-----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, U0jTcu9l2GMruESlDkerC9sot7aBRRkMhicHiY+7x1ESsLeoHZTmRXmEU+Lx6d70 CK96faU5xtNf3fGypPRwxw== 0000075234-97-000012.txt : 19970725 0000075234-97-000012.hdr.sgml : 19970725 ACCESSION NUMBER: 0000075234-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970724 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OWENS CORNING CENTRAL INDEX KEY: 0000075234 STANDARD INDUSTRIAL CLASSIFICATION: ABRASIVE ASBESTOS & MISC NONMETALLIC MINERAL PRODUCTS [3290] IRS NUMBER: 344323452 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03660 FILM NUMBER: 97644495 BUSINESS ADDRESS: STREET 1: OWENS CORNING WORLD HEADQUARTERS STREET 2: ONE OWENS CORNING PKWY CITY: TOLEDO STATE: OH ZIP: 43659 BUSINESS PHONE: 4192488000 MAIL ADDRESS: STREET 1: OWENS CORNING WORLD HEADQUARTERS STREET 2: ONE OWENS CORNING PARKWAY CITY: TOLEDO STATE: OH ZIP: 43659 FORMER COMPANY: FORMER CONFORMED NAME: OWENS CORNING FIBERGLAS CORP DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended June 30, 1997 Commission File No. 1-3660 Owens Corning One Owens Corning Parkway Toledo, Ohio 43659 Area Code (419) 248-8000 A Delaware Corporation I.R.S. Employer Identification No. 34-4323452 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 / / Shares of common stock, par value $.10 per share, outstanding at June 30, 1997 53,338,336 - 2 - PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OWENS CORNING AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME Quarter Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 (In millions of dollars, except share data) NET SALES $ 1,017 $ 956 $ 1,892 $ 1,805 COST OF SALES 778 702 1,430 1,334 Gross margin 239 254 462 471 OPERATING EXPENSES Marketing and administrative expenses 122 115 244 242 Science and technology expenses 17 20 34 41 Provision for asbestos litigation claims - 875 - 875 Other (5) 6 2 3 Total operating expenses 134 1,016 280 1,161 INCOME (LOSS) FROM OPERATIONS 105 (762) 182 (690) Cost of borrowed funds 23 18 42 36 INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 82 (780) 140 (726) Provision (credit) for income taxes (Note 5) 24 (304) 43 (288) INCOME (LOSS) BEFORE EQUITY IN NET INCOME OF AFFILIATES 58 (476) 97 (438) Equity in net income of affiliates 5 3 8 4 NET INCOME (LOSS) $ 63 $ (473) $ 105 $ (434) NET INCOME (LOSS) PER COMMON SHARE Primary net income (loss) per share $ 1.17 $(9.19) $ 1.96 $(8.43) Fully diluted net income (loss) per share $ 1.11 $(9.19) $ 1.87 $(8.43) Weighted average number of common shares outstanding and common equivalent shares during the period (in millions) Primary 53.8 51.5 53.6 51.5 Assuming full dilution 58.5 51.5 58.2 51.5 The accompanying notes are an integral part of this statement.
- 3 - OWENS CORNING AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET June 30, December 31, 1997 1996 ASSETS (In millions of dollars) CURRENT Cash and cash equivalents $ 19 $ 45 Receivables 567 314 Inventories (Note 6) 541 340 Insurance for asbestos litigation claims - current portion (Note 8 - Item A) 50 100 Deferred income taxes 147 106 VEBA trust 3 19 Income tax receivable 11 4 Other current assets (Note 3) 95 30 Total current 1,433 958 OTHER Insurance for asbestos litigation claims (Note 8 - Item A) 440 454 Asbestos costs to be reimbursed - Fibreboard (Note 8 - Item B) 110 - Deferred income taxes 394 474 Goodwill (Note 3) 704 286 Investments in affiliates 73 64 Other noncurrent assets (Note 4) 241 155 Total other 1,962 1,433 PLANT AND EQUIPMENT, at cost Land 62 58 Building and leasehold improvements 640 614 Machinery and equipment 2,462 2,384 Construction in progress 306 285 3,470 3,341 Less--Accumulated depreciation (1,789) (1,819) Net plant and equipment 1,681 1,522 TOTAL ASSETS $ 5,076 $ 3,913
The accompanying notes are an integral part of this statement. - 4 - OWENS CORNING AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Continued) June 30, December 31, 1997 1996 (In millions of dollars) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities $ 694 $ 705 Reserve for asbestos litigation claims - current portion (Note 8 - Item A) 300 300 Short-term debt 156 96 Long-term debt - current portion 23 20 Total current 1,173 1,121 LONG-TERM DEBT (Note 4) 1,854 818 OTHER Reserve for asbestos litigation claims (Note 8 - Item A) 1,485 1,670 Asbestos claims settlements - Fibreboard (Note 8 - Item B) 88 - Long-term debt associated with asbestos - Fibreboard (Note 8 - Item B) 26 - Other employee benefits liability 340 349 Pension plan liability 66 63 Other (Note 8 - Item B) 178 161 Total other 2,183 2,243 COMPANY OBLIGATED CONVERTIBLE SECURITY OF SUBSIDIARY HOLDING SOLELY PARENT DEBENTURES (MIPS) 194 194 MINORITY INTEREST 25 21 STOCKHOLDERS' EQUITY Common stock 653 606 Deficit (980) (1,072) Foreign currency translation adjustments (8) (1) Other (18) (17) Total stockholders' equity (353) (484) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,076 $ 3,913
The accompanying notes are an integral part of this statement. - 5 - OWENS CORNING AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Quarter Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 (In millions of dollars) NET CASH FLOW FROM OPERATIONS Net income (loss) $ 63 $ (473) $ 105 $(434) Reconciliation of net cash provided by operating activities: Noncash items: Provision for depreciation and amortization 39 35 76 68 Provision (credit) for deferred income taxes 39 (345) 56 (345) Provision for asbestos litigation claims (Note 8 - Item A) - 875 - 875 Other (6) 1 (7) 2 (Increase) decrease in receivables (56) (34) (163) (101) (Increase) decrease in inventories (1) (18) (92) (69) Increase (decrease) in accounts payable and accrued liabilities (31) 2 (90) (66) Increase (decrease) in accrued income taxes (15) 7 (26) 55 Proceeds from insurance for asbestos litigation claims 24 33 64 63 Payments for asbestos litigation claims (90) (86) (185) (121) Other (38) 23 (57) (14) Net cash flow from operations (72) 20 (319) (87) NET CASH FLOW FROM INVESTING Additions to plant and equipment (57) (90) (131) (167) Investment in subsidiaries, net of cash acquired (Note 3) (10) (39) (30) (39) Proceeds from the sale of affiliate - - - 55 Other (4) (6) (9) (12) Net cash flow from investing $(71) $ (135) $ (170) $ (163)
The accompanying notes are an integral part of this statement. - 6 - OWENS CORNING AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) Quarter Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 (In millions of dollars) NET CASH FLOW FROM FINANCING Net additions to long-term credit facilities (Note 4) $ 26 $ 86 $ 283 $ 184 Other additions to long-term debt 108 13 136 13 Other reductions to long-term debt (39) (20) (41) (32) Net increase in short-term debt 45 47 62 88 Dividends paid (4) - (7) - Other 2 - 21 2 Net cash flow from financing 138 126 454 255 Effect of exchange rate changes on cash 1 - (1) 1 Opening cash balance of Fibreboard 10 - 10 - Net increase (decrease) in cash and cash equivalents 6 11 (26) 6 Cash and cash equivalents at beginning of period 13 13 45 18 Cash and cash equivalents at end of period $ 19 $ 24 $ 19 $ 24
The accompanying notes are an integral part of this statement. - 7 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Quarter Six Months Ended Ended June 30, June 30, 1. SEGMENT DATA 1997 1996 1997 1996 (In millions of dollars) NET SALES Industry Segments Building Materials United States $ 600 $ 570 $1,100 $1,040 Europe 72 63 146 127 Canada and other 41 30 72 54 Total Building Materials 713 663 1,318 1,221 Composite Materials United States 161 152 299 302 Europe 103 107 200 215 Canada and other 40 34 75 67 Total Composite Materials 304 293 574 584 Intersegment sales Building Materials - - - - Composite Materials 29 29 56 54 Eliminations (29) (29) (56) (54) Net sales $1,017 $ 956 $1,892 $1,805 Geographic Segments United States $ 761 $ 722 $1,399 $1,342 Europe 175 170 346 342 Canada and other 81 64 147 121 Total $1,017 $ 956 $1,892 $1,805 Intersegment sales United States 31 28 60 45 Europe 7 13 16 21 Canada and other 26 18 48 39 Eliminations (64) (59) (124) (105) Net sales $1,017 $ 956 $1,892 $1,805
- 8 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SEGMENT DATA (CONTINUED) Quarter Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 (In millions of dollars) INCOME (LOSS) FROM OPERATIONS (1) Industry Segments Building Materials United States $ 70 $ 70 $ 107 $ 85 Europe 3 3 8 8 Canada and other 3 - 7 (4) Total Building Materials 76 73 122 89 Composite Materials United States 50 36 90 68 Europe 2 20 9 39 Canada and other - 6 2 9 Total Composite Materials 52 62 101 116 General corporate expense (23) (897) (41) (895) Income (loss) from operations 105 (762) 182 (690) Cost of borrowed funds (23) (18) (42) (36) Income (loss) before provision for income taxes $ 82 $(780) $ 140 $(726) Geographic Segments United States $120 $ 106 $ 197 $ 153 Europe 5 23 17 47 Canada and other 3 6 9 5 General corporate expense (23) (897) (41) (895) Income (loss) from operations 105 (762) 182 (690) Cost of borrowed funds (23) (18) (42) (36) Income (loss) before provision for income taxes $ 82 $(780) $ 140 $(726)
(1) Income from operations for the quarter and six months ended June 30, 1996 includes the Company's pretax charge of $875 million for asbestos litigation claims to be received after 1999 all of which was recorded as an increase in general corporate expense. Income from operations for the six months ended June 30, 1996 also includes the Company's pretax gain of $37 million from the sale of its ownership interest in its Japanese affiliate Asahi Fiber Glass Co. Ltd., which was recorded as a reduction in general corporate expense. Also included are special charges totaling $42 million including valuation adjustments associated with prior divestitures, major product line productivity initiatives and a contribution to the Owens-Corning Foundation. The impact of these special items was to reduce income from operations for Building Materials in the United States, Europe, and Canada and other by $19 million, $1 million and $2 million, respectively, Composite Materials in the United States and Europe by $3 million and $2 million, respectively, and to increase general corporate expense by $15 million. - 9 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. GENERAL The financial statements included in this Report are condensed and unaudited, pursuant to certain Rules and Regulations of the Securities and Exchange Commission, but include, in the opinion of the Company, adjustments necessary for a fair statement of the results for the periods indicated, which, however, are not necessarily indicative of results which may be expected for the full year. In connection with the condensed financial statements and notes included in this Report, reference is made to the financial statements and notes thereto contained in the Company's 1996 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. 3. ACQUISITIONS At the end of the second quarter of 1997, the Company completed its cash tender offer to acquire the outstanding shares of Fibreboard Corporation, a North American manufacturer of vinyl siding and accessories, as well as manufactured stone. Additionally, Fibreboard operates more than 130 company-owned distribution centers in 32 states. At the time of acquisition, management formulated a plan to divest Fibreboard's calcium silicate insulation and metal jacket business (Pabco). Pabco's assets are included in other current assets as available for sale. The purchase price of Fibreboard was $657 million, including $138 million of debt assumed, the majority of which was financed through borrowings on the Company's new long-term credit facility early in the third quarter of 1997 (see Note 4). The following unaudited table presents the pro forma results of operations for the quarter and six months ended June 30, 1997 and 1996, assuming the acquisition of Fibreboard occurred at the beginning of each period presented. These results include certain adjustments, primarily for depreciation and amortization, interest and other expenses directly attributable to the acquisition and are not necessarily indicative of what the results would have been had the transactions actually occurred at the beginning of the periods presented. The pro forma results do not include operations that were discontinued by Fibreboard prior to the acquisition, or Pabco. Quarter Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 (In millions of dollars, except share data) Net Sales $1,197 $1,122 $2,223 $2,092 Income from continuing operations 61 (476) 99 (443) Fully diluted earnings per share from continuing operations $ 1.07 $(9.24) $ 1.76 $(8.59)
Excluding the Fibreboard acquisition discussed above, the Company completed other 1997 acquisitions in the Building Materials segment, one in Europe, the other in the U.S. and two acquisitions in Composite Materials impacting the U.S. and Canada and other geographic segments. The aggregate purchase price of these acquisitions, including possible subsequent contingent consideration, was $47 million. These acquisitions exchanged 340,000 shares of the Company's common stock and $30 million in cash. The pro forma effect of these acquisitions was not material to net income for the quarters or six months ended June 30, 1997 and 1996. - 10 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. ACQUISITIONS (Continued) All of the Company's acquisitions have been accounted for using the purchase method of accounting, whereby the assets acquired and liabilities assumed have been recorded at their fair values and the results of operations of the acquisitions have been included in the Company's consolidated financial statements subsequent to the acquisitions' dates. The purchase price allocations were based on preliminary estimates of fair market value and are subject to revision. The estimated fair value of assets acquired from Fibreboard, including goodwill was $923 million, liabilities assumed totaled $404 million, $138 million of which was debt. The 1997 acquisitions include goodwill of $424 million, which is being amortized over 40 years. 4. LONG-TERM DEBT On June 26, 1997 the Company entered into a long-term revolving credit agreement with a maximum commitment equivalent to $2 billion U.S., of which portions can be denominated in Canadian dollars, Belgian francs, British pounds or U.S. dollars. Issuance costs incurred in conjunction with the establishment of this new credit facility are included in other noncurrent assets and being amortized over the term of the facility. The agreement allows the Company to borrow under multiple options, which provide for varying terms and interest rates. The commitment fee, charged on the entire commitment, is a sliding scale based on credit ratings and was .15% at June 30, 1997. Early in the third quarter of 1997 the Company borrowed $1.04 billion at LIBOR plus .275% under the new facility. This new facility replaces the Company's previous U.S and Canadian facilities, and select short term debt instruments. The proceeds borrowed were used to pay off these instruments and to fund the acquisition of Fibreboard, which included the purchase of Fibreboard's outstanding shares as well as the refinancing of substantially all of Fiberboard's preacquisition debt. 5. INCOME TAXES The reconciliation between the U.S. federal statutory rate and the Company's effective income tax rate is: Quarter Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 U.S. federal statutory rate 35% (35)% 35% (35)% Adjustment of deferred tax asset allowance - - (5) (1) State and local income taxes 3 (3) 3 (4) Other (8) (1) (2) - Effective tax rate 30% (39)% 31% (40)%
During the first quarter of 1996, the Company reversed approximately $7 million of its valuation allowances on the operating loss carryforwards of a foreign subsidiary as management determined that the loss carryforwards would be realizable. In 1997, the Company reversed the remaining $7 million valuation allowance on this loss carryforward. - 11 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. INVENTORIES June 30, December 31, 1997 1996 (In millions of dollars) Inventories are summarized as follows: Finished goods $ 410 $ 273 Materials and supplies 216 149 FIFO inventory 626 422 Less: Reduction to LIFO basis (85) (82) $ 541 $ 340
Approximately $263 million and $216 million of FIFO inventories were valued using the LIFO method at June 30, 1997 and December 31, 1996, respectively. 7. CONSOLIDATED STATEMENT OF CASH FLOWS Cash payments for income taxes, net of refunds, and cost of borrowed funds are summarized as follows: Quarter Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 (In millions of dollars) Income taxes $ 3 $ 8 $ 9 $(9) Cost of borrowed funds 43 33 56 39
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Consolidated Statement of Cash Flows does not reflect the acquisition of Fibreboard as no cash was exchanged until early July (see Notes 3 and 4). 8. CONTINGENT LIABILITIES ASBESTOS LIABILITIES ITEM A.OWENS CORNING (EXCLUDING FIBREBOARD) Owens Corning is a co-defendant with other former manufacturers, distributors and installers of products containing asbestos and with miners and suppliers of asbestos fibers (collectively, the "Producers") in personal injury and property damage litigation. The personal injury claimants generally allege injuries to their health caused by inhalation of asbestos fibers from Owens Corning's products. Most of the claimants seek punitive damages as well as compensatory damages. The property damage claims generally allege property damage to school, public and commercial buildings resulting from the presence of products containing asbestos. Virtually all of the asbestos-related lawsuits against Owens Corning arise out of its - 12 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. CONTINGENT LIABILITIES (Continued) manufacture, distribution, sale or installation of an asbestos-containing calcium silicate, high temperature insulation product, the manufacture of which was discontinued in 1972. Status As of June 30, 1997, approximately 165,700 asbestos personal injury claims were pending against Owens Corning, of which 16,700 were received in the first six months of 1997. Owens Corning received approximately 36,400 such claims in 1996 and 55,900 in 1995. Many of the recent claims appear to be the product of mass screening programs and not to involve malignancies or other significant asbestos related impairment. Owens Corning believes that at least 40,000 of the recent claims involve plaintiffs whose pulmonary function tests ("PFTs") were improperly administered or manipulated by the testing laboratory or otherwise inconsistent with proper medical practice, and it is investigating a number of testing organizations and their methods. In 1996 Owens Corning filed suit in federal court in New Orleans, Louisiana against the owners and operators of certain pulmonary function testing laboratories in the southeastern U.S. challenging such improper testing practices. This matter is now in active pre-trial discovery. In January 1997, Owens Corning filed a similar suit in federal court in Jackson, Mississippi against the owner of an additional testing laboratory. During 1996 Owens Corning engaged in discussions with a group of approximately 30 leading plaintiffs' law firms to explore approaches toward resolution of its asbestos liability. Agreements with the various firms not to file claims against Owens Corning except for those involving malignancies, most of which agreements expired on or before January 1, 1997, may have impacted the number of cases received by Owens Corning during 1996 and the first two quarters of 1997. Through June 30, 1997, Owens Corning had resolved (by settlement or otherwise) approximately 192,100 asbestos personal injury claims. This number includes cases resolved by two orders of dismissal for lack of medical proof, covering approximately 18,900 federal maritime cases which named Owens Corning as a defendant, resulting in a 15,600 case reduction in the backlog after reduction for duplicate cases and cases previously settled. Of these cases, approximately 11,700 were dismissed in 1996, with the remaining 3,900 being dismissed in the first quarter of 1997. During 1996, 1995 and 1994, Owens Corning resolved approximately 60,600 asbestos personal injury claims, over 99% without trial, and incurred total indemnity payments of $626 million (an average of about $10,300 per case). Owens Corning's indemnity payments have varied considerably over time and from case to case, and are affected by a multitude of factors. These include the type and severity of the disease sustained by the claimant (i.e., mesothelioma, lung cancer, other types of cancer, asbestosis or pleural changes); the occupation of the claimant; the extent of the claimant's exposure to asbestos-containing products manufactured, sold or installed by Owens Corning; the extent of the claimant's exposure to asbestos-containing products manufactured, sold or installed by other Producers; the number and financial resources of other Producer defendants; the jurisdiction of suit; the presence or absence of other possible causes of the claimant's illness; the availability