3 Changing Form of Benefit. Beneficiaries may petition the Company once, and only after the death of the Participant, for a change in the form of Retirement Benefits. The Company may, in its sole and absolute discretion, choose to grant or deny such a petition, and in the case of installment payments, reduce the period to the number of whole months required to result in a monthly benefit of at least three hundred dollars ($300.00). 9.4 Small Benefit Exception. Notwithstanding any of the foregoing, in the event the sum of all vested benefits payable to the Beneficiary is less than or equal to ten thousand dollars ($10,000), the Company may, in its sole discretion, elect to pay such benefits in a single lump sum. ARTICLE 10 Disability 10.1 For purposes of the Plan, a Participant shall be considered to have entered Retirement upon a determination by the Administrator that the Participant has suffered a Disability, and the Company shall pay the benefit described in Article 7. ARTICLE 11 Change in Control 11.1 Election. At the time a Participant is completing the initial Participation Election, the Participant may elect that, if a Change in Control occurs, the Participant (or after the Participant's death the Participant's Beneficiary) shall receive a lump sum payment of the balance of the Accounts within thirty (30) days after the Change of Control. Such balance shall be determined as of the last business day of the month thirty (30) days prior to the month in which the Change of Control occurs. 11.2 Benefit Reduction on Withdrawal. If a Participant has not made the election described in Section 11.1 above and, within two (2) years after a Change of Control, the Participant (or Beneficiary) elects to receive a distribution of the balance of the vested Accounts (determined as of the last business day of the month in which such election is received by the Administrator), the lump sum payment shall be reduced by an amount equal to five percent (5%) of the total balance of the vested Accounts (instead of the ten percent (10%) reduction otherwise provided for in Section 12.2, which amounts shall be forfeited to the Company) and shall be paid within ninety (90) days following the last business day of the month in which such election is received by the Administrator. If a Participant elects such a withdrawal, any ongoing Annual Deferral shall cease, and the Participant may not again be designated as an Eligible Employee with respect to Annual Deferrals until one entire Plan Year following the Plan Year in which such withdrawal was made has elapsed. ARTICLE 12 Scheduled and Unscheduled Withdrawals of Employee Deferrals 12.1 Scheduled Withdrawals. 12.1.1 Election. A Participant may, when making a Participation Election, elect to receive at a specified year in the future, a distribution while employed of all or a percentage of the Participant's Deferral Account attributable to Annual Deferrals, excluding earnings, to be made in subsequent Plan Years. The election of a Scheduled Withdrawal shall apply only to prospective Annual Deferrals, excluding earnings, and not to any previous Annual Deferrals or earnings thereon. 12.1.2 Timing and Form of Withdrawal. The year specified for the Scheduled Withdrawal must be at least two (2) entire Plan Years after the commencement of Annual Deferral Commitments covered by the Participation Election. The Company shall make a lump sum distribution of the amount elected in February of the Plan Year specified. 12.1.3 Remaining Deferral Account. The remainder, if any, of the Participant's Deferral Account shall continue in effect and shall be distributed in the future according to the terms of the Plan. 12.2 Unscheduled Withdrawals. 12.2.1 Election. A Participant (or Beneficiary if the Participant is deceased) may request an Unscheduled Withdrawal of all or a portion of the entire vested amount credited to the Participant's Deferral Account, which shall be paid in a single lump sum within ninety (90) days following the last business day of the month in which such election is received by the Administrator; provided, however, that (i) the minimum withdrawal shall be twenty-five percent (25%) of the Deferral Account balance, (ii) an election to withdraw seventy-five percent (75%) or more of the balance shall be deemed to be an election to withdraw the entire balance, (iii) such an election may be made only once in a Plan Year, and (iv) such Deferral Account shall be valued as of the last business day of the month in which the request was received by the Administrator. 12.2.2 Withdrawal Penalty. There shall be a forfeiture from the Deferral Account prior to an Unscheduled Withdrawal equal to ten percent (10%) of the Unscheduled Withdrawal (which amount shall be forfeited to the Company). If a Participant elects such a withdrawal, any ongoing Annual Deferrals shall cease, and the Participant may not again be designated as an Eligible Employee with respect to Annual Deferrals until one entire Plan Year following the Plan Year in which such withdrawal was made has elapsed. 12.2.3 Small Benefit Exception. Notwith standing any of the foregoing, if the sum of all benefits payable to the Participant or Beneficiary who has requested the Unscheduled Withdrawal is less than or equal to ten thousand dollars ($10,000), the Company may, in its sole discretion, elect to pay out the entire Deferral Account (reduced by the ten percent (10%) penalty) in a single lump sum. ARTICLE 13 Restoration of Benefits 13.1 Purpose. The purpose of this Article 13 is to restore retirement benefits to certain Participants whose benefit under the Retirement Plan is reduced due to participation in the Plan. The benefits under this Article 13 shall be determined without reference to Articles 2 through 12 and Article 16 unless otherwise specifically referenced in this Article 13. 