or not of legal defenses such as the statute of limitations or state of the art; whether the claim was resolved on an individual basis or as part of a group settlement; and whether the claim proceeded to an adverse verdict or judgment. - 13 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. CONTINGENT LIABILITIES (Continued) Insurance As of June 30, 1997, Owens Corning had approximately $265 million in unexhausted insurance coverage (net of deductibles and self-insured retentions and excluding coverage issued by insolvent carriers) under its liability insurance policies applicable to asbestos personal injury claims. This insurance, which is substantially confirmed, includes both products hazard coverage and primary level non- products coverage. Portions of this coverage are not available until 1998 and beyond under agreements with the carriers confirming such coverage. All of Owens Corning's liability insurance policies cover indemnity payments and defense fees and expenses subject to applicable policy limits. In addition to its confirmed primary level non-products insurance, Owens Corning has a significant amount of unconfirmed potential non-products coverage with excess level carriers. For purposes of calculating the amount of insurance applicable to asbestos liabilities, Owens Corning has estimated its probable recoveries in respect of this additional non-products coverage at $225 million, which amount was recorded in the second quarter of 1996. This coverage is unconfirmed and the amount and timing of recoveries from these excess level policies will depend on subsequent negotiations or proceedings. Reserve The Company's financial statements include a reserve for the estimated cost associated with Owens Corning's asbestos personal injury claims. This reserve was established principally through a charge to income in 1991 for the costs of asbestos claims expected to be received through 1999 and an additional $1.1 billion non-recurring, noncash charge to income (before taking into account the probable non-products insurance recoveries) during the second quarter of 1996 for cases that may be received subsequent to 1999. In establishing the reserve, Owens Corning took into account, among other things, the effect of federal court decisions relating to punitive damages and the certification of class actions in asbestos cases, the discussions with the group of plaintiffs' law firms referred to above, the results of its continuing investigations of medical screening practices of the kind at issue in the federal PFT lawsuits, recent developments as to the prospects for federal and state tort reform, the continued rate of case filings at historically high levels, additional information on filings received during the 1993-1995 period and other factors. The combined effect of the $1.1 billion charge and the $225 million probable additional non-products insurance recovery was an $875 million charge in the second quarter of 1996. Owens Corning's estimated total liabilities in respect of indemnity and defense costs associated with pending and unasserted asbestos personal injury claims that may be received in the future, and its estimated insurance recoveries in respect of such claims, are reported separately as follows: - 14 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. CONTINGENT LIABILITIES (Continued) June 30, December 31, 1997 1996 (In millions of dollars) Reserve for asbestos litigation claims Current $ 300 $ 300 Other 1,485 1,670 Total Reserve 1,785 1,970 Insurance for asbestos litigation claims Current 50 100 Other 440 454 Total Insurance 490 554 Net Owens Corning Asbestos Liability $ 1,295 $ 1,416
Owens Corning cautions that such factors as the number of future asbestos personal injury claims received by it, the rate of receipt of such claims, and the indemnity and defense costs associated with asbestos personal injury claims, as well as the prospects for confirming additional insurance, including the additional $225 million in non- products coverage referenced above, are influenced by numerous variables that are difficult to predict, and that estimates, such as Owens Corning's, which attempt to take account of such variables, are subject to considerable uncertainty. Owens Corning believes that its estimate of liabilities and insurance will be sufficient to provide for the costs of all pending and future asbestos personal injury claims that involve malignancies or significant asbestos- related functional impairment. While such estimates cover unimpaired claims, the number and cost of unimpaired claims are much harder to predict and such estimates reflect Owens Corning's belief that such claims have little or no value. Owens Corning will continue to review the adequacy of its estimate of liabilities and insurance on a periodic basis and make such adjustments as may be appropriate. Management Opinion Although any opinion is necessarily judgmental and must be based on information now known to Owens Corning, in the opinion of management, while any additional uninsured and unreserved costs which may arise out of pending personal injury and property damage asbestos claims and additional similar asbestos claims filed in the future may be substantial over time, management believes that any such additional costs will not impair the ability of the Company to meet its obligations, to reinvest in its businesses or to take advantage of attractive opportunities for growth. ITEM B. FIBREBOARD (EXCLUDING OWENS CORNING) Prior to 1972, Fibreboard manufactured insulation products containing asbestos. Fibreboard has since been named as a defendant in many thousands of personal injury claims for injuries allegedly caused by asbestos exposure as well as in asbestos property damage cases. - 15 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. CONTINGENT LIABILITIES (Continued) As of June 30, 1997, approximately 97,600 asbestos personal injury claims were pending against Fibreboard, of which 21,200 were received in the first six months of 1997. Fibreboard received approximately 32,900 such claims in 1996 and 20,700 in 1995. These claims and most of the pending claims are made against the Fibreboard Global Settlement Trust and are subject to the Global Settlement injunction discussed below. In the first six months of 1997, Fibreboard resolved approximately 1,800 asbestos personal injury claims at an average cost of $22,000 per claim. Approximately 2,700 such claims were resolved in 1996 at an approximate average cost of $34,000 per claim and 14,500 were resolved in 1995 at an approximate average cost of $12,000 per claim. The average cost per claim has increased recently from the historical average cost of $11,000 per claim. This is due to the absence of group settlements, where large numbers of low value cases are traditionally settled along with higher value cases, and due to the fact that in 1996 and 1997 a relatively small number of individual cases involving more seriously injured plaintiffs were settled as exigent claims (all of which are malignancy claims) during the pendency of the Global Settlement injunction discussed below. As of June 30, 1997, amounts payable under various asbestos claim settlement agreements were $88 million. These amounts are payable either from the Settlement Trust discussed below or directly by the insurers. Amounts due from insurers in payment of these or past claims paid directly by Fibreboard, as of June 30, 1997 are $110 million. The asbestos-related long-term debt of $26 million consists of amounts advanced under a reimbursement agreement; interest accrues at prime minus 2%. Fibreboard has unique insurance coverage of personal injury claims. During 1993, Fibreboard and its insurers, Continental Casualty Company (Continental) and Pacific Indemnity Company (Pacific), entered into the Insurance Settlement, and Fibreboard, its insurers and representatives of a nationwide class of future asbestos plaintiffs entered into the Global Settlement. These agreements are interrelated and require final court approval. On July 26, 1996, the U.S. Fifth Circuit Court of Appeals affirmed the Global Settlement by a majority decision and the Insurance Settlement by a unanimous decision. The parties opposing the Global Settlement filed petitions seeking review with the U.S. Supreme Court. On June 27, 1997, the Supreme Court granted the petition, vacated the judgment and remanded the case to the Fifth Circuit for further consideration in light of the Supreme Court's decision in the Georgine class action involving asbestos claims filed against members of the Center for Claims Resolution. In light of this ruling, final resolution of the Global Settlement may not be known until 1998 or later. On October 24, 1996, the statutory time period for objectors to seek further judicial review of the Insurance Settlement lapsed with no petition for review having been filed with the U.S. Supreme Court. Therefore, the Insurance Settlement is now final and not subject to further appeal. - 16 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. CONTINGENT LIABILITIES (Continued) The parties will continue to seek approval of the Global Settlement. If the Global Settlement becomes effective, all asbestos-related personal injury liabilities of Fibreboard will be resolved through insurance funds and existing corporate reserves. A permanent injunction barring the filing of any further claims against Fibreboard or its insurers is included as part of the Global Settlement. Upon final approval, Fibreboard's insurers are required to pay existing settlements and assume full responsibility for any claims filed before August 27, 1993, the date the settling parties reached agreement on the terms of the Global Settlement. A court-supervised claims processing trust ("Settlement Trust") will be responsible for resolving claims which were not filed against Fibreboard before August 27, 1993, and any further claims that might otherwise be asserted against Fibreboard in the future. The Settlement Trust will be funded principally by Continental and Pacific. These insurers have placed $1,525 million in an interest-bearing escrow account pending court approval of the settlements. Fibreboard is responsible for contributing $10 million plus accrued interest toward the Settlement Trust, which it will obtain from other remaining insurance sources and existing reserves. The Home Insurance Company has already paid $9.9 million into the escrow account on behalf of Fibreboard, in satisfaction of an earlier settlement agreement. The balance of the escrow account was $1,691 million at June 30, 1997, after payment of interim expenses and exigent claims associated with the Global Settlement. If the Global Settlement becomes effective, Fibreboard would have no on-going or future liabilities for asbestos personal injury claims in excess of the $10 million currently reserved in other long term liabilities. The Insurance Settlement is structured as an alternative solution in the event the Global Settlement fails to receive final approval. Under the Insurance Settlement, Continental and Pacific will pay in full settlements reached as of August 27, 1993 and provide Fibreboard with the remaining balance of the Global Settlement escrow account for claims filed after August 27, 1993, plus an additional $475 million for claims which were pending but not settled at August 27, 1993, less amounts paid for those claims since August 27, 1993. Under the Insurance Settlement, Fibreboard will manage the defense and resolution of asbestos-related personal injury claims and will remain subject to suit by asbestos personal injury claimants. The Insurance Settlement will not be fully implemented or funded until such time as the Global Settlement has been finally resolved. In the event the Global Settlement is finally approved, the Insurance Settlement will not be implemented. While there are various uncertainties regarding whether the Global Settlement or the Insurance Settlement will be in effect, and these may ultimately impact Fibreboard's liability for asbestos personal injury claims, the Company believes the amounts available under the Insurance Settlement will be adequate to fund the ongoing defense and indemnity costs associated with asbestos-related personal injury claims for the foreseeable future. The Company anticipates reevaluating and updating its estimates of the Fibreboard liability for asbestos personal injury claims once it is determined which of the Global Settlement or the Insurance Settlement is ultimately implemented. - 17 - OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. CONTINGENT LIABILITIES (Continued) NON-ASBESTOS LIABILITIES Various other lawsuits and claims arising in the normal course of business are pending against the Company, some of which allege substantial damages. Management believes that the outcome of these lawsuits and claims will not have a materially adverse effect on the Company's financial position or results of operations. - 18 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (All per share information in Item 2 is on a fully diluted basis.) RESULTS OF OPERATIONS Net sales were $1,017 million for the quarter ended June 30, 1997, a six percent increase from the 1996 level of $956 million. The growth is attributable to increased volumes in the Building Materials and Composite Materials segments, worldwide. In Building Materials, niche acquisitions and the integration of their products into the Company's existing channels of distribution continue to grow the Company's volumes, particularly in the U.S. and Europe. These volume increases were offset in large part by a decline in worldwide composites pricing, most notably in Europe, the effects of a stronger dollar on sales made in foreign currencies, and a decline in insulation prices in North America. Gross margin for the quarter ended June 30, 1997 was 24%, a decline from the second quarter 1996 level of 27%, primarily resulting from declining prices and a change in the mix of product sales in Building Materials to lower margin products. Net income for the quarter ended June 30, 1997 was $63 million, or $1.11 per share, compared to a net loss of $473 million, or $9.19 per share, for the quarter ended June 30, 1996. Income from operations of $105 million in the second quarter of 1997 was negatively impacted by the price declines described above. This impact was partially offset by volume increases experienced in the Company's roofing, foam and composites businesses. Additionally, income from operations benefited by $15 million from the modification of certain employee benefits in the U.S. Earnings in the second quarter of 1997 were also affected by increased cost of borrowed funds resulting from increased borrowing to fund working capital and certain acquisitions, and the improved performance of the Company's unconsolidated affiliates. Included in the quarter ended June 30, 1996 was the net after-tax charge of $542 million, or $10.53 per share, for asbestos litigation claims that may be received after 1999 and probable additional insurance recovery. The net loss created by this item caused common stock equivalents and convertible securities to be excluded from the number of fully diluted shares reported in the second quarter of 1996 due to their anti-dilutive effect. Had these anti-dilutive shares been included in the calculation of earnings per share, such amount for the second quarter of 1996 would have been $.09 lower. Net sales for the six months ended June 30, 1997, were $1,892 million, a five percent increase over the $1,805 million reported for the first six months of 1996. This increase reflects the strength of the Company's roofing and foam businesses in the Building Materials segment, coupled with the Company's continued expansion through strategic niche acquisitions. For the six months ended June 30, 1997, the Company reported net income of $105 million, or $1.87 per share, compared to a net loss of $434 million, or $8.43 per share, for the comparable period in 1996. When compared to the earlier year period, net income for the six months ended June 30, 1997 was negatively impacted by price declines, partially offset by the benefit of increased volumes and productivity gains, particularly in the insulation business, . In addition to the net asbestos charge recorded in the second quarter of 1996, results for the six months ended June 30, 1996 included a $37 million pretax gain from the sale of the Company's minority interest in Asahi Fiber Glass Co. Ltd. in Japan and several one-time special charges, including valuation adjustments associated with prior divestitures, major product line productivity initiatives and a contribution to the Owens-Corning Foundation. The impact of the gain on net income was reduced to near zero by these special items. - 19 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Marketing and administrative expenses were $122 million for the quarter ended June 30, 1997, compared to $115 million in the same period in 1996. The increase is primarily the result of incremental administrative expenses from acquisitions. Building Materials In the Building Materials segment, sales increased 8% for the quarter and six months ended June 30, 1997 compared to 1996. This growth reflects the incremental sales from acquisitions as well as an increase in volume, particularly in the roofing and foam businesses. Income from operations for Building Materials increased to $122 million for the six months ended June 30, 1997. This improvement is primarily the result of volume increases, productivity gains and incremental amounts derived from acquisitions offset in part by the continuing costs of the Company's expansion program in the Asia Pacific region. On June 27, the Company acquired 92% of the outstanding stock of Fibreboard Corporation through a cash tender offer commenced in May for all of the outstanding shares of Fibreboard at $55 per share. In early July, Fibreboard became a wholly owned subsidiary as a result of a short form merger consummated at the same price. The purchase price of Fibreboard was $657 million, including $138 million of debt assumed, the majority of which was financed through borrowings under the Company's new long-term credit facility early in the third quarter of 1997. Fibreboard is one of the five largest producers in North America of vinyl siding and accessories, marketing products under the brand names Norandex and Vytec. The business has plants in the U.S. and Canada and also operates more than 130 company-owned distribution centers in 32 states. Fibreboard is also the leading producer of manufactured stone used in home building construction. On July 15, the Company announced plans to sell the Pabco business of Fibreboard. Pabco is a producer of calcium silicate insulation used for industrial pipe applications and metal jacketing for pipe insulation. As the acquisition was completed at the end of the quarter, the reported results do not include the results of operations of Fibreboard. To enhance comparability, certain information below is presented on a "pro forma" basis and reflects the acquisition of Fibreboard (excluding Pabco and operations that were discontinued by Fibreboard prior to the acquisition) as though it had occurred at the beginning of the respective periods presented. The pro forma results include certain adjustments, primarily for depreciation and amortization, interest and other expenses directly attributable to the acquisition and are not necessarily indicative of the combined results that would have occurred had the acquisition occurred at the beginning of those periods. PRO FORMA AS REPORTED Six Months Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 (In millions of dollars, except share data) Net Sales $2,223 $2,092 $1,892 $1,805 Income from continuing operations 99 (443) 105 (434) Fully diluted earnings per share from continuing operations $ 1.76 $(8.59) $ 1.87 $(8.43)
Additionally, during the first quarter of 1997, the Company acquired Polypan Nord S.P.A., a manufacturer of extruded polystyrene foam (XPS) insulation products based in Italy and Falcon Manufacturing of California, Inc., a U.S. producer of expanded polystyrene (EPS) foam insulation products. - 20 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Composite Materials In the Composite Materials segment, sales increased four percent for the quarter ended June 30, 1997, but were down two percent for the six months then ended, when compared to the comparable 1996 periods. While composites sales showed improvement in overall volume, the business continued to experience significant price decline during the quarter, particularly in Europe where weakening currencies compounded the sales decline. Composite Materials income from operations in the quarter and six months ended June 30, 1997, of $52 and $101 million, respectively, declined from the equivalent prior year periods. The declines are primarily attributable to the pricing weakness being experienced in Europe. The Company does not expect to see significant improvement in the Composite Materials segment in 1997. However, the Company now believes pricing is stabilizing in both the U.S. and Europe and has implemented a price increase effective during the second half of the year. During the second quarter of 1997, the Company completed the acquisition of the assets of The Stewart Group, Inc., a manufacturer and marketer of a composite central strength member for telecommunication cable using a proprietary technology. With this addition, the Company now markets a complete line of glass fiber products that protect and reinforce fiber optic and copper telecommunications cable. In the first quarter of 1997, the Company completed the previously announced acquisition of Knytex Company, a manufacturer of specialty glass fiber fabrics. The Company's cost of borrowed funds for the quarter ended June 30, 1997 was $5 million higher than during second quarter 1996, due to increased borrowings used to fund growth in working capital and certain acquisitions. LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS Cash flow from operations, excluding asbestos-related activities, was negative $6 million for the second quarter of 1997, compared to $73 million for second quarter 1996. The decline from 1996 to 1997 is primarily attributable to a reduction in accounts payable and accrued liabilities, and an increase in accounts receivable. Excluding Fibreboard inventories of approximately $110 million, inventories at June 30, 1997 increased 26% over December 31, 1996 levels due to the Company's seasonal inventory build in the first half of the year. Please see Notes 6 and 7 to the Consolidated Financial Statements. At June 30, 1997, the Company's net working capital was $260 million and its current ratio was 1.22, as compared to negative $163 million and .85, respectively at December 31, 1996. The increase in 1997 is the result of increased working capital, driven by higher seasonal inventories and receivables, as well as a decline in accounts payable and accrued liabilities. The Company's total borrowings at June 30, 1997 were $2,033 million, $1,099 million higher than at year-end 1996. The June 30, 1997 long-term debt balance includes $519 million payable, as well as $138 million of debt assumed, for the acquisition of Fibreboard. The acquisition amounts were drawn from the Company's new credit facility in early July. Since the cash was not exchanged until July, the Consolidated Statement of Cash Flows, for the quarter and six months ended June 30, 1997, does not reflect the acquisition of Fibreboard. Typically, the Company reports greater cash usage during the first half of the year as the Company builds inventories and other working capital. - 21 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) As of June 30, 1997, the Company had unused lines of credit of $736 million available under long-term bank loan facilities and an additional $37 million under short-term facilities, after the exclusion of the amount utilized in early July to fund the acquisition of Fibreboard, compared to $440 million and $195 million, respectively, at year-end 1996. The increase in available lines of credit is the result of the new $2 billion credit facility established to fund the acquisition of Fibreboard. Letters of credit issued under the Company's new long-term loan facility, most of which support appeals from asbestos trials, reduce the available credit of that facility. The impact of such reduction is reflected in the unused lines of credit discussed above. See Notes 3 and 4 of the Consolidated Financial Statements. Capital spending for property, plant and equipment, excluding acquisitions and investments in affiliates, was $131 million for the first six months of 1997. For the year 1997, the Company anticipates capital spending, exclusive of acquisitions and investments in affiliates, to be approximately $250 million, the majority of which is committed. The Company expects that funding for these expenditures will be from the Company's operations and external sources as required. Gross payments for asbestos litigation claims against Owens Corning during the second quarter of 1997, including $11 million in defense costs and $2 million for appeal bond and other costs, were $90 million. Proceeds from insurance were $24 million, resulting in a net pretax cash outflow of $66 million, or $40 million after-tax. During the second quarter of 1997, Owens Corning received approximately 9,700 new asbestos personal injury cases and closed approximately 3,200 cases. Over the next twelve months, Owens Corning's total payments for asbestos litigation claims, including defense costs, are expected to be approximately $300 million. Proceeds from insurance of $50 million are expected to be available to cover Owens Corning's costs, resulting in a net pretax cash outflow of $250 million, or $150 million after-tax. Please see Note 8 Item A to the Consolidated Financial Statements. During the next twelve months, any payments for asbestos claims against Fibreboard are expected to be paid by Fibreboard's insurers. Please see Note 8 Item B to the Consolidated Financial Statements. The Company expects funds generated from operations, together with funds available under long and short term bank loan facilities, to be sufficient to satisfy its debt service obligations under its existing indebtedness, as well as its contingent liabilities for uninsured asbestos personal injury claims. The Company has been deemed by the Environmental Protection Agency (EPA) to be a potentially responsible party (PRP) with respect to certain sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund). The Company has also been deemed a PRP under similar state or local laws, including two state Superfund sites where the Company is the primary generator. In other instances, other PRPs have brought suits or claims against the Company as a PRP for contribution under such federal, state or local laws. During the second quarter of 1997, the Company was designated a PRP in such federal, state, local or private proceedings for one additional site. At June 30, 1997, a total of 42 such PRP designations remained unresolved by the Company, some of which designations the Company believes to be erroneous. The Company is also involved with environmental investigation or remediation at a number of other sites at which it has not been designated a PRP. The Company has established a $30 million reserve, of which $15 million relates to Fibreboard, for its Superfund (and similar state, local and private action) contingent liabilities. Based upon information presently available to the Company, and without regard to the - 22 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) application of insurance, the Company believes that, considered in the aggregate, the additional costs associated with such contingent liabilities, including any related litigation costs, will not have a materially adverse effect on the Company's results of operations, financial condition or long-term liquidity. The 1990 Clean Air Act Amendments (Act) provide that the EPA will issue regulations on a number of air pollutants over a period of years. Until these regulations are developed, the Company cannot determine the extent to which the Act will affect it. The Company anticipates that its sources to be regulated will include glass fiber manufacturing and asphalt processing activities. The EPA's announced schedule is to issue regulations covering glass fiber manufacturing by late 1997 and asphalt processing activities by late 2000, with implementation as to existing sources up to three years thereafter. Based on information now known to the Company, including the nature and limited number of regulated materials it emits, the Company does not expect the Act to have a materially adverse effect on the Company's results of operations, financial condition or long-term liquidity. FUTURE REQUIRED ACCOUNTING CHANGES On June 30, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS No. 130). This statement establishes standards for reporting and display of comprehensive income and its components in financial statements. The adoption of this standard will not impact results from operations, financial condition, or long-term liquidity, but will require the Company to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately in the equity section of the balance sheet. The Company is required to adopt the new standard for periods beginning after December 15, 1997. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS No.128). This statement introduces new methods for calculating earnings per share. The adoption of this standard will not impact results from operations, financial condition, or long-term liquidity, but will require the Company to restate earnings per share reported in prior periods to conform with this statement. The Company is required to adopt the new standard for periods ending after December 15, 1997. The Company believes that the adoption of this standard will result in essentially the same earnings per share when comparing the current fully diluted earnings per share calculation to the calculation of diluted earnings per share required by SFAS No. 128. - 23 - PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See the paragraphs in Note 8, Contingent Liabilities, to the Company's Consolidated Financial Statements above, which are incorporated here by reference. ITEM 2. CHANGES IN SECURITIES (a) None of the constituent instruments defining the rights of the holders of any class of the Company's registered securities was materially modified in the quarter ended June 30, 1997. (b) None of the rights evidenced by any class of the Company's registered securities was materially limited or qualified in the quarter ended June 30, 1997 by the issuance or modification of any other class of securities. ITEM 3. DEFAULTS UPON SENIOR SECURITIES (a) During the quarter ended June 30, 1997, there was no material default in the payment of principal, interest, sinking or purchase fund installments, or any other material default not cured within 30 days, with respect to any indebtedness of the Company or any of its significant subsidiaries exceeding 5 percent of the total assets of the Company and its consolidated subsidiaries. (b) During the quarter ended June 30, 1997, no material arrearage in the payment of dividends occurred, and there was no other material delinquency not cured within 30 days, with respect to any class of preferred stock of the Company which is registered or which ranks prior to any class of registered securities, or with respect to any class of preferred stock of any significant subsidiary of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company's annual meeting of stockholders was held April 17, 1997. (c) The matters voted upon at the meeting, and the votes cast with respect to each, were: 1. Election of four directors for a term expiring in 2000: Norman P. Blake, Jr. - 43,939,578 shares cast for election and 1,517,001 shares withheld; Leonard S. Coleman, Jr. - 43,721,727 shares cast for election and 1,734,852 shares withheld; Jon M. Huntsman, Jr. - 43,931,194 shares cast for election and 1,525,385 shares withheld; and W. Ann Reynolds - 43,926,804 shares cast for election and 1,529,775 shares withheld. 2. Approval of amendment of the Certificate of Incorporation to increase the maximum size of the Board of Directors to fourteen persons: 42,178,715 shares cast for the proposal; 2,900,332 shares cast against; and 377,532 shares abstained. 3. Approval of amendments to the 1987 Stock Plan for Directors: 32,930,218 shares cast for the proposal; 12,061,885 shares cast against; and 464,476 shares abstained. - 24 - PART II. OTHER INFORMATION (Continued) 4. Approval of the action of the Board of Directors in selecting Arthur Andersen LLP as independent public accountants for the Company for the year 1997: 44,608,152 shares cast for the proposal; 599,035 shares cast against; and 249,392 shares abstained. There were no broker nonvotes on any matter. ITEM 5. OTHER INFORMATION The Company does not elect to report any information under this item. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. See Exhibit Index below, which is incorporated here by reference. (b) Reports on Form 8-K. During the quarter ended June 30, 1997, the Company filed the following current reports on Form 8-K: - Filed May 14, 1997, under Item 7. - Filed May 28, 1997, under Items 5 and 7. - 25 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OWENS CORNING Registrant Date: July 23, 1997 By: /s/ David W. Devonshire David W. Devonshire Senior Vice President and Chief Financial Officer (as duly authorized officer) Date: July 23, 1997 By: /s/ Steven J. Strobel Steven J. Strobel Vice President and Controller - 26 - EXHIBIT INDEX Exhibit Number Document Description (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession. Agreement and Plan of Merger, dated as of May 27, 1997, among Owens Corning, Sierra Corp. and Fibreboard Corporation (incorporated herein by reference to Exhibit 2(a) to the Company's current report on Form 8-K (File No. 1-3660), filed May 28, 1997). (3) Articles of Incorporation and By-Laws. (i) Certificate of Incorporation of Owens Corning, as amended (incorporated herein by reference to Exhibit (3)(i) to the Company's quarterly report on Form 10-Q (File No. 1-3660) for the quarter ended March 31, 1997). (ii) By-Laws of Owens Corning, as amended (incorporated herein by reference to Exhibit (3) to the Company's annual report on Form 10-K (File No. 1-3660) for 1995). (4) Instruments Defining the Rights of Security Holders, Including Indentures. Credit Agreement, dated as of June 26, 1997, among Owens Corning, other Borrowers and Guarantors, the Banks listed on Annex A thereto, and Credit Suisse First Boston, as Agent (filed herewith). (10) Material Contracts. Credit Agreement, dated as of June 26, 1997, among Owens Corning, other Borrowers and Guarantors, the Banks listed on Annex A thereto, and Credit Suisse First Boston, as Agent (filed as Exhibit (4) to this quarterly report on Form 10-Q). Agreement and Plan of Merger, dated as of May 27, 1997, among Owens Corning, Sierra Corp. and Fibreboard Corporation (incorporated herein by reference to Exhibit 2(a) to the Company's current report on Form 8-K (File No. 1-3660), filed May 28, 1997). Owens Corning 1987 Stock Plan for Directors, as amended (filed herewith). (11) Statement re Computation of Per Share Earnings (filed herewith). (27) Financial Data Schedule (filed herewith). (99) Additional Exhibits. Subsidiaries of Owens Corning, as amended (filed herewith). EX-4 2 $2,000,000,000 CREDIT AGREEMENT Dated as of June 26, 1997 Among OWENS CORNING, as Borrower and Guarantor, THE OTHER BORROWERS AND GUARANTORS, THE BANKS LISTED ON ANNEX A HERETO and CREDIT SUISSE FIRST BOSTON, as Agent ---------------------------- TABLE OF CONTENTS Page ARTICLE 1. THE REVOLVING CREDIT FACILITY Section 1.01 Revolving Loans 1 Section 1.02 Procedure for Revolving Loan Borrowings 2 Section 1.03 Repayment of Revolving Loans 3 Section 1.04 Interest 4 (a) Rates 4 (b) Payment 4 (c) Conversion and Continuation Options 4 (d) Inability to Determine Interest Rate 6 Section 1.05 Minimum Amounts of Tranches 7 Section 1.06 Belgian Loan Participations 7 Section 1.07 Canadian Bankers' Acceptances 9 ARTICLE 2. THE COMPETITIVE ADVANCE FACILITY Section 2.01 Competitive Advance Loans 12 Section 2.02 Procedure for CA Loan Borrowing 13 Section 2.03 Repayment of CA Loans 15 Section 2.04 Prepayments 15 ARTICLE 3. THE SWING LINE FACILITY Section 3.01 Swing Line Loans 15 Section 3.02 Procedure for Swing Line Borrowing 16 Section 3.03 Repayment of Swing Line Loans 16 Section 3.04 Allocating Swing Line Loans; Swing Line Loan Participations 16 ARTICLE 4. THE LETTER OF CREDIT FACILITY Section 4.01 Letter of Credit Commitment 18 Section 4.02 Procedure for Issuance of Letters of Credit Under This Agreement 20 -i- Section 4.03 Fees and Other Charges 20 Section 4.04 L/C Participations 21 Section 4.05 Reimbursement Obligation of the Borrowers 23 Section 4.06 Nature of Borrowers' Obligations 24 Section 4.07 Letter of Credit Payments 24 Section 4.08 Letter of Credit Requests 24 Section 4.09 Existing Letters of Credit 25 Section 4.10 L/C Reports 25 ARTICLE 5. CERTAIN PROVISIONS APPLICABLE TO THE LOANS AND LETTERS OF CREDIT Section 5.01 Cancellation or Reduction of Commitments 25 (a) Optional Cancellation or Reductions 25 (b) Mandatory Reductions 25 (i) Debt 25 (ii) Capital Securities 26 (iii) Reduction Limit 26 (iv) Investment Rating 26 (v) Sales of Accounts Receivable 26 (c) Canadian Commitments 27 Section 5.02 Prepayments 27 (a) Optional Prepayments 27 (b) Mandatory Prepayments 27 Section 5.03 Post-Default Rate 28 Section 5.04 Maximum Interest Rate 28 Section 5.05 Facility Fee 28 Section 5.06 Computation of Interest and Fees 29 Section 5.07 Manner of Payment 29 Section 5.08 Taxes 29 (a) (i) Taxes Payable by the Borrowers and the Guarantors 29 (ii) Taxes Payable by the Agent or any Bank 30 (iii) Limitations 30 (iv) Exemption From U.S. Withholding Taxes 31 (b) Credits and Deductions 31 Section 5.09 Pro Rata Treatment 32 Section 5.10 Evidence of Debt 33 Section 5.11 Bank Default 33 Section 5.12 Availability of Amounts of Loans 34 ARTICLE 6. CONDITIONS PRECEDENT Section 6.01 Conditions to Initial Loan or Letter of Credit 35 Section 6.02 Conditions to Each Credit Extension 38 -ii- Section 6.03 Conditions of the Initial Credit Extension to Certain Borrowers 39 Section 6.04 Conditions to Initial Credit Extension to Fibreboard 40 ARTICLE 7. CERTAIN REPRESENTATIONS AND WARRANTIES Section 7.01 Organization; Power; Qualification; Subsidiaries 41 Section 7.02 Authorization and Compliance; Regulatory Approvals 42 Section 7.03 Litigation 43 Section 7.04 Burdensome Provisions 43 Section 7.05 Requirements of Law; Environmental Matters 43 Section 7.06 No Adverse Change 44 Section 7.07 No Adverse Fact 44 Section 7.08 No Undisclosed Material Loss Contingency 44 Section 7.09 Margin Stock 45 ARTICLE 8. COVENANTS A. Affirmative Covenants 45 Section 8.01 Preservation of Existence and Properties, Scope of Business, Compliance With Law, Payment of Taxes and Claims 45 Section 8.02 Accounting Methods, Financial Records and Disclosure to Auditors 45 Section 8.03 Insurance 45 Section 8.04 Visits and Inspections 46 Section 8.05 Use of Proceeds of Loans and Letters of Credit 46 Section 8.06 Additional Guarantors 46 B. Negative Covenants 46 Section 8.07 Liens 46 Section 8.08 Restricted Payments 50 Section 8.09 Mergers, Consolidations and Acquisitions 51 Section 8.10 Disposition of Assets 51 Section 8.11 [Intentionally Omitted] 52 Section 8.12 Transactions With Affiliates 52 Section 8.13 [Intentionally Omitted] 52 C. Financial Covenants 52 Section 8.14 Fixed Charge Coverage Ratio 52 Section 8.15 Interest Coverage Ratio 53 -iii- Section 8.16 Leverage Ratio 53 D. Non-Loan Party Subsidiary Covenants 53 Section 8.17 Debt 53 Section 8.18 Guaranties by Non-Loan Party Subsidiaries 53 E. TRUPS Notes 54 Section 8.19 TRUPS Notes 54 ARTICLE 9. INFORMATION Section 9.01 Information to Be Furnished 55 (a) Quarterly Financial Statements 55 (b) Audited Year-End Statements; No Default Certificate 55 (c) Officer's Certificate 56 (d) Additional Materials 56 (i) Reports and Filings 56 (ii) Requested Materials 56 (iii) Investment Rating 56 (e) Notice of Defaults, Litigation and Other Matters 57 Section 9.02 Accuracy of Information 57 (a) Historical Financial Information 57 (b) Future Information 57 ARTICLE 10. GUARANTIES Section 10.01 Guaranty 58 Section 10.02 Limitation on Guaranty 58 Section 10.03 Continuance and Acceleration of Guaranteed Obligations Upon Certain Events 58 Section 10.04 Recovered Payments 59 Section 10.05 Evidence of Guaranteed Obligations 59 Section 10.06 Binding Nature of Certain Adjudications 59 Section 10.07 Nature of Guarantor's Obligations 59 Section 10.08 No Release of Guarantor 59 Section 10.09 Certain Waivers 60 Section 10.10 Additional Guarantors 60 ARTICLE 11. DEFAULT Section 11.01 Events of Default 60 Section 11.02 Remedies Upon Event of Default 63 -iv- ARTICLE 12. THE AGENT Section 12.01 Appointment and Powers 63 Section 12.02 Limitation on Agent's Liability 64 Section 12.03 Defaults 64 Section 12.04 Rights as a Bank 65 Section 12.05 Indemnification 65 Section 12.06 Non-Reliance on Agent and Other Banks 66 Section 12.07 Resignation of the Agent 66 ARTICLE 13. MISCELLANEOUS Section 13.01 Notices 67 Section 13.02 Expenses and Indemnification 69 Section 13.03 Rights Cumulative 70 Section 13.04 Confidentiality 70 Section 13.05 Waivers; Amendments 71 Section 13.06 Set-Off 72 Section 13.07 Sharing of Recoveries 73 Section 13.08 Assignment 74 Section 13.09 Participations 75 Section 13.10 Governing Law 77 Section 13.11 Judicial Proceedings; Waiver of Jury Trial 77 Section 13.12 Limitation of Liability 77 Section 13.13 Change of Funding Offices 78 Section 13.14 Severability of Provisions 78 Section 13.15 Counterparts 78 Section 13.16 Entire Agreement 78 Section 13.17 Successors and Assigns 78 Section 13.18 Cash Collateral 78 Section 13.19 Rating Services. 