13.2 Eligibility. A Participant shall be eligible for a benefit under this Article 13 if: (i) The Participant is also a participant in the Retirement Plan; (ii) The Participant has made employee deferrals under Articles 2 and 3; and (iii) The Participant is not eligible to participate in the Milacron Supplemental Pension Plan, Milacron Supplemental Retirement Plan or the Milacron Supplemental Executive Retirement Plan. 13.3 Benefit. A Participant's vested benefit under this Article 13 shall be a monthly amount equal to the amount determined under the terms of the Retirement Plan as of the Participant's or surviving spouse's "benefit commencement date" (as defined in the Retirement Plan) in the form of payment as elected or determined under the Retirement Plan, calculated using the Participant's "highest average compensation" (as defined under the Retirement Plan, except that "compensation" for a year shall include employee deferrals made under Articles 2 and 3 of the Plan with respect to that year) reduced by the monthly amount determined as of the Participant's or surviving spouse's benefit commencement date under the Retirement Plan, in the form of payment as elected or determined under the Retirement Plan, calculated without regard to this Article 13. 13.4 Benefit Commencement Date and Payment Options. Benefits under this Article 13 shall commence at the same time and in the same payment form as the Participant or surviving spouse has elected under the Retirement Plan and shall cease at the time benefits cease under the Retirement Plan. Notwithstanding the foregoing, the Company may, in its sole discretion, elect to pay such benefits in a single lump sum determined using the actuarial assumptions used to calculate lump sum amounts as set forth in the Retirement Plan. 13.5 Vesting. Unless forfeited pursuant to Sections 13.6 or 13.7, a Participant's benefit under this Article 13 shall become vested at the same time the Participant's benefit under the Retirement Plan becomes vested. 13.6 Fraud. In the event that a Participant shall at any time be dismissed for, or convicted of a crime involving, dishonesty or fraud on his part in his relationship with the Company and its subsidiaries, all benefits which would otherwise be payable to him under this Article 13 shall be forfeited. 13.7 Competition. By accepting payment of any benefit under this Article 13, the Participant agrees not to be employed, or consult, in any business which is, or is about to be, engaged in a business of the same or substantially the same nature as the businesses of the Company and its subsidiaries without prior written consent of the Company, and breach of this agreement by the Participant shall be cause for termination of payment of benefits under this Article 13. ARTICLE 14 Conditions Related to Benefits 14.1 Nonassignability. The benefits provided under the Plan may not be alienated, assigned, transferred, pledged or hypothecated by or to any person or entity, at any time or any manner whatsoever. These benefits shall be exempt from the claims of creditors of any Participant or other claimants and from all orders, decrees, levies, garnishment or executions against any Participant to the fullest extent allowed by law. 14.2 Financial Hardship Distribution. Upon a petition from the Participant to the Administrator and a subsequent finding by the Administrator that the Participant or the Beneficiary has suffered a Financial Hardship, the Administrator may in its sole discretion, permit the Participant to cease any ongoing deferrals and accelerate distribution of the Participant's Deferral Account under the Plan in the amount reasonably necessary to alleviate such Financial Hardship with such amount paid within ninety (90) days following the last business day of the month in which the petition is received by the Administrator. If a distribution is to be made to a Participant on account of Financial Hardship, the Participant may not make deferrals under the Plan until one entire Plan Year following the Plan Year in which a distribution based on Financial Hardship was made has elapsed. 14.3 No Right to Company Assets. The benefits paid under the Plan shall be paid from the general funds of the Company, and the Participant and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. 14.4 Protective Provisions. The Participant shall cooperate with the Company by furnishing any and all information requested by the Administrator, in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Administrator may deem necessary and taking such other actions as may be requested by the Administrator. If the Participant refuses to cooperate, the Company shall have no further obligation to the Participant under the Plan. 14.5 Withholding. The Participant or the Beneficiary shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no other arrangements are made, the Company may provide, at its discretion, for such withholding and tax payments as may be required. ARTICLE 15 Administration of Plan 15.1 The Administrator shall administer the Plan and interpret, construe and apply its provisions in accordance with its terms. The Administrator shall further establish, adopt or revise such rules and regulations as it may deem necessary or advisable for the administration of the Plan. All decisions of the Administrator shall be final and binding. The individuals serving on the Personnel and Compensation Committee of the Company's Board of Directors, and their designees for purposes of administering the Plan, shall, except as prohibited by law, be indemnified and held harmless by the Company from any and all liabilities, costs, and expenses (including legal fees), to the extent not covered by liability insurance arising out of any action taken by any member of the Committee with respect to the Plan, unless such liability arises from the individual's own gross negligence or willful misconduct. ARTICLE 16 Beneficiary Designation 16.1 Designation. The Participant shall have the right, at any time, to designate any person or persons as Beneficiary (both primary and contingent) to whom payment under the Plan shall be made in the event of the Participant's death. The Beneficiary designation shall be effective when it is submitted in writing to the Administrator during the Participant's lifetime on a form prescribed by the Administrator, 16.2 Revocation. The submission of a new Beneficiary designation shall cancel all prior Beneficiary designations. Any finalized divorce or marriage of a Participant subsequent to the date of a Beneficiary designation shall revoke such designation, unless in the case of divorce the previous spouse was not designated as Beneficiary and unless in the case of marriage the Participant's new spouse has previously been designated as Beneficiary. The spouse of a married Participant shall consent to any designation of a Beneficiary other than the spouse. 16.3 Failure to Designate. If a Participant fails to designate a Beneficiary as provided above, or if the Beneficiary designation is revoked by marriage, divorce, or otherwise without execution of a new designation, or if every person designated as Beneficiary predeceases the Participant or dies prior to complete distribution of the Participant's benefits, then the Administrator shall direct the distribution of such benefits to the Participant's estate. ARTICLE 17 Amendment and Termination of Plan 17.1 Amendment of Plan. Subject to the terms of Article 17.3, the Company may at any time amend the Plan in whole or in part, provided, however, that such amendment (i) shall not decrease the balance of the Participant's Account at the time of such amendment and (ii) shall not retroactively decrease the applicable Crediting Rates of the Plan prior to the time of such amendment. The Company may amend the Crediting Rates of the Plan prospectively, or the method used for the determination of Crediting Rates, in which case the Company shall notify the Participant of such amendment in writing within thirty (30) days after such amendment. 17.2 Termination of Plan. Subject to the terms of Article 17.3, the Company may at any time terminate the Plan. If the Company terminates the Plan, the date of such termination shall be treated as the date of Termination of Employment for the purpose of calculating Plan benefits, and the Company shall pay to the Participant the vested benefits the Participant is entitled to receive under the Plan in either a lump sum within ninety (90) days or in installments over three (3) years, as determined by the Administrator. 17.3 Amendment or Termination After Change in Control. Notwithstanding the foregoing, the Company shall not amend or terminate the Plan without the prior written consent of affected Participants for a period of two calendar years following a Change in Control and shall not thereafter amend or terminate the Plan in any manner which affects any Participant (or Beneficiary of a deceased Participant) who commences receiving payment of benefits under the Plan prior to the end of such two year period following a Change in Control. 17.4 Company Action. Except as provided in Section 17.3, the Company's power to amend or terminate the Plan shall be exercisable by the Company's Board of Directors or by the Administrator. 17.5 Constructive Receipt Termination. In the event the Administrator determines that amounts deferred under the Plan have been constructively received by Participants and must be recognized as income for federal income tax purposes, the Plan shall terminate and distributions shall be made to Participants in accordance with the provisions of Section 17.2 or as may be determined by the Administrator. The determination of the Administrator under this Section 17.5 shall be binding and conclusive. ARTICLE 18 Miscellaneous 18.1 Successors of the Company. The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. 18.2 ERISA Plan. The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. 18.3 Trust. The Company shall be responsible for the payment of all benefits under the Plan. At its discretion, the Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. Benefits paid to the Participant from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan. 18.4 Employment Not Guaranteed. Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Company or its subsidiaries. 18.5 Gender, Singular and Plural. All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular. 18.6 Captions. The captions of the articles and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 18.7 Validity. If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of the Plan. 18.8 Waiver of Breach. The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant. 18.9 Applicable Law. The Plan shall be governed and construed in accordance with the laws of Ohio except where the laws of Ohio are preempted by ERISA. 18.10 Notice. Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of the Company, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark. 18.11 Incapacity. If a Participant entitled to receive a benefit under this Plan is deemed by the Company or is adjudged by a court of competent jurisdiction to be legally incapable of giving valid receipt and discharge for such benefit, such benefit shall be paid to such person or persons as the Co -----END PRIVACY-ENHANCED MESSAGE-----