79 Section 13.20 Amounts Payable Due Upon Request for Payment 79 Section 13.21 Remedies of the Essence 79 Section 13.22 Registered Notes 80 Section 13.23 Judgment Currency 80 ARTICLE 14. ADDITIONAL CREDIT FACILITY PROVISIONS Section 14.01 Mandatory Suspension and Conversion of Fixed Rate Loans 80 Section 14.02 Regulatory Changes 81 Section 14.03 Mitigation by Banks 82 Section 14.04 Funding Losses 83 Section 14.05 Determinations 84 -v- ARTICLE 15. INTERPRETATION Section 15.01 Interpretation 84 (a) Defined Terms 84 (b) Other Definitional Provisions 120 Section 15.02 Accounting Matters 121 Section 15.03 Representations and Warranties 121 Section 15.04 Captions 122 ANNEX A-1 BANKS, FUNDING OFFICES, NOTICE ADDRESSES AND COMMITMENTS ANNEX A-2 CANADIAN FUNDING BANKS, LENDING OFFICES, NOTICE ADDRESSES AND CANADIAN COMMITMENTS ANNEX A-3 DESIGNATED SUBSIDIARY BORROWERS, BELGIAN BORROWERS AND CANADIAN BORROWERS ANNEX B ADMINISTRATIVE SCHEDULE ANNEX C FORM OF NOTICE OF REVOLVING CREDIT BORROWING ANNEX D FORM OF NOTICE OF CONVERSION ANNEX E FORM OF NOTICE OF CONTINUATION ANNEX F FORM OF NOTICE OF COMPETITIVE ADVANCE BORROWING ANNEX G FORM OF NOTICE OF SWING LINE BORROWING ANNEX H FORM OF LETTER OF CREDIT REQUEST ANNEX I FORM OF NOTICE OF PREPAYMENT ANNEX J FORM OF PROMISSORY NOTE ANNEX K FORM OF ASSIGNMENT AND ACCEPTANCE Schedule I to Assignment and Acceptance ANNEX L FORM OF DESIGNATED BORROWER OPINION ANNEX M TERMS OF SUBORDINATED INTERCOMPANY DEBT Schedule 4.09 EXISTING LETTERS OF CREDIT Schedule 5.01(b)(i) SCHEDULE OF EXISTING DEBT Schedule 5.01(b)(iv) EXISTING CREDIT COMMITMENTS Schedule 5.08(a)(iv) NON-US BANK CERTIFICATE Schedule 6.01(b)(i) CERTIFICATE AS TO RESOLUTIONS, ETC. Schedule 6.01(b)(iv)-A FORM OF OPINION OF GENERAL COUNSEL TO COMPANY Schedule 6.01(b)(iv)-B FORM OF OPINION OF OTHER COUNSEL TO COMPANY Schedule 6.01(b)(v) FORM OF OPINION OF COUNSEL TO AGENT Schedule 6.01(b)(viii) FORM OF SUBSIDIARY CONSENT Schedule 6.01(d) SCHEDULE OF REFINANCED LOANS Schedule 7.01 SCHEDULE OF SUBSIDIARIES Schedule 7.02 SCHEDULE OF REQUIRED CONSENTS AND APPROVALS Schedule 7.03 SCHEDULE OF LITIGATION Schedule 7.07 SCHEDULE OF MATERIAL ADVERSE FACTS Schedule 8.06 GUARANTOR SUPPLEMENT Schedule 8.07(n) SCHEDULE OF EXISTING LIENS -vi- Schedule 8.18 SCHEDULE OF EXISTING GUARANTIES Schedule 9.01(a) CERTIFICATE AS TO FINANCIAL STATEMENTS Schedule 9.01(c) CERTIFICATE AS TO COMPLIANCE WITH FINANCIAL COVENANTS AND DEFAULTS Schedule 9.02(a) SCHEDULE OF HISTORICAL FINANCIAL INFORMATION -vii- CREDIT AGREEMENT Dated as of June 26, 1997 OWENS CORNING, a Delaware corporation, the other BORROWERS and GUARANTORS, the BANKS listed on Annex A-1 and each additional Bank that shall become a party hereto in accordance with Section 13.08, severally and not jointly, each CANADIAN LENDING BANK listed on Annex A-2 that is not a branch or agency of a Bank and each additional Canadian Lending Bank that shall become a party hereto pursuant to Section 13.08, severally and not jointly, and CREDIT SUISSE FIRST BOSTON, as agent for the Banks, agree as follows (with certain terms used herein being defined in Article 15): ARTICLE 1. THE REVOLVING CREDIT FACILITY Section 1.01 Revolving Loans. (a) Subject to the terms and conditions hereof, each Bank and each Canadian Lending Bank severally agrees to make Revolving Loans to any Borrower from time to time during the Commitment Period; provided that no such Revolving Loan shall be made if, after giving effect to the making of such Revolving Loan and the simultaneous application of the proceeds thereof, (i) the Total Exposure would exceed the aggregate amount of the Commitments, (ii) the aggregate amount of the Foreign Currency Exposure would exceed $400,000,000, or (iii) the aggregate amount of the Foreign Currency Exposure of all Revolving Loans and Letters of Credit denominated in any of Belgian Francs, Canadian Dollars or Pounds Sterling would exceed $100,000,000 in the case of each such Currency; and provided, further, that (1) (A) Revolving Loans to Canadian Borrowers shall be made only by the Canadian Lending Banks and shall be denominated only in Canadian Dollars, and (B) Revolving Loans denominated in Canadian Dollars may be made only to Canadian Borrowers and only by the Canadian Lending Banks, and (2) Revolving Loans to Belgian Borrowers shall be made only by the Belgian Lending Bank, and only Belgian Borrowers can borrow Belgian Francs. Revolving Loans made by the Belgian Lending Bank shall be subject to the provisions of Section 1.06. During the Commitment Period, the Borrowers may use the Commitments by borrowing, prepaying in whole or in part, and reborrowing Revolving Loans, all in accordance with the terms and conditions hereof. The aggregate amount of the Commitments on the Agreement Date is $2,000,000,000. (b) The Revolving Loans may be made in Dollars or any Available Foreign Currency and may from time to time be (i) Revolving Eurocurrency Loans, (ii) in the case of Revolving Loans in Dollars only, Revolving Base Rate Loans, (iii) in the case of Revolving Loans that are Canadian Loans, (A) Canadian Cost of Funds Loans or (B) Canadian Bankers' Acceptances, or (iv) a combination thereof, as determined by the relevant Borrower and set forth in the Notice of Revolving Borrowing or Notice of Conversion with respect thereto; provided that no Revolving Eurocurrency Loan, Canadian Cost of Funds Loan or Canadian Bankers' Acceptance shall be made or created after the day that is one month prior to the Termination Date. Section 1.02 Procedure for Revolving Loan Borrowings. (a) Any Borrower (other than a Belgian Borrower or a Canadian Borrower) may request the Banks, any Belgian Borrower may request the Belgian Lending Bank and any Canadian Borrower may request the Canadian Lending Banks to make Revolving Loans on any Business Day during the Commitment Period by delivering a Notice of Revolving Borrowing. Each borrowing of Revolving Loans (other than pursuant to a Swing Line Loan refunding pursuant to Section 3.04) shall be in an amount equal to (i) in the case of Revolving Base Rate Loans, $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or, if the then aggregate undrawn amount of the Commitments is less than $5,000,000, such lesser amount), (ii) in the case of Revolving Eurocurrency Loans (A) if in Dollars, $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and (B) if in any Available Foreign Currency, an amount in such Available Foreign Currency of which the Dollar Equivalent Amount is at least $5,000,000, and (iii) in the case of Canadian Loans, an amount in Canadian Dollars of which the Dollar Equivalent Amount is at least $5,000,000. (b) Upon receipt of a Notice of Revolving Borrowing from a Borrower, the Agent shall promptly: (i) if such Notice of Revolving Borrowing is for Revolving Loans that are not Belgian Loans or Canadian Loans, notify each Bank of receipt of such Notice of Revolving Borrowing and of such Bank's Borrowing Percentage of the Revolving Loans to be made pursuant thereto; (ii) if such Notice of Revolving Borrowing is for Revolving Loans that are Belgian Loans, notify each Bank of receipt of such Notice of Revolving Borrowing and, in the case of the Belgian Lending Bank, the amount of the Revolving Loan requested and, in the case of each other Bank, such Bank's Borrowing Percentage of such Revolving Loan; and (iii) if such Notice of Revolving Borrowing is for Revolving Loans that are Canadian Loans, notify each Canadian Lending Bank of receipt of such Notice of Revolving Borrowing and of such Canadian Lending Bank's Canadian -2- Borrowing Percentage of the Revolving Loans that are Canadian Loans to be made pursuant thereto. (c) Subject to the terms and conditions hereof, (i) each Bank will make its Borrowing Percentage of each Borrowing that is not of Belgian Loans or Canadian Loans available to the Agent for the account of the Borrower at the applicable Funding Office, at or prior to the applicable Funding Time, for the Currency of such Loan in funds immediately available to the Agent in the applicable Currency; (ii) the Belgian Lending Bank will make the amount of any Borrowing that is a Belgian Loan available to the Agent for the account of the Belgian Borrower at the applicable Funding Office, at or prior to the applicable Funding Time, for the Currency of such Loan in funds immediately available to the Agent in the applicable Currency; and (iii) each Canadian Lending Bank will (A) make its Canadian Borrowing Percentage of each Borrowing that is of Canadian Loans that are not Canadian Bankers' Acceptances available to the Agent for the account of the Canadian Borrower at the applicable Funding Office, at or prior to the applicable Funding Time, for Canadian Dollars in funds immediately available to the Agent in Canadian Dollars and (B) accept Canadian Bankers' Acceptances as provided in Section 1.07. The amounts made available by each Bank to the Agent will then be made available by the Agent to such Borrower at the applicable Funding Office, in like funds as received by the Agent. Section 1.03 Repayment of Revolving Loans. (a) On the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 5.02(b) or Article 11), each Borrower hereby unconditionally promises to pay to, (i) in the case of Revolving Loans that are not Canadian Loans, the Agent for the account of each Bank (or in the case of Belgian Loans the Belgian Lending Bank) and, (ii) in the case of Revolving Loans that are Canadian Loans that are not Canadian Bankers' Acceptances, to the Agent for the account of each Canadian Lending Bank, the then unpaid principal amount of each Revolving Loan made by such Bank or Canadian Lending Bank, as the case may be, to such Borrower. (b) On the maturity date of each Canadian Bankers' Acceptance, unless the applicable Canadian Borrower shall, in accordance with the terms hereof, have requested the renewal thereof, such Canadian Borrower shall pay to the Agent, for the account of the Canadian Lending Banks, an amount equal to the face amount of such Canadian Bankers' Acceptance. (c) Each Borrower hereby further agrees to pay interest on the unpaid principal amount of the Revolving Loans (that are not Canadian Bankers' Acceptances) made to such Borrower from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 1.04. -3- Section 1.04 Interest. (a) Rates. Subject to Section 5.03, each Revolving Loan (other than Canadian Bankers' Acceptances) shall bear interest on the outstanding principal amount thereof at a rate per annum equal to, (i) so long as it is a Revolving Base Rate Loan, the Base Rate as in effect from time to time plus the Utilization Fee as in effect from time to time, (ii) so long as it is a Revolving Eurocurrency Loan, for each Bank the Eurocurrency Rate for such Bank for the applicable Currency for each applicable Interest Period plus the Eurocurrency Margin as in effect on each day during such Interest Period, and (iii) so long as it is a Canadian Cost of Funds Loan, the Canadian Cost of Funds Rate for each applicable Interest Period plus the COF Margin as in effect on the first day of such Interest Period. (b) Payment. Interest shall be payable, (i) in the case of Revolving Base Rate Loans and Swing Line Loans on each Interest Payment Date, (ii) in the case of Revolving Eurocurrency Loans and Canadian Cost of Funds Loans, on the last day of each applicable Interest Period (and, if an Interest Period is longer than three months, at intervals of three months after the first day of such Interest Period), (iii) in the case of (A) each Revolving Base Rate Loan and Swing Line Loan that shall be prepaid prior to an Interest Payment Date and (B) each Revolving Eurocurrency Loan and Canadian Cost of Funds Loan that shall be prepaid prior to the last day of the then applicable Interest Period in respect thereof, on the day of such prepayment (together with any amounts that may be owing pursuant to Section 14.04), (iv) in the case of each Loan, when such Loan shall be due at maturity or by reason of acceleration, and (v) in the case of each Drawing under a Letter of Credit, as provided in Section 4.05(b). Interest at the Post-Default Rate shall be payable on demand. (c) Conversion and Continuation Options. (i) (A) By giving a Notice of Conversion, any Borrower may elect from time to time (1) to convert such Borrower's Eurocurrency Loans in Dollars to Base Rate Loans, or (2) to convert such Borrower's Base Rate Loans to Eurocurrency Loans in Dollars. Upon receipt of any such Notice of Conversion, the Agent shall promptly notify each Bank thereof. All or any part of the Eurocurrency Loans outstanding in Dollars or the Base Rate Loans may be converted as provided herein; provided that (x) no Base Rate Loan may be converted into a Eurocurrency Loan when any Event of Default exists, and (y) no Base Rate Loan may be converted into a Eurocurrency Loan after the date that is one month prior to the Termination Date. Each such Notice of Conversion shall be delivered to the Agent at its address set forth in Section 13.01 and shall be delivered before 11:00 a.m. (New York time), on the Business Day before the Business Day of the requested conversion in the case of conversions to Base Rate Loans, and before 11:00 a.m. (New -4- York time), on the Business Day three Business Days before the requested conversion in the case of conversions to Eurocurrency Loans. (B) By giving a Notice of Conversion, any Canadian Borrower may elect from time to time (1) to convert such Borrower's Canadian Cost of Funds Loans to Canadian Bankers' Acceptances or (2) to convert such Borrower's Canadian Bankers' Acceptances to Canadian Cost of Funds Loans; provided that a Canadian Bankers' Acceptance may be converted only on the last day of its term. Each such Notice of Conversion shall be delivered to the Agent at its address set forth in Section 13.01 and shall be delivered before 11:00 a.m. (New York time), on the Business Day before the Business Day of the requested conversion. (ii) (A) By giving a Notice of Continuation, any Borrower may continue any of such Borrower's Eurocurrency Loans as Eurocurrency Loans in the same Currency for additional Interest Periods. (B) By giving a Notice of Continuation, any Canadian Borrower may continue any of such Canadian Borrower's Canadian Cost of Funds Loans as Canadian Cost of Funds Loans for additional Interest Periods. (C) By giving a Notice of Continuation, any Canadian Borrower may renew any of such Canadian Borrower's outstanding Canadian Bankers' Acceptances for an additional term. (D) Each such Notice of Continuation referred to in Section 1.04(c)(ii)(A), (B) or (C) shall be delivered to the Agent at its address set forth in Section 13.01 and shall be delivered before 11:00 a.m. (New York time) three Business Days before the requested continuation in the case of Loans in Dollars, and four Business Days before the requested continuation in the case of Loans in any Available Foreign Currency. (iii) Any Borrower may convert Revolving Loans outstanding in Dollars or an Available Foreign Currency to Revolving Loans in Dollars or a different Available Foreign Currency by repaying such Loans in the first Currency and borrowing Loans in such different Currency in accordance with Section 1.02 and the other applicable provisions of this Agreement. (iv) (A) If any Borrower shall fail to timely give a Notice of Continuation or a Notice of Conversion in respect of any of such Borrower's Eurocurrency Loans with respect to which an Interest Period is expiring, such Borrower shall be deemed, (A) in the case of Eurocurrency Loans denominated in a Currency other than Dollars, to have -5- given a Notice of Continuation for an Interest Period of one month, and (B) in the case of Eurocurrency Loans denominated in Dollars, to have given a Notice of Conversion to Base Rate Loans. (B) If any Canadian Borrower shall fail to timely give a Notice of Continuation or a Notice of Conversion in respect of such Canadian Borrower's Canadian Loans with respect to which an Interest Period is expiring, such Canadian Borrower shall be deemed (1) in the case of Canadian Cost of Funds Loans, to have given a Notice of Continuation for an Interest Period of one month and (2) in the case of Canadian Bankers' Acceptances, to have given a Notice of Continuation for renewal for a term of one month. (d) Inability to Determine Interest Rate. If on or prior to the Quotation Day for any Interest Period in respect of any Revolving Eurocurrency Loan in any Currency or any Canadian Cost of Funds Loan, or for the term of any Canadian Bankers' Acceptance: (i) the Agent shall have determined (which determination shall be conclusive absent manifest error) that, by reason of circumstances affecting the relevant market generally, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such affected Currency, the Canadian Cost of Funds Rate or the Discount Rate for such affected Interest Period or such affected term, or (ii) the Agent shall have received notice from, in the case of Revolving Loans that are not Canadian Loans, Banks having Commitments comprising at least 20% of the aggregate amount of the Commitments or, in the case of Revolving Loans that are Canadian Loans, from Canadian Lending Banks having Canadian Commitments comprising at least 20% of the aggregate amount of the Canadian Commitments, that the Eurocurrency Rate for the relevant Currency or the Canadian Interest Rate, as the case may be, determined or to be determined for such affected Interest Period will not adequately and fairly reflect the cost to such Banks or such Canadian Lending Banks, as the case may be (as conclusively certified by such Banks or such Canadian Lending Banks, as the case may be), of making or maintaining their affected Revolving Loans during such affected Interest Period, the Agent shall give telecopy or telephonic notice thereof to the Company and the relevant Banks or Canadian Lending Banks, as the case may be, as soon as practicable thereafter. If such notice is given, (w) any Revolving Eurocurrency Loans requested to be made in such affected Currency on the first day of such Interest Period shall be made as Revolving Base Rate Loans in Dollars in the Dollar Equivalent Amount, (x) any Revolving Loans that were -6- to have been converted on the first day of such Interest Period from Revolving Base Rate Loans to Revolving Eurocurrency Loans shall be continued as Revolving Base Rate Loans, (y) any Revolving Eurocurrency Loans in such affected Currency that were to have been continued as such shall be converted, on the first day of such Interest Period, to Revolving Base Rate Loans in Dollars in the Dollar Equivalent Amount, and (z) any Canadian Loans that were to have been made or continued at the affected Canadian Interest Rate shall be made as or converted to Canadian Prime Rate Loans. Until such notice has been withdrawn by the Agent, no further Revolving Eurocurrency Loans in such affected Currency, and no further Canadian Loans to bear interest at such affected Canadian Interest Rate, shall be made, converted to or continued as such. Section 1.05 Minimum Amounts of Tranches. (a) All conversions and continuations of Revolving Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections that, after giving effect thereto, the aggregate principal amount of the Revolving Loans comprising (i) each Tranche in Dollars shall be not less than $5,000,000, and (ii) each Tranche in any Available Foreign Currency shall not be less than the Dollar Equivalent Amount of $5,000,000. (b) There shall not in any event be, at any one time, more than (i) nine Interest Periods in effect with respect to Revolving Eurocurrency Loans, (ii) two Interest Periods in effect with respect to Canadian Cost of Funds Loans, and (iii) two terms in effect with respect to Canadian Bankers' Acceptances. Section 1.06 Belgian Loan Participations. (a) (i) The Belgian Lending Bank irrevocably agrees to grant, and hereby grants, to each Bank, and, to induce the Belgian Lending Bank to make Revolving Loans that are Belgian Loans hereunder, each Bank irrevocably agrees to accept and purchase, and hereby accepts and purchases, from the Belgian Lending Bank, on the terms and conditions hereinafter stated, for such Bank's own account and risk, an undivided participation interest equal to such Bank's Borrowing Percentage in the Belgian Lending Bank's rights under each Revolving Loan that is a Belgian Loan made by the Belgian Lending Bank hereunder, including the right to receive the principal of, interest on, and all other amounts payable hereunder in respect of, such Revolving Loan. Each Bank unconditionally and irrevocably agrees with the Belgian Lending Bank that, if the principal of, interest on, or any other amount payable hereunder in respect of, a Revolving Loan that is a Belgian Loan is not paid when due, such Bank shall pay to the Agent for the account of the Belgian Lending Bank upon demand at the applicable Funding Office an amount (in Belgian Francs or such other Currency as may be acceptable to the Agent) equal to such Bank's Borrowing Percentage of the amount of such principal, interest or other amount which is not so paid; provided that a Bank shall not be required to make a payment to the Belgian -7- Lending Bank in respect of a Belgian Loan if before the Belgian Lending Bank made such Belgian Loan such Bank gave notice to the Belgian Lending Bank stating its good faith belief that one or more Defaults or Events of Default have occurred and are continuing, specifying each such Default or Event of Default and stating that such Bank does not intend to make a payment to the Belgian Lending Bank in respect of such Belgian Loan as long as such Default or Event of Default is continuing; provided, further, that the obligation of such Bank to make such payment to the Belgian Lending Bank shall resume when such Defaults or Events of Default are no longer continuing; and provided, further, that notwithstanding such Bank's good faith belief, in the event no Default or Event of Default specified by such Bank had occurred and was continuing at the time such notice was sent, such Bank shall be liable for any such payment it would have been required to make to the Belgian Lending Bank hereunder but for the sending of the notice described herein. (ii) Each Bank's obligation to purchase participating interests pursuant to Section 1.06(a)(i) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (A) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against any other Bank, the Agent or the Belgian Borrower, or the Belgian Borrower may have against any Bank, the Agent or any other Person, as the case may be, for any reason whatsoever; (B) the occurrence or continuance of a Default or an Event of Default; (C) any adverse change in the financial condition of the Company or any of its Subsidiaries; (D) any breach of any Loan Document by any party thereto; or (E) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (b) If any amount required to be paid by any Bank to the Belgian Lending Bank pursuant to Section 1.06(a)(i) is not paid to the Belgian Lending Bank when due from such Bank, such Bank shall pay to the Agent for the account of the Belgian Lending Bank on demand an amount equal to the product of (i) such amount, times (ii) the rate customary in the applicable Currency for settlement of similar interbank obligations, as quoted by the Belgian Lending Bank, in each case during the period from and including the date such payment is required to the date on which such payment is immediately available to the Belgian Lending Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of the Belgian Lending Bank submitted to any Bank with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) (i) Whenever the Belgian Lending Bank receives any payment of principal of, interest on, or any other amount payable hereunder in respect of, a Revolving Loan that is a Belgian Loan (whether directly from the Borrower or otherwise, -8- including by way of set-off or proceeds of collateral applied thereto by the Belgian Lending Bank), the Belgian Lending Bank will promptly distribute to the Agent for the account of each Bank its pro rata share of (A) prior to the payment by such Bank for its participation interest in unpaid amounts pursuant to the second sentence of Section 1.06(a)(i) and subject to Section 1.06(c)(ii), payments in respect of the Eurocurrency Margin only, and (B) after, and to the extent of, the payment by such Bank for its participation interest in unpaid amounts pursuant to the second sentence of Section 1.06(a)(i), payments in respect of all such unpaid amounts; provided, however, that in the event that any such payment received by the Belgian Lending Bank shall be required to be returned by the Belgian Lending Bank, such Bank shall return to the Belgian Lending Bank the portion thereof previously distributed by the Belgian Lending Bank to it. (ii) Amounts to be paid by the Belgian Lending Bank to the Agent for the accounts of the Banks pursuant to clause (A) of Section 1.06(c)(i) to the extent received by the Belgian Lending Bank in a Currency other than Dollars shall be converted into Dollars by the Agent before distribution to the Banks at the rate into which such Currency may be exchanged into Dollars at the Agent's spot rate of exchange in the interbank market where its foreign exchange operations in respect of such Currency are then being conducted at or about 10:00 a.m. local time on the date of such exchange for delivery two business days later; provided that if at the time of any such determination, no such spot rate can reasonably be quoted, the Agent may use any reasonable method as it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error (without prejudice to the determination of the reasonableness of such method); and for this purpose "business day" shall mean a day other than a Saturday, Sunday or other day on which commercial banks in the city in which such interbank market is conducted are authorized or required by law to close. (iii) Amounts to be paid by the Belgian Lending Bank to the Agent for the accounts of the Banks pursuant to Section 1.06(c)(i) shall bear interest from the date such funds are received by the Belgian Lending Bank until they are paid by it to the Agent at the rate specified in and calculated in accordance with the provisions of Section 1.06(b). Section 1.07 Canadian Bankers' Acceptances. (a) Any Canadian Borrower may present drafts for acceptance as Canadian Bankers' Acceptances by the Canadian Lending Banks by delivering a Notice of Revolving Borrowing. The full face amount of Canadian Bankers' Acceptances, without Discount, shall be used when calculations are made to determine the outstanding amount of Canadian Exposure, Canadian Outstanding Exposure and Foreign Currency Exposure. (b) The Agent is authorized by each Canadian Borrower and each Canadian Lending Bank to allocate among the Canadian -9- Lending Banks the Canadian Bankers' Acceptances to be issued in such manner and amounts as the Agent may, in its sole and absolute discretion, acting reasonably, consider necessary, rounding a Canadian Lending Bank's allocation up or down, so as to ensure that no Canadian Lending Bank is required to accept a Bankers' Acceptance for a fraction of $100,000, and in such event the respective Canadian Borrowing Percentages of any such Canadian Bankers' Acceptances and repayments thereof shall be altered accordingly; further, the Agent is authorized by each Canadian Borrower and each Canadian Lending Bank to cause the proportionate share of one or more Canadian Lending Banks' Canadian Commitments to be exceeded by not more than $100,000 each as a result of such allocations; provided that the principal amount of outstanding Canadian Exposure (including the face amount of Canadian Bankers' Acceptances) shall not thereby exceed the aggregate amount of the Canadian Commitments; and provided, further, that no Canadian Lending Bank shall be required to make available an amount greater than its Canadian Commitment. (c) (i) Upon the issue of Canadian Bankers' Acceptances which are purchased hereunder, the issuing Canadian Borrower shall be entitled to be credited by the Agent on behalf of the Canadian Lending Banks with the Discounted Proceeds thereof, less the Acceptance Fee. (ii) On each day on which drafts are to be accepted as Canadian Bankers' Acceptances, the Agent shall notify the Canadian Lenders of the Discount Rate, Discounted Proceeds and the Acceptance Fee applicable thereto. (d) Upon the issue of each Canadian Bankers' Acceptance as a result of the conversion of outstanding Revolving Loans that are Canadian Cost of Funds Loans into Canadian Bankers' Acceptances or as a result of the renewal of outstanding Canadian Bankers' Acceptances, the issuing Canadian Borrower shall, concurrently with the renewal or conversion, pay in advance out of its own funds to the Agent on behalf of the Canadian Lending Banks an amount equal to the Discount applicable to such issue, to be applied against the principal of the Canadian Loan being so converted or renewed, plus the applicable Acceptance Fee. (e) Each Canadian Borrower hereby (i) appoints the Agent as its agent to sign and endorse on its behalf, in handwriting or by facsimile or mechanical signature as and when deemed necessary by the Agent, blank forms of Canadian Bankers' Acceptances, and (ii) instructs the Agent to forward such forms of Canadian Bankers' Acceptances so pre-signed and pre-endorsed to each Canadian Lending Bank in order to allow each of them to complete and accept such instruments in the aggregate face amounts and for the maturities chosen by such Canadian Borrower. In this respect, it is each Canadian Lending Bank's responsibility to request from the Agent from time to time an adequate supply of blank forms of Canadian Bankers' Acceptances -10- so pre-signed and pre-endorsed for acceptance hereunder. Each Canadian Borrower recognizes and agrees that all Canadian Bankers' Acceptances signed and endorsed on its behalf by the Agent shall bind such Canadian Borrower as fully and effectually as if signed in the handwriting of and duly issued by the proper signing officers of such Canadian Borrower. In this connection, the parties also agree as follows: (i) The Agent and each Canadian Lending Bank shall deal prudently with any Canadian Bankers' Acceptance forms purported to have been pre-signed and/or pre-endorsed by a Canadian Borrower and delivered from time to time by the Agent to such Canadian Lending Bank and shall use them only in accordance with the instructions of such Canadian Borrower given to the Agent for onward conveyance to each of the Canadian Lending Banks, in conformity with this Agreement; each Canadian Lending Bank shall be presumed to have acted prudently when following such instructions so conveyed to it by the Agent. (ii) In accordance with the instructions given from time to time by the applicable Canadian Borrower, each Canadian Lending Bank is hereby authorized to complete the aforementioned Canadian Bankers' Acceptance forms, to provide its acceptance thereon, to provide the Discounted Proceeds thereof to the Agent for the account of such Canadian Borrower and, at each Canadian Lending Bank's option, to put them into circulation, all as provided in and subject to this Agreement. (iii) In consideration of a Canadian Lending Bank accepting Canadian Bankers' Acceptances so signed and endorsed by the Agent on behalf of the Canadian Borrowers, but except as provided in clause (iv) below, each Canadian Borrower shall pay on demand to such Canadian Lending Bank at such Canadian Lending Bank's branch of account the face amount of any Canadian Bankers' Acceptance forms purporting to bear the signatures of officers of such Canadian Borrower, presented to a Canadian Lending Bank for payment and paid by such Canadian Lending Bank, that has been put into circulation fraudulently or without authority, and shall indemnify such Canadian Lending Bank against any loss, cost, damages, expense or claim, regardless of whomsoever made by, that such Canadian Lending Bank may suffer or incur by reason of any fraudulent, unauthorized or unlawful issue or use of any such Canadian Bankers' Acceptance. (iv) The provisions of clause (iii) hereabove shall not apply in respect of any fraudulent, unauthorized or unlawful issue or use of any such Canadian Bankers' Acceptance forms which is caused by the recklessness, willful misconduct or a violation of law of the Agent or a Canadian Lending Bank. -11- (v) On request of or on behalf of a Canadian Borrower, a Canadian Lending Bank shall cancel all forms of Canadian Bankers' Acceptances which have been pre-signed or pre-endorsed by or on behalf of such Canadian Borrower and which are held by such Canadian Lending Bank and have not yet been issued in accordance with such Canadian Borrower's instructions hereunder. (vi) Each Canadian Lending Bank shall maintain a record with respect to Canadian Bankers' Acceptances (A) received by it from the Agent in blank hereunder, (B) voided by it for any reason, (C) accepted by it hereunder and (D) canceled at their respective maturities. Each Canadian Lending Bank agrees to provide such records to the applicable Canadian Borrower promptly upon request. (f) Notwithstanding that any Person whose signature appears on any Canadian Bankers' Acceptance may no longer be an authorized signatory for a Canadian Borrower or the Agent at the date of issuance of such Canadian Bankers' Acceptance, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance and any such Canadian Bankers' Acceptance so signed shall be binding on such Canadian Borrower. (g) The applicable Canadian Borrower shall pay to the Agent for the account of each of the Canadian Lending Banks the Acceptance Fee forthwith upon the acceptance by a Canadian Lending Bank of a Canadian Bankers' Acceptance issued by such Canadian Borrower. Each Canadian Borrower authorizes and directs the Agent and the Canadian Lending Banks to deduct from the Discounted Proceeds of Canadian Bankers' Acceptances purchased by the Canadian Lending Banks for their own account, the amount of each such Acceptance Fee upon the issue of each Canadian Bankers' Acceptance. ARTICLE 2. THE COMPETITIVE ADVANCE FACILITY Section 2.01 Competitive Advance Loans. (a) Subject to the terms and conditions hereof, any Borrower may, from time to time during the Commitment Period, request the Banks or the Canadian Lending Banks to offer bids, and any Bank or Canadian Lending Bank may, in its sole discretion, offer such bids, to make competitive advance loans ("CA Loans") to such Borrower on the terms and conditions set forth in such bids; provided that (i) CA Loans that are Canadian Loans may be made only by Canadian Lending Banks, and shall be denominated only in Canadian Dollars and (ii) CA Loans denominated in Canadian Dollars may be made only to Canadian Borrowers and only by Canadian Lending Banks; and provided, further, that CA Loans that are Belgian Loans may only be made by a Bank payment to which of principal, interest -12- and other amounts shall not be subject to Belgian withholding taxes that the Belgian Lending Bank would then not be subject to, and each offer to make a CA Loan that is a Belgian Loan shall constitute a representation to the Borrower and the Agent by the Bank making such offer that such payments to it are not subject to such Belgian withholding taxes. Each CA Loan shall bear interest at the rates, be payable on the dates, and mature on the date, agreed between such Borrower and Bank or Canadian Lending Bank, as the case may be, at the time such CA Loan is made; provided that (i) each CA Loan shall mature not earlier than seven days, and not later than 180 days, after the date such CA Loan is made, and (ii) no CA Loan shall mature after the Termination Date. During the Commitment Period, the Borrowers may accept bids from Banks or Canadian Lending Banks, as the case may be, from time to time for CA Loans, and borrow and repay CA Loans, all in accordance with the terms and conditions hereof; provided that no CA Loan shall be made if, after giving effect to the making of such Loan and the simultaneous application of the proceeds thereof, (i) the Total Exposure would exceed the aggregate amount of the Commitments, (ii) the aggregate amount of the Foreign Currency Exposure would exceed $400,000,000, or (iii) the aggregate amount of the CA Loan Exposure would exceed $500,000,000. Subject to the foregoing, any Bank may, in its sole discretion, make CA Loans that are not Canadian Loans in an aggregate outstanding amount exceeding the amount of such Bank's Commitment, and any Canadian Lending Bank may, in its sole discretion, make CA Loans that are Canadian Loans in an aggregate amount exceeding the amount of such Canadian Lending Bank's Canadian Commitment. (b) CA Loans that are not Belgian Loans or Canadian Loans may be made in Dollars or any Available Foreign Currency, as agreed between the Borrower and the Bank at the time such CA Loan is made. Section 2.02 Procedure for CA Loan Borrowing. (a) Any Borrower may request CA Loans by delivering a CA Loan Request to the Person, in the manner and by the time specified for a CA Loan Request in respect of the applicable Currency in the Administrative Schedule. The Agent shall notify each Bank, or if such request is for Canadian Loans, each Canadian Lending Bank, promptly by facsimile transmission of the contents of each CA Loan Request received by the Agent. Each Bank, or if such request is for Canadian Loans, each Canadian Lending Bank, may elect, in its sole discretion, to offer irrevocably to make one or more CA Loans to the Borrower requesting such CA Loan by delivering a CA Loan Offer to the Agent; provided that if the Agent, in its capacity as a Bank shall, in its sole discretion, elect to make a CA Loan Offer, it shall deliver to such Borrower its CA Loan Offer at least 30 minutes before the time and on the date on which other Banks or, if such request is for Canadian Loans, the Canadian Lending Banks, are required to deliver their CA Loan Offers to the Agent. -13- (b) Before the acceptance time set forth in the applicable CA Loan Request, the Borrower, in its absolute discretion, shall either: (i) cancel such CA Loan Request by giving the Agent telephone notice to that effect; or (ii) by giving telephone notice to the Agent immediately confirmed in writing or by facsimile transmission, (A) subject to the provisions of Section 2.02(c), accept one or more of the offers made by any Bank or Banks or Canadian Lending Bank or Canadian Lending Banks pursuant to Section 2.02(a) to make CA Loans for each relevant maturity date, and (B) reject any other offers made by Banks or Canadian Lending Banks pursuant to Section 2.02(a). (c) A Borrower's acceptance of a Bank's or a Canadian Lending Bank's offer or Banks' or Canadian Lending Banks' offers to make CA Loans in response to any CA Loan Request shall be subject to the following limitations: (i) the amount of CA Loans accepted for each maturity date specified by any Bank or Canadian Lending Bank in its CA Loan Offer shall not exceed the maximum amount specified in respect of such maturity date in such CA Loan Offer; (ii) the aggregate amount of CA Loans accepted for all maturity dates specified by any Bank or Canadian Lending Bank in its CA Loan Offer shall not exceed the aggregate maximum amount specified for all such maturity dates in such CA Loan Offer; (iii) a Borrower may not accept offers for CA Loans for any maturity date in an aggregate amount in excess of the maximum principal amount requested in respect of such maturity date in the related CA Loan Request; and (iv) if a Borrower accepts any of such offers, it must accept offers based solely upon the lowest prices specified in the CA Loan Offers received in respect of each relevant maturity date and upon no other criteria whatsoever, and if two or more Banks, or Canadian Lending Banks, submit CA Loan Offers in respect of any maturity date at identical pricing and the Borrower accepts any of such offers but does not wish to (or by reason of the limitations set forth in Section 2.02(c)(iii) cannot) borrow the total amount offered by such Banks or Canadian Lending Banks with such identical pricing, the Agent shall allocate the amount of such borrowing among such Banks pro rata to the respective amounts offered by such Banks or Canadian Lending Banks (or as nearly pro rata as shall be practicable). -14- (d) If a Borrower notifies the Agent that a CA Loan Request is canceled, the Agent shall give prompt notice thereof to the Banks and Canadian Lending Banks, as applicable. (e) If a Borrower accepts one or more of the offers made by any Bank or Banks, or Canadian Lending Bank or Canadian Lending Banks, the Agent promptly shall notify (in writing or by telephone, promptly confirmed in writing) each Bank or Canadian Lending Bank which has made such a CA Loan Offer of (i) the aggregate amount of such CA Loans to be made for each maturity date and (ii) the acceptance or rejection of any offers to make such CA Loans made by such Bank or Canadian Lending Bank. Before the Funding Time for CA Loans of the applicable Currency, subject to the terms and conditions hereof, each Bank or Canadian Lending Bank whose CA Loan Offer has been accepted shall make available to the Agent for the account of the Borrower at the Funding Office for CA Loans of the applicable Currency the amount of CA Loans in the applicable Currency to be made by such Bank or Canadian Lending Bank, in immediately available funds. Section 2.03 Repayment of CA Loans. Each Borrower that borrows any CA Loan hereby unconditionally promises to pay to the Bank or the Canadian Lending Bank that made such CA Loan on the maturity date, as agreed by such Borrower and such Bank or such Canadian Lending Bank (or such earlier date on which all the Loans become due and payable pursuant to Section 5.02(b) or Article 11), the then unpaid principal amount of such CA Loan. Subject to Section 5.03, each Borrower hereby further agrees to pay interest on the unpaid principal amount of the CA Loans made to such Borrower by any Bank or Canadian Lending Bank from time to time outstanding from the date thereof until payment in full thereof at the rate per annum, and on the dates, agreed by such Borrower and such Bank or Canadian Lending Bank at the time such CA Loan is made. All payments in respect of CA Loans shall be made by such Borrower to the Agent for the account of the Bank or Canadian Lending Bank that makes such CA Loan to the relevant Payment Office and by the Payment Time specified for CA Loans in the applicable Currency. Section 2.04 Prepayments. Unless otherwise agreed by the Bank or Canadian Lending Bank making a CA Loan, a CA Loan may not be optionally prepaid prior to the scheduled maturity date thereof. ARTICLE 3. THE SWING LINE FACILITY Section 3.01 Swing Line Loans. Subject to the terms and conditions hereof, the Company may borrow from the Swing Line Bank swing line loans in Dollars ("Swing Line Loans") from time to time during the Commitment Period; provided that no Swing Line Loan shall be made if, after giving effect to the making of such -15- Loan and the simultaneous application of the proceeds thereof, (a) the Total Exposure would exceed the aggregate amount of the Commitments, or (b) the aggregate amount of all outstanding Swing Line Loans would exceed $50,000,000. During the Commitment Period, the Company may borrow, prepay, in whole or in part, and reborrow the Swing Line Loans in accordance with the terms and conditions hereof. Section 3.02 Procedure for Swing Line Borrowing. The Company may borrow a Swing Line Loan during the Commitment Period on any Business Day by giving a Notice of Swing Line Borrowing in respect of such Swing Line Loan to the Agent not later than 12:00 noon (New York time) on the day such Swing Line Loan is to be made. Subject to the terms and conditions hereof, on the Borrowing Date of each Swing Line Loan, the Swing Line Bank shall make the proceeds thereof available to the Company in immediately available funds in Dollars in the manner from time to time agreed by the Company and the Swing Line Bank. Section 3.03 Repayment of Swing Line Loans. The Company hereby unconditionally promises to pay to the Swing Line Bank on the Termination Date (or such earlier date on which such Swing Line Loans become due and payable pursuant to Section 3.04 or Section 5.02(b) or on which all the Loans become due and payable pursuant to Article 11), the then unpaid principal amount of all Swing Line Loans made to the Company. Subject to Section 5.03, the Company hereby further agrees to pay interest on the unpaid principal amount of each Swing Line Loan made to the Company from time to time outstanding from the date thereof until payment in full thereof at the Base Rate, payable on each Interest Payment Date and when such Swing Line Loan shall be due at maturity, by reason of acceleration or otherwise, but only to the extent then accrued on the amount then so due. All payments in respect of Swing Line Loans shall be made by the Company to the Swing Line Bank at the Funding Office. Section 3.04 Allocating Swing Line Loans; Swing Line Loan Participations. (a) If any Event of Default exists, the Swing Line Bank may, in its sole and absolute discretion, direct that the Swing Line Loans owing to it be refunded by delivering a Notice of Swing Line Refunding. Upon receipt of a Notice of Swing Line Refunding, the Agent shall promptly give notice of the contents thereof to the Banks and, unless an Event of Default described in Section 11.01(e) in respect of the Company has occurred, to the Company. Each such Notice of Swing Line Refunding shall be deemed to constitute delivery by the Company of a Notice of Revolving Borrowing in the amount of the Swing Line Loans to which it relates. Subject to the terms and conditions hereof (other than the conditions precedent set forth in Section 6.02, except that set forth in Section 6.02(d)), each Bank (including the Swing Line Bank in its capacity as a Bank having a Commitment) hereby agrees to make a Revolving Loan to the Company pursuant to Section 1.01(a) in an amount equal to such Bank's Borrowing Percentage of the aggregate amount of the -16- Swing Line Loans to which such Notice of Swing Line Refunding relates. Unless any of the events described in Section 11.01(e) in respect of the Company shall have occurred (in which case the procedures of Section 3.04(b) shall apply), each Bank shall make the amount of such Revolving Loan available to the Agent at the Funding Office at or prior to the Funding Time in funds immediately available to the Agent. The proceeds of such Revolving Loans shall be made immediately available to the Swing Line Bank by the Agent and applied by the Swing Line Bank to repay the Swing Line Loans to which such Notice of Swing Line Refunding related. (b) If prior to the time a Revolving Loan would have otherwise been made pursuant to Section 3.04(a), one of the events described in Section 11.01(e) shall have occurred in respect of the Company or one or more Banks shall be affected by an Applicable Law as provided in Section 6.02(d), each Bank (other than the Swing Line Bank) or each Bank so affected, as the case may be, shall, on the date such Revolving Loan would have been made pursuant to the Notice of Swing Line Refunding referred to in Section 3.04(a) (the "Refunding Date"), purchase an undivided participating interest in the outstanding Swing Line Loans to which such Notice of Swing Line Refunding related, in an amount equal to (i) such Bank's Borrowing Percentage times (ii) the aggregate principal amount of such Swing Line Loans then outstanding which were to have been repaid with Revolving Loans (the "Swing Line Participation Amount"). On the Refunding Date, each Bank or each Bank so affected, as the case may be, shall transfer to the Swing Line Bank, in immediately available funds, such Bank's Swing Line Participation Amount, and upon receipt thereof the Swing Line Bank shall, if requested by any Bank, deliver to such Bank a participation certificate dated the date of the Swing Line Bank's receipt of such funds and evidencing such Bank's ownership of its Swing Line Participation Amount. If any amount required to be paid by any Bank to the Swing Line Bank pursuant to this Section 3.04 in respect of any Swing Line Participation Amount is not paid to the Swing Line Bank on the date such payment is due from such Bank, such Bank shall pay to the Swing Line Bank on demand an amount equal to the product of (i) such amount, times (ii) the Federal Funds Rate, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Swing Line Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of the Swing Line Bank submitted to any Bank with respect to any amounts owing under this Section 3.04(b) shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Swing Line Bank has received from any Bank such Bank's Swing Line Participation Amount, the Swing Line Bank receives any payment on account of the related Swing Line Loans, the Swing Line Bank will promptly distribute to such Bank its Borrowing Percentage of such payment -17- on account of its Swing Line Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Swing Line Bank is required to be returned, such Bank will return to the Swing Line Bank any portion thereof previously distributed to it by the Swing Line Bank. (d) Each Bank's obligation to make Revolving Loans pursuant to Section 3.04(a) and to purchase participating interests pursuant to Section 3.04(b) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against any other Bank or the Company, or the Company may have against any Bank or any other Person, as the case may be, for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Company or any of its Subsidiaries; (iv) any breach of any Loan Document by any party thereto; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that a Bank shall not be required to make a Revolving Loan pursuant to Section 3.04(a) to refund a Swing Line Loan or to purchase a participating interest pursuant to Section 3.04(b) in a Swing Line Loan if before the Swing Line Bank made such Swing Line Loan such Bank gave notice to the Swing Line Bank stating its good faith belief that one or more Defaults or Events of Default have occurred and are continuing, specifying each such Default or Event of Default and stating that such Bank does not intend to make a Revolving Loan to refund or purchase a participating interest in such Swing Line Loan as long as such Default or Event of Default is continuing; provided, further, that the obligation of such Bank to make such Revolving Loans shall resume when such Defaults or Events of Default are no longer continuing; and provided, further, that notwithstanding such Bank's good faith belief, in the event no Default or Event of Default specified by such Bank had occurred and was continuing at the time such notice was sent, such Bank shall be liable for any such Revolving Loans it would have been required to make hereunder but for the sending of the notice described herein. ARTICLE 4. THE LETTER OF CREDIT FACILITY Section 4.01 Letter of Credit Commitment. (a) (i) Subject to the terms and conditions hereof, each Issuing Bank agrees to issue Non-Canadian Letters of Credit for the account of any Borrower that is not a Canadian Borrower on any Business Day during the Commitment Period in such form as shall be reasonably acceptable to the Issuing Bank; provided that no Non-Canadian -18- Letter of Credit shall be issued if, after giving effect thereto (A) the Total Exposure would exceed the aggregate amount of the Commitments, (B) the aggregate amount of the Foreign Currency Exposure would exceed $400,000,000, (C) the aggregate amount of the Foreign Currency Exposure of all Revolving Loans and Letters of Credit denominated in any of Belgian Francs or Pounds Sterling would exceed $100,000,000 in the case of any such Currency, or (D) the aggregate amount of the L/C Obligations, plus the aggregate amount of the Canadian L/C Obligations, would exceed $600,000,000. (ii) Subject to the terms and conditions hereof, each Canadian Issuing Bank agrees to issue Canadian Letters of Credit for the account of any Canadian Borrower on any Business Day during the Commitment Period in such form as shall be reasonably acceptable to the Canadian Issuing Bank; provided that no Canadian Letter of Credit shall be issued if, after giving effect thereto (A) the aggregate amount of the Canadian Exposure (other than CA Loans) of all of the Canadian Lending Banks would exceed the aggregate amount of the Canadian Commitments, (B) the Total Exposure would exceed the aggregate amount of the Commitments, (C) the aggregate amount of the Foreign Currency Exposure would exceed $400,000,000, (D) the aggregate amount of the Foreign Currency Exposure of all Revolving Loans and Letters of Credit denominated in Canadian Dollars would exceed $100,000,000, or (E) the aggregate amount of the Canadian L/C Obligations, plus the aggregate amount of the L/C Obligations, would exceed $600,000,000. (b) Each Letter of Credit shall: (i) be denominated in Dollars or an Available Foreign Currency; provided that a Letter of Credit denominated in Belgian Francs shall only be issued by the Belgian Lending Bank and only for the account of a Belgian Borrower; (ii) expire no later than the earlier of one year after its date of issuance and five Business Days prior to the Termination Date, although any such Letter of Credit may be automatically extended for periods not in excess of one year from the expiration date of the Letter of Credit unless the Issuing Bank elects not to extend such Letter of Credit or the extended maturity date would be subsequent to the day which is five Business Days prior to the Termination Date; (iii) be issued by the Issuing Bank in such form, and contain such terms, as shall be satisfactory to the Issuing Bank; provided that the inclusion of terms that (A) permit the beneficiary to draw on the Letter of Credit in full prior to the expiration date thereof if such Letter of Credit is not extended or a substitute letter of credit furnished or (B) provide for the automatic extension of the expiration date of the Letter of Credit unless the Issuing -19- Bank gives not less than 30 days prior notice to the beneficiary of its non-extension, shall not, in and of itself, make the terms of any Letter of Credit unsatisfactory; (iv) be subject to the Uniform Customs and, to the extent not inconsistent therewith, the law of the State of New York or, if acceptable to the Majority Banks and the relevant account party, the jurisdiction of the Issuing Office at which such Letter of Credit is issued; (v) be in a stated Dollar Equivalent Amount of not less than $500,000; and (vi) be issued only on a Business Day. (c) An Issuing Bank shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Bank or any Bank or Canadian Lending Bank to exceed any limits imposed by, any change after the date hereof in any applicable Requirement of Law. Section 4.02 Procedure for Issuance of Letters of Credit Under This Agreement. Any Borrower may from time to time request that an Issuing Bank issue a Letter of Credit by delivering to such Issuing Bank at its Issuing Office a Letter of Credit Request in respect thereof (with a copy to the Agent), completed to the satisfaction of the Issuing Bank, and such other application, certificates, documents and other papers and information as such Issuing Bank may reasonably request. Upon receipt by an Issuing Bank of any Letter of Credit Request, and subject to the terms and conditions hereof, such Issuing Bank will process such Letter of Credit Request and the application, certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall any Issuing Bank be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Letter of Credit Request in respect thereof and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by such Issuing Bank and such Borrower. Such Issuing Bank shall advise the Agent of the terms of such Letter of Credit on the date of issuance thereof and shall promptly thereafter furnish copies thereof and of each amendment thereto to the Company, to the Borrower for whose account such Letter of Credit is being issued, if such Borrower is not the Company, and, through the Agent, to each Bank. Section 4.03 Fees and Other Charges. (a) Each Borrower for whose account a Non-Canadian Letter of Credit is issued hereunder shall pay to the Agent, for the accounts of the L/C Participants (including the Issuing Bank) pro rata according -20- to their respective Borrowing Percentages, a letter of credit fee with respect to each Non-Canadian Letter of Credit, computed at a rate equal to the then Eurocurrency Margin for Revolving Eurocurrency Loans on the daily average undrawn face amount of such Non-Canadian Letter of Credit. Such fees shall be payable in arrears on each Interest Payment Date (beginning with the Interest Payment Date occurring on the last Business Day of September, 1997, occurring after the date of issuance of each Non-Canadian Letter of Credit) and shall be nonrefundable. (b) Each Canadian Borrower for whose account a Canadian Letter of Credit is issued hereunder shall pay to the Agent, for the account of the Canadian L/C Participants (including the Issuing Bank) pro rata according to their Canadian Borrowing Percentages, a letter of credit fee with respect to each Canadian Letter of Credit, computed at a rate equal to the then COF Margin for Canadian Cost of Funds Loans on the daily average undrawn face amount of such Canadian Letter of Credit. Such fees shall be payable in arrears on each Interest Payment Date (beginning with the Interest Payment Date occurring on the last Business Day of September, 1997, occurring after the date of issuance of each Canadian Letter of Credit) and shall be nonrefundable. (c) The Agent shall, promptly following its receipt thereof, distribute to the L/C Participants and the Canadian L/C Participants all fees received by the Agent for their respective accounts pursuant to this subsection. (d) In addition to the foregoing fees, each Borrower for whose account a Letter of Credit is issued hereunder shall (i) pay or reimburse the Issuing Bank for such normal and customary fees, costs and expenses as are incurred or charged by such Issuing Bank in issuing, effecting payment under, amending or otherwise administering such a Letter of Credit, and (ii) pay the Issuing Bank such other fees as shall be agreed by the Issuing Bank and such Borrower. Section 4.04 L/C Participations. (a) Each Issuing Bank irrevocably agrees to grant, and hereby grants, in the case of each Non-Canadian Letter of Credit, to each L/C Participant, and, in the case of each Canadian Letter of Credit, to each Canadian L/C Participant, and, to induce each Issuing Bank to issue Non-Canadian Letters of Credit and Canadian Letters of Credit hereunder, each L/C Participant and each Canadian L/C Participant irrevocably agrees to accept and purchase, and hereby accepts and purchases, from each Issuing Bank, on the terms and conditions hereinafter stated, for such L/C Participant's or such Canadian L/C Participant's own account and risk, an undivided interest equal to such L/C Participant's Borrowing Percentage, or such Canadian L/C Participant's Canadian Borrowing Percentage, as applicable, of the Issuing Bank's obligations and rights under each Non-Canadian Letter of Credit and Canadian Letter of Credit, respectively, issued by such Issuing Bank hereunder and the -21- amount of each draft paid by such Issuing Bank thereunder. Each L/C Participant and Canadian L/C Participant unconditionally and irrevocably agrees with each Issuing Bank that, if a draft is paid under any Non-Canadian Letter of Credit or Canadian Letter of Credit issued by the Issuing Bank for which the Borrower which is the account party under such Letter of Credit or Canadian Letter of Credit has not reimbursed the Issuing Bank to the full extent required by the terms of this Agreement, such L/C Participant or Canadian L/C Participant, as applicable, shall pay the Agent for the account of the Issuing Bank upon demand, at the Agent's office in respect of the relevant Currency set forth on the Administrative Schedule, an amount equal to such L/C Participant's Borrowing Percentage or such Canadian L/C Participant's Canadian Borrowing Percentage, as applicable, of the amount of such draft, or any part thereof, which is not so reimbursed; provided that an L/C Participant or a Canadian L/C Participant shall not be required to make any such payment in respect of a Letter of Credit if before the Issuing Bank issued such Letter of Credit such L/C Participant or Canadian L/C Participant gave notice to the Issuing Bank stating its good faith belief that one or more Defaults or Events of Default have occurred and are continuing, specifying each such Default or Event of Default and stating that such L/C Participant or Canadian L/C Participant does not intend to make a payment to the Issuing Bank in respect of such Letter of Credit as long as such Defaults or Events of Default are continuing; provided, further, that the obligation of such L/C Participant or Canadian L/C Participant to make such payment to the Issuing Bank shall resume when such Defaults or Events of Default are no longer continuing; and provided, further, that notwithstanding such L/C Participant's or Canadian L/C Participant's good faith belief, in the event no Default or Event of Default specified by such L/C Participant or Canadian L/C Participant had occurred and was continuing at the time such notice was sent, such L/C Participant or Canadian L/C Participant shall be liable for any such payment it would have been required to make to the Issuing Bank hereunder but for the sending of the notice described herein. (b) If any amount required to be paid by any L/C Participant or Canadian L/C Participant to the Agent for the account of the Issuing Bank pursuant to Section 4.04(a) in respect of any unreimbursed portion of any payment made by an Issuing Bank under any Non-Canadian Letter of Credit or Canadian Letter of Credit is not paid to the Agent on the date such payment is due from such L/C Participant or Canadian L/C Participant, such L/C Participant or Canadian L/C Participant shall pay to the Agent for the account of the Issuing Bank on demand an amount equal to the product of (i) such amount, times (ii) (A) in the case of any such payment obligation denominated in Dollars, the daily average Federal Funds Rate, as quoted by the Issuing Bank, or (B) in the case of any such payment obligation denominated in an Available Foreign Currency, the rate customary in such Currency for settlement of similar interbank obligations, as quoted by the Issuing Bank, in each case during -22- the period from and including the date on which such payment is required to the date on which such payment is immediately available to the Issuing Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of an Issuing Bank submitted to any L/C Participant or Canadian L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Bank has made payment under any Non-Canadian Letter of Credit or Canadian Letter of Credit and has received from any L/C Participant or Canadian L/C Participant its pro rata share of such payment in accordance with Section 4.04(a), the Issuing Bank receives any payment related to such Non-Canadian Letter of Credit or Canadian Letter of Credit (whether directly from the account party or otherwise, including by way of set-off or proceeds of collateral applied thereto by the Issuing Bank), or any payment of interest on account thereof, the Issuing Bank will promptly distribute to the Agent for the respective accounts of such L/C Participant or Canadian L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Bank shall be required to be returned by the Issuing Bank, such L/C Participant or Canadian L/C Participant shall return to the Issuing Bank the portion thereof previously distributed by the Issuing Bank to it. Section 4.05 Reimbursement Obligation of the Borrowers. (a) Each Borrower for whose account a Letter of Credit is issued hereunder irrevocably agrees to reimburse the Issuing Bank in respect of each Drawing under such Letter of Credit, on the later of (A) the date such Drawing is disbursed by such Issuing Bank and (B) the second Business Day after such Issuing Bank notifies such Borrower (with a copy to the Agent at its address in the Administrative Schedule for Notices of Borrowing for the applicable Currency) of the date and amount of a draft presented under such Letter of Credit, for the amount of (i) such draft and (ii) all taxes, fees, charges or other costs or expenses incurred by the Issuing Bank in connection with the payment of such draft. Each such payment shall be made to the Issuing Bank at its Issuing Office in the Currency of the payment of such draft and in immediately available funds. (b) Subject to Section 5.03, interest shall be payable on any and all amounts payable by a Borrower pursuant to Section 4.05(a) remaining unpaid from the date such amounts become payable until such amounts shall be paid in full at a rate per annum equal to (i) in the case of such amounts payable in Dollars, the Base Rate as in effect from time to time plus the Utilization Fee as in effect from time to time, and (ii) in the case of such amounts payable in any other Currency, 2% above the rate reasonably determined by the Issuing Bank as the cost of funding such overdue amounts from time to time on an overnight basis. Amounts not paid on the Business Day next succeeding the -23- day such amounts become payable shall bear interest thereafter at the Post-Default Rate. Section 4.06 Nature of Borrowers' Obligations. Without affecting any rights the Issuing Bank, the Banks, the Belgian Lending Bank, the Canadian Lending Banks or the Agent may have under Applicable Law, each Borrower agrees that none of the Issuing Bank, the Banks, the Belgian Lending Bank, the Canadian Lending Banks or the Agent, or their respective officers or directors, shall be liable or responsible for, and the obligations of such Borrower to the Issuing Bank, the L/C Participants, the Canadian L/C Participants, the Belgian Lending Bank, the Canadian Lending Banks, the Banks and the Agent hereunder shall not in any manner be affected by: (a) the use that may be made of any Letter of Credit or the proceeds thereof by the beneficiary thereof or any other Person; (b) the validity, sufficiency or genuineness of documents presented in connection with any Drawing, or of any endorsements thereon, even if such documents should, in fact, prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (c) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that such Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to such Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by such Borrower that are caused by (i) the Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms of such Letter of Credit, or (ii) the Issuing Bank's willful failure to pay under any Letter of Credit after the presentation to it of documents strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept documents that appear on their face to be in order without responsibility for further investigation, regardless of any notice or information to the contrary. Section 4.07 Letter of Credit Payments. If any draft shall be presented for payment to the Issuing Bank under any Letter of Credit, the Issuing Bank shall promptly notify the account party of the date and amount thereof. The responsibility of the Issuing Bank to the account party in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. Section 4.08 Letter of Credit Requests. To the extent that any provision of any Letter of Credit Request related to any Letter of Credit is inconsistent with the provisions of this Article 4, the provisions of this Article 4 shall apply. -24- Section 4.09 Existing Letters of Credit. If, on the date of the initial Credit Extension, there are any letters of credit outstanding under the 1993 Credit Agreement which have been issued by a Bank, such letters of credit, together with each other letter of credit listed on Schedule 4.09 outstanding on such date (which shall include certain letters of credit issued for the account of Fibreboard which shall be deemed to be reissued for the account of Sierra Corp.), shall be deemed to be Letters of Credit for purposes of this Agreement, the Bank that issued each such letter of credit shall constitute the Issuing Bank hereunder in respect of such Letter of Credit, and such Issuing Bank shall be deemed, without further action by any party hereto, to have granted to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have acquired from such Issuing Bank, a participation in each such Letter of Credit, and any Drawings that may at any time be made thereunder, to the extent of such Bank's Borrowing Percentage. Section 4.10 L/C Reports. Each Issuing Bank shall send a report to the Agent specifying the aggregate amount of Letters of Credit issued by it that were outstanding as of the opening of business on each day during a calendar month, such report to be due on or prior to the last Business Day of the first calendar week succeeding such calendar month, commencing with the first week of August, 1997. ARTICLE 5. CERTAIN PROVISIONS APPLICABLE TO THE LOANS AND LETTERS OF CREDIT Section 5.01 Cancellation or Reduction of Commitments. (a) Optional Cancellation or Reductions. The Company may irrevocably cancel or reduce the Commitments without penalty by giving the Agent not less than three Business Days' prior notice of its intention to effect such a cancellation or reduction and not less than one Business Day's prior notice irrevocably confirming such cancellation or reduction; provided that any partial reduction shall be in an aggregate amount equal to $25,000,000 or an integral multiple thereof. (b) Mandatory Reductions. (i) Debt. Subject to Section 5.01(b)(iii), the Commitments shall be reduced by an amount equal to the Net Cash Proceeds of each incurrence or sale of Debt of the Company or any Subsidiary by the Company or any Subsidiary (whether, in the case of the sale of any such Debt, the Debt is that of the Person making such sale or of another Person); provided that this Section 5.01(b)(i) shall not apply to (v) drawdowns under a credit facility listed on Schedule 5.01(b)(iv) hereto not in excess of the listed amount of such facility, (w) Permitted Intercompany Debt, (x) the refinancing or extension of any Existing Debt, (y) the issuance of TRUPS Notes by the Company so long as the Company is in compliance with -25- Section 8.19 or (z) such other incurrences or sales of Debt as may be agreed to by the Majority Banks. (ii) Capital Securities. Subject to Section 5.01(b)(iii), the Commitments shall be reduced by an amount equal to the Net Cash Proceeds of any issuance or sale of any Capital Securities of the Company or any Subsidiary by the Company or any Subsidiary (whether, in the case of the sale of any such Capital Securities, the Capital Securities are those of the Person making such sale or another Person); provided that this Section 5.01(b)(ii) shall not apply to (v) the issuance or sale of Capital Securities of the Company or any Subsidiary that results from an exercise of stock options of such Person; (w) the issuance or sale of Capital Securities of the Company or any Subsidiary under an employee stock purchase, stock ownership or other incentive plan of any such Person; (x) the issuance or sale of Capital Securities by the Company or any Subsidiary to the Company or a Wholly Owned Subsidiary; (y) the issuance and sale of TRUPS in connection with the acquisition by the Company, directly or indirectly, of substantially all of the assets and business of, or all of the ownership interest in, another business entity, or any TRUPS issued in repayment or replacement thereof in accordance with the last sentence of Section 15.02; or (z) such other issuances or sales of Capital Securities as may be agreed to by the Majority Banks. (iii) Reduction Limit. Notwithstanding the foregoing, the Commitments shall not be required to be further reduced pursuant to either Section 5.01(b)(i) or Section 5.01(b)(ii), after the aggregate amount of the Commitment reductions effected pursuant to Section 5.01(b)(i), plus those effected pursuant to Section 5.01(b)(ii), plus those effected pursuant to Section 5.01(a), but not including any Commitment reductions effected pursuant to Section 5.01(b)(iv) or Section 5.01(b)(v), shall equal $200,000,000. (iv) Investment Rating. In addition to any Commitment reductions pursuant to Section 5.01(a) or the preceding paragraphs (i) and (ii), if, on the date which is six months after the Agreement Date (the "Existing Debt Reduction Date"), the long-term senior unsecured debt of the Company has an S&P Rating lower than BBB- and a Moody's Rating lower than Baa3, the Commitments shall be reduced permanently by an amount equal to the Existing Debt Reduction Amount. (v) Sales of Accounts Receivable. If at any time any sale or sales by the Company, its Domestic Subsidiaries, and its Foreign Subsidiaries that are Loan Parties of accounts receivable (or undivided interests therein) shall cause the aggregate outstanding uncollected amount of accounts receivable (or undivided interests therein) sold by the Company, its Domestic Subsidiaries, and its Foreign Subsidiaries that are Loan Parties after the Agreement Date to exceed $200,000,000, or shall cause the amount of such excess to increase above the highest -26- previous amount thereof subsequent to the Agreement Date, the Company shall notify the Agent of (A) such sale or sales and the amount of such excess, and (B) each subsequent sale or sales where, after giving effect thereto, such excess shall have increased in an amount of $10,000,000 or more, and the Commitments shall be automatically reduced by the amount of such excess above $200,000,000 and each such increase therein of $10,000,000 or more. (c) Canadian Commitments. A reduction of the Commitments under Section 5.01(a) or (b) shall not cause a reduction of the Canadian Commitments. Section 5.02 Prepayments. (a) Optional Prepayments. A Borrower may, at any time and from time to time, prepay Revolving Loans and Swing Line Loans and, if the applicable Borrower and the Bank or the Canadian Lending Bank making such Loan shall have so agreed, a CA Loan, in whole or in part, without premium or penalty, except that (i) any prepayment of any Loans having the same Interest Period shall be in an aggregate principal amount of at least $5,000,000 or a greater integral multiple of $1,000,000, or, if less, the then outstanding amount of such Loans, (ii) any prepayment of any Loans made on a day other than on the last day of an applicable Interest Period shall be made together with payment of the amount, if any, due with respect thereto under Section 14.04, and (iii) any prepayment of Revolving Base Rate Loans shall be in an aggregate principal amount of at least $5,000,000 or a greater integral multiple of $1,000,000 or, if less, the then outstanding amount of such Loans. A Borrower shall deliver to the Agent and, in the case of CA Loans, to the Bank or the Canadian Lending Bank making such Loan, a Notice of Prepayment in respect of each prepayment, (A) in the case of a prepayment of Swing Line Loans, no later than 11:00 a.m. (New York time) on the Business Day of, (B) in the case of Revolving Base Rate Loans, one Business Day before, and, (C) in the case of a prepayment of any other Loans, three Business Days before, the date of such prepayment. Amounts to be prepaid shall irrevocably be due and payable on the date specified in the applicable Notice of Prepayment. (b) Mandatory Prepayments. The Company shall, on each date that a reduction in the Commitments or any change in any Exchange Rate or Exchange Rates causes the Total Exposure to exceed the Commitments, or Canadian Outstanding Exposure to exceed the Canadian Commitments, prepay, or cause to be prepaid, an aggregate principal amount of the Loans, L/C Obligations and Canadian L/C Obligations equal to such excess, together with the amounts, if any, due with respect thereto under Section 14.04. Any such prepayment shall be applied, as applicable, first, to the outstanding amount of Drawings, second, to the outstanding amount of Swing Line Loans, third, to the outstanding amount of Revolving Loans, fourth, to the outstanding amount of CA Loans, and fifth, to the outstanding amount of Canadian Bankers' Acceptances, Contingent Reimbursement Obligations and Canadian -27- Contingent Reimbursement Obligations, pro rata on the basis of the respective principal amounts thereof provided that in the case of Drawings and Loans to be prepaid, only Drawings, Swing Line Loans and Base Rate Loans outstanding on such date shall be prepaid on such date, and the remainder of the aggregate principal amount of Loans required to be prepaid shall be prepaid on the last day of each current Interest Period in respect of CA Loans, Canadian Cost of Funds Loans and Eurocurrency Loans as such last days occur until such aggregate excess principal amount shall be paid in full. Any such prepayment made on account of Canadian Bankers' Acceptances, Contingent Reimbursement Obligations or Canadian Contingent Reimbursement Obligations that are not prepayable shall be held as cash collateral in accordance with Section 13.18. Section 5.03 Post-Default Rate. If all or any part of any Loan or Drawing or any other amount due and payable hereunder is not paid when due (whether at maturity, by reason of Notice of Prepayment or acceleration, or otherwise), such unpaid amount shall, to the maximum extent permitted by Applicable Law, bear interest for each day during the period from the date such amount so becomes due until it shall be paid in full (whether before or after judgment) at a rate per annum equal to the applicable Post- Default Rate. Section 5.04 Maximum Interest Rate. Nothing contained in the Loan Documents shall require any Borrower at any time to pay interest at a rate exceeding the Maximum Permissible Rate. If the interest payable by any Borrower on any date would exceed the maximum amount permitted by the Maximum Permissible Rate, such interest payment shall automatically be reduced to such maximum permitted amount, and interest for any subsequent period, to the extent less than the maximum amount permitted for such period by the Maximum Permissible Rate, shall be increased by the unpaid amount of such reduction. Any interest actually received for any period in excess of such maximum amount permitted for such period shall be deemed to have been applied as a prepayment of the Loans. Section 5.05 Facility Fee. (a) The Company shall pay to the Agent for the account of each Bank a facility fee (the "Facility Fee") for the period from and including the Agreement Date to, but excluding, the Termination Date, computed at the Facility Fee Rate in effect from time to time on the average daily amount of the Commitment (used and unused) of such Bank during the period for which payment is made, payable quarterly in arrears on the successive Interest Payment Dates (beginning with the Interest Payment Date occurring on the last Business Day of September, 1997) and on the Termination Date or such earlier date on which the Commitments shall be reduced (to the extent accrued and unpaid on the amount of the reduction) or shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. -28- (b) The Company agrees to pay to the Agent, for its own account and for the account of CSFB, as Arranger of the facilities provided under this Agreement, the fees in the amounts and on the dates agreed to by such parties in writing prior to the Agreement Date. Section 5.06 Computation of Interest and Fees. All fees and interest, other than interest calculated on the basis of the Prime Rate or the Canadian Prime Rate, shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed. Interest calculated on the basis of the Prime Rate or the Canadian Prime Rate shall be computed on the basis of a year of 365 or 366 days, as the case may be, and paid for the actual number of days elapsed. Interest for each Interest Period shall be calculated from and including the first day thereof to but excluding the last day thereof. If the date for any payment of principal is extended (whether by operation of this Agreement, any provision of law or otherwise), interest shall be payable on such principal for such extended time. Section 5.07 Manner of Payment. All payments due to each Bank, each Canadian Lending Bank, the Swing Line Bank, an Issuing Bank and the Agent hereunder and under the Notes shall be due and shall be made at the Payment Time and place, and in the manner and Currency, required hereunder, without any deduction whatsoever, including, but not limited to, any deduction for any set-off, recoupment, counterclaim (whether sounding in tort, contract or otherwise) or Tax, except for any withholding or deduction for Taxes required to be withheld or deducted under Applicable Law. The Company, each other Borrower, each Guarantor and each Consenting Subsidiary hereby authorizes each such Person, if and to the extent payment due to such Person hereunder is not otherwise made when due, to charge any amount so due against any or all of the accounts of the Company, any Borrower, any Guarantor or any Consenting Subsidiary with the Agent or such Bank, Canadian Lending Bank, Swing Line Bank or Issuing Bank or any of their respective Affiliates, with the applicable Borrower and each Guarantor remaining liable for any deficiency. Whenever any payment to any Bank, any Canadian Lending Bank, the Swing Line Bank, any Issuing Bank or the Agent hereunder shall be due on a day that is not a Business Day, the date of payment thereof shall be extended to the next succeeding Business Day, unless, in the case of a payment on account of a Eurocurrency Loan or a Canadian Cost of Funds Loan, such extension would cause payment to be made in the next succeeding calendar month, in which case such due date shall be advanced to the next preceding Business Day. Section 5.08 Taxes. (a) (i) Taxes Payable by the Borrowers and the Guarantors. If under Applicable Law any Tax is required to be withheld or deducted from, or is otherwise payable by any Borrower or any Guarantor in connection with, any payment to the Agent or any Bank under this Agreement or any other Loan Document, such Borrower or Guarantor (A) shall (1) if so -29- required, withhold or deduct the amount of such Tax from such payment and, in any case, pay such Tax to the appropriate taxing authority in accordance with Applicable Law, and (2) indemnify the Agent and such Bank in accordance with the provisions of Section 13.02(a) against its failure so to do, and (B) shall, subject to Section 5.08(a)(iii), pay to the Agent or such Bank, as applicable, such additional amounts as may be necessary so that the net amount received by the Agent or such Bank with respect to such payment and such additional amounts, after withholding or deducting all Taxes required to be withheld or deducted, is equal to the full amount payable under this Agreement or any other Loan Document. If any Tax is withheld or deducted from, or is otherwise payable by any Borrower or Guarantor in connection with, any payment payable to the Agent or any Bank under this Agreement or any other Loan Document, such Borrower or Guarantor shall, as soon as possible after the date of such payment, furnish to the Agent or such Bank, as applicable, the original or a certified copy of a receipt for such Tax from the applicable taxing authority. If any payment due to the Agent or any Bank under this Agreement or any other Loan Document is or is expected to be made by any Borrower or Guarantor without withholding or deducting therefrom, or otherwise paying in connection therewith, any Tax payable to any taxing authority, such Borrower or Guarantor shall, within 30 days after any reasonable request from the Agent or such Bank, as applicable, furnish to the Agent or such Bank a certificate from such taxing authority, or an opinion of counsel acceptable to the Agent or such Bank, in either case stating that no Tax payable to such taxing authority was or is, as the case may be, required to be withheld or deducted from, or otherwise paid by such Borrower or Guarantor in connection with, such payment. (ii) Taxes Payable by the Agent or any Bank. Each Borrower or Guarantor shall, promptly upon request by the Agent or any Bank for the payment thereof, but subject to Section 5.08(a)(iii), pay to the Agent or such Bank, as the case may be, (A) all Taxes (other than Bank Taxes and without duplication of amounts paid pursuant to Section 5.08(a)(i)) payable by the Agent or such Bank, as the case may be, with respect to any payment due to the Agent or such Bank under this Agreement or any other Loan Document, (B) all Taxes deducted or withheld by the Belgian Lending Bank with respect to payments made by it to the Banks pursuant to Section 1.06 and (C) all Taxes (including Bank Taxes) payable by the Agent or such Bank (after giving effect to any credit, deduction or other reduction in Taxes received by the Agent or such Bank) as a result of payments made by such Borrower (whether made to a taxing authority or to the Agent or such Bank) pursuant to this Section 5.08(a)(ii). (iii) Limitations. Notwithstanding anything to the contrary contained herein, no Borrower or Guarantor shall be required to pay any additional amount in respect of the withholding of United States Federal income taxes pursuant to this Section 5.08 to any Bank (A) except to the extent such Taxes -30- are required to be withheld as a result of (1) in the case of a person that is a Bank on the Agreement Date, a Regulatory Change Enacted after the Agreement Date, and (2) in the case of a Person that becomes a Bank after the Agreement Date, a Regulatory Change Enacted after such Person becomes a Bank, or (B) to the extent such withholding is required because such Bank has failed (1) to submit any form or certificate that it is entitled to so submit under Applicable Law, or (2) in the case of a Bank that is a Non- US Bank, to cause its Notes to be issued as Registered Notes, or (C) in the case of a Person that becomes a Bank after the Agreement Date, except to the extent such additional amount would have been payable had such Person not become a Bank. (iv) Exemption From U.S. Withholding Taxes. There shall be submitted to the Company and the Agent, (A) on or before the first date that interest or fees are payable to such Bank under this Agreement or any other Loan Document, (1) if at the time the same are applicable, (aa) by each Bank that is not a United States Person, two duly completed and signed copies of Internal Revenue Service Form 1001 or 4224, in either case entitling such Bank to a complete exemption from withholding of any United States Federal income taxes on all amounts to be received by such Bank under the Loan Documents, or (bb) by each Bank that is a Non-US Bank, (x) a duly completed Internal Revenue Service Form W-8 and (y) a certification in the form of Schedule 5.08(a)(iv) that such Bank is a Non-US Bank, or (2) if at the time any of the foregoing are inapplicable, duly completed and signed copies of such form, if any, as entitles such Bank to exemption from withholding of United States Federal income taxes to the maximum extent to which such Bank is then entitled under Applicable Law, and (B) from time to time thereafter, prior to the expiration or obsolescence of any previously delivered form or upon any previously delivered form becoming inaccurate or inapplicable, such further duly completed and signed copies of such form, if any, as entitles such Bank to exemption from the withholding of United States Federal income taxes to the maximum extent to which such Bank is then entitled under Applicable Law. Each Bank shall promptly notify the Company and the Agent if (A) it is required to withdraw or cancel any form or certificate previously submitted by it or any such form or certificate has otherwise become ineffective or inaccurate, or (B) payments to it are or will be subject to withholding of United States Federal income taxes to a greater extent than the extent to which payments to it were previously subject. Upon the request of the Company or the Agent, each Bank that is a United States Person shall from time to time submit to the Company and the Agent a certificate to the effect that it is such a United States Person and a duly completed Internal Revenue Service Form W-9. (b) Credits and Deductions. If the Agent or any Bank is, in its sole opinion, able to apply for any credit, deduction or other reduction in Bank Taxes by reason of any payment made by any Borrower under Section 5.08(a)(i), the Agent or such Bank, as the case may be, shall use reasonable efforts to obtain such -31- credit, deduction or other reduction and, upon receipt thereof, will pay to such Borrower such amount, not exceeding the increased amount paid by such Borrower, as is equal to the net after-tax value (determined after giving effect to, among other things, any deduction or credit the Agent or any Bank receives by reason of such payment to such Borrower) to the Agent or such Bank, in its sole opinion, of such part of such credit, deduction or other reduction as it considers to be allocable to such payment by such Borrower, having regard to all of the Agent's or such Bank's dealings giving rise to similar credits, deductions or other reductions in relation to the same tax period and to the cost of obtaining the same; provided, however, that (i) the Agent or such Bank, as the case may be, shall not be obligated to disclose to the Borrower any information regarding its tax affairs or computations, and (ii) nothing in this Section 5.08(b) shall interfere with the right of the Agent or such Bank to arrange its tax affairs as it deems appropriate or impose an obligation on the Agent or such Bank to obtain any credit, deduction or other reduction in Taxes if, in its sole opinion, to do so would (x) impose undue hardships, burdens or expenditures on it or (y) increase its exposure to taxation by the jurisdiction in question. Section 5.09 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) (i) each Borrowing of Revolving Loans that are not Belgian Loans, Canadian Loans, Swing Line Loans or CA Loans shall be made from the Banks pro rata in accordance with their respective Borrowing Percentages, provided that, when the Aggregate Non-Canadian Exposure equals or exceeds the aggregate amount of the Non-Canadian Commitments, such Loans shall be made only by Banks that are, or whose Affiliates are, Canadian Lending Banks, and provided, further, that (A) in the case of a Bank that is not a Canadian Lending Bank, its Outstanding Exposure shall not exceed its Commitment and (B), in the case of a Bank that is, or whose Affiliate is, a Canadian Lending Bank, its Outstanding Exposure plus its, or its Affiliate's, Canadian Outstanding Exposure shall not exceed such Bank's Commitment, (ii) each Borrowing of Revolving Loans that are Belgian Loans shall be made from the Belgian Lending Bank, and (iii) each borrowing of Revolving Loans that are Canadian Loans shall be made from the Canadian Lending Banks pro rata in accordance with their respective Canadian Commitments, provided that a Canadian Lending Bank's Outstanding Canadian Exposure shall not exceed its Canadian Commitment; (b) each conversion or continuation of Revolving Loans shall be made pro rata according to the respective aggregate principal amounts outstanding of the Loans of the Type and Interest Period being converted or continued; (c) each payment or prepayment by a Borrower or Guarantor of principal of or interest on Loans shall be made for the account of the Banks or Canadian Lending Banks, as the case may be, pro rata in accordance with the respective unpaid principal amounts of Loans of the Type and Interest Period with respect to which such payment or prepayment is being made; (d) each payment by a Borrower or Guarantor of principal of or -32- interest on Loans shall be distributed by the Agent for the account of the Banks pro rata in accordance with the respective amounts thereof to which they are entitled; (e) each payment of letter of credit fees or Facility Fees shall be made for the account of the Banks and the Canadian Lending Banks, as applicable, pro rata in accordance with the respective amounts thereof; and (f) each reduction in the Commitments shall be made pro rata in accordance with the respective amounts thereof. Section 5.10 Evidence of Debt. (a) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of each Borrower to such Bank resulting from each Loan by such Bank from time to time and, in the case of each Issuing Bank, each Drawing, including the amounts of principal and interest payable and paid to such Bank from time to time under this Agreement. (b) The Agent shall maintain a loan register (the "Loan Register") and a subaccount therein for each Bank in which shall be recorded (i) the amount of each Loan made hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Bank under Loans and to each Issuing Bank in respect of Drawings, and (iii) the amount of any sum received by the Agent from each Borrower in respect of Loans, and the amount of each Bank's share thereof, and in respect of Drawings. (c) This Agreement, each Note, the entries made by the Agent in the Loan Register and the accounts of each Bank maintained pursuant to Section 5.10(a) shall, to the extent permitted by Applicable Law, be prima facie evidence of the existence and amounts of the obligations of each Borrower therein recorded; provided, however, that the failure of any Bank or the Agent to maintain the Loan Register or any such account, or any error therein, shall not in any manner affect the obligation of each Borrower to repay (with applicable interest) the Loans made to, and Drawings made for the account of, such Borrower by any Bank in accordance with the terms of this Agreement. (d) Each Borrower agrees that, if in the sole opinion of any Bank, any Canadian Lending Bank or the Swing Line Bank, a promissory note or notes are required or desirable to evidence any Loans made by such Person, such Borrower will promptly execute and deliver to such Person a Note (which may be a Registered Note) to further evidence the Loans that may be outstanding to such Person from time to time. Section 5.11 Bank Default. (a) If any Bank Default occurs with respect to any Bank or any Canadian Lending Bank, (i) the Agent and such Bank or Canadian Lending Bank agree, if requested by the Company, to attempt to locate a commercial bank or other financial institution that desires to accept the assignment of the Loans, L/C Participations, Canadian L/C Participations, Commitment and Canadian Commitment of such Bank -33- or Canadian Lending Bank and its other rights and obligations hereunder relating thereto and (ii) if such a bank or institution is located, such Bank and Canadian Lending Bank each agrees to assign its interest in its Loans, L/C Participations, Canadian L/C Participations, Commitment, Canadian Commitment and Note, if any, and its other rights and obligations hereunder relating thereto to such bank or institution in accordance with Section 13.08(a) for an amount equal to the aggregate amount owing to such Bank or Canadian Lending Bank under this Agreement and such Bank's or Canadian Lending Bank's Note, if any, at the time of such assignment (including the aggregate principal amount of such Bank's or Canadian Lending Bank's Loans and such Bank's Borrowing Percentage, or such Canadian Lending Bank's Canadian Borrowing Percentage, of Drawings with respect to which it has made its required payments under Section 4.04(a), accrued interest, and all fees and other amounts accrued or payable to such Bank or Canadian Lending Bank). If no such assignment is arranged and no Default exists, the Company may, upon ten days' prior notice to such Bank or Canadian Lending Bank, terminate such Bank's Commitment or such Canadian Lending Bank's Canadian Commitment and thereupon promptly prepay such Bank's and such Canadian Lending Bank's Loans, Notes and all other amounts payable to such Bank and Canadian Lending Bank hereunder with respect to its Loans, L/C Participations, Canadian L/C Participations, Commitment and Canadian Commitment and cash collateralize its L/C Participations and Canadian L/C Participations; provided that prepayments of Fixed Rate Loans may be made on the last day of the applicable Interest Periods. (b) If, as a result of the existence of a Bank Default with respect to any Bank or Canadian Lending Bank, an Issuing Bank elects not to issue any Letter of Credit that it has been requested to issue in accordance with Section 4.01(a), or the Belgian Lending Bank elects not to make any Revolving Loan that is a Belgian Loan that it has been requested to make pursuant to Section 1.01(a), such defaulting Bank or Canadian Lending Bank, shall be deemed to have breached its Commitment or its Canadian Commitment, as the case may be, and, subject to the limitations set forth in Section 13.12, shall be liable to the Company for any damages resulting from such non-issuance. Section 5.12 Availability of Amounts of Loans. Unless the Agent shall have received notice from a Bank or a Canadian Lending Bank, as the case may be, prior to 12:00 noon on the requested date for the making of any Loan by such Bank or Canadian Lending Bank that such Bank or Canadian Lending Bank will not make available to the Agent the Loans requested to be made by such Bank or Canadian Lending Bank on such date, the Agent may assume that such Bank or Canadian Lending Bank has made such Loans available to the Agent on such date in accordance with the provisions of this Agreement, and the Agent in its sole discretion may, in reliance upon such assumption, make available to the relevant Borrower on such date a corresponding amount on behalf of such Bank or Canadian Lending Bank. If and to the -34- extent such Bank or Canadian Lending Bank shall not have so made available to the Agent the Loans requested to be made by such Bank or Canadian Lending Bank on such date and the Agent shall have so made available to such Borrower a corresponding amount on behalf of such Bank or Canadian Lending Bank, such Bank or Canadian Lending Bank shall, on demand, pay to the Agent such corresponding amount together with interest thereon, for each day from the date such amount shall have been so made available by the Agent to such Borrower until the date such amount shall have been paid to the Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Base Rate. If such Bank does not pay such corresponding amount promptly upon the Agent's demand therefor, the Agent shall promptly notify the relevant Borrower and such Borrower shall promptly repay such corresponding amount to the Agent together with accrued interest thereon at the applicable rate or rates provided herein; provided, however, that, with respect to such repayment, the Borrower shall have no liability with respect to losses, costs or expenses otherwise compensable under Section 14.04 in connection therewith. ARTICLE 6. CONDITIONS PRECEDENT Section 6.01 Conditions to Initial Loan or Letter of Credit. The obligation of the Banks or any of them to make the initial Credit Extension hereunder (whether such initial Credit Extension shall be a Loan or the issuance of a Letter of Credit) is subject to the fulfillment of the following conditions: (a) each such Bank, if it shall have requested the same, shall have received a duly prepared and executed Note or Notes of the Borrower requesting such Credit Extension; (b) the Agent shall have received each of the following, in form and substance, and, in the case of the documents referred to in clauses (i), (ii), (iii), (vii), (ix) and (x) below, certified in a manner, satisfactory to the Agent: (i) a certificate of the Secretary or an Assistant Secretary of the Company and Sierra Corp., dated the date of such Loan or Letter of Credit, substantially in the form of Schedule 6.01(b)(i), to which shall be attached copies of the resolutions and by-laws referred to in such certificate; (ii) a copy of the certificate of incorporation of the Company, Sierra Corp. and Fibreboard, certified as of a recent date by the Secretary of State or other appropriate official of such Person's jurisdiction of incorporation; -35- (iii) a good standing certificate with respect to the Company, Sierra Corp. and Fibreboard, issued as of a recent date by the Secretary of State or other appropriate official of the jurisdiction of such Person's incorporation, together with a telefax from such Secretary of State or other official, updating the information in such certificate; (iv) (A) an opinion of the General Counsel of the Company, dated the date of such Loan or Letter of Credit, in the form of Schedule 6.01(b)(iv)-A, and (B) an opinion of Sidley & Austin, in the form of Schedule 6.01(b)(iv)-B, with such changes in either such opinion as the Agent shall approve; (v) an opinion of Winthrop, Stimson, Putnam & Roberts, special counsel for the Agent, dated the date of such Loan or Letter of Credit, in the form of Schedule 6.01(b)(v); (vi) a duly executed copy of this Agreement and each of the other Loan Documents required to be delivered on such date pursuant to this Agreement; (vii) copies certified by the Secretary or Assistant Secretary of the Company of the Tender Offer Documents and the Merger Agreement; (viii) a duly executed Subsidiary Consent of each Wholly-Owned Domestic Subsidiary listed in Part I of Schedule 6.01(b) (viii), in the form of Part II of Schedule 6.01(b)(viii); (ix) a copy of the Schedule 14D-9 and all amendments thereto filed by Fibreboard with the SEC, together with a certificate of an officer of the Company stating that, after consultation with an officer of Fibreboard, to the best of such officer's knowledge, there are no additional amendments to the Schedule 14D-9 and that the recommendation of the Board of Directors of Fibreboard to the stockholders of Fibreboard that they tender their shares pursuant to the Offer has not been modified or withdrawn; and (x) evidence satisfactory to the Agent and the Majority Banks that, concurrently with the disbursement of the Loans or issuance of the Letters of Credit requested to be made on such date, Sierra Corp. shall have purchased pursuant to the Offer and at a price not higher than the Offer Price, or otherwise acquired, at least that number of Shares necessary for Sierra Corp. to effect the Merger without the affirmative vote of any other holder of Shares or any other Capital Security of Fibreboard in accordance with Applicable Law and the organizational documents of -36- Fibreboard, and that such purchased, or otherwise acquired, Shares are free and clear of all restrictions on such purchase or other acquisition imposed by Applicable Law or otherwise and any voting trusts, proxies or similar arrangements that would restrict Sierra Corp.'s right to exercise the voting rights attributable to such Shares; (c) the Company shall have paid all of the fees required to be paid to the Agent and the Banks on or prior to the date of the initial Credit Extension; and (d) the Banks shall be satisfied that, concurrently with the disbursement of the Loans or issuance of the Letters of Credit requested to be made on such date, and giving effect to the application of the proceeds thereof, (i) the outstanding loans under the 1993 Credit Agreement shall have been repaid in full, (ii) the outstanding loans under the Canadian Credit Agreement shall have been repaid in full, (iii) all commitments for the making of loans and issuance of letters of credit under the 1993 Credit Agreement and the Canadian Credit Agreement shall have been terminated, (iv) there shall have been delivered to the Company all promissory notes evidencing loans under the 1993 Credit Agreement and the Canadian Credit Agreement, and (v) all other existing credit agreements and outstanding indebtedness of the Company, Fibreboard and their respective Subsidiaries agreed by the Company and the Banks to be fully paid and terminated on or prior to the date of the initial Loans hereunder, as set forth on Schedule 6.01(d), shall have been fully paid; (e) the Merger Agreement shall not have been amended in any material respect and shall be in full force and effect, and there shall not have occurred or exist any material breach or default thereunder that has not been waived with the prior written consent of, if such waiver was granted prior to the Agreement Date, CSFB, as Arranger of this facility, and, if such waiver was granted after the Agreement Date, the Majority Banks; (f) all material conditions of the Offer shall have been satisfied (unless waived with the consent of the Majority Banks), to the reasonable satisfaction of the Majority Banks; (g) there shall not exist any judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon the purchase of the Shares by Sierra Corp. pursuant to the Offer or the consummation of the Merger pursuant to the Merger Agreement, and no actions, suits or proceedings shall be pending or threatened with respect to the Company, Sierra Corp. or Fibreboard or their respective Subsidiaries that could reasonably be expected to have a materially adverse effect on the Offer, the Merger, the rights or remedies of the Banks or the Agent under the Loan Documents or the ability of the Company or any of its Subsidiaries (including after the Merger, Fibreboard and its Subsidiaries) to perform any of their respective obligations under the Loan Documents; -37- (h) the corporate and capital structure of Sierra Corp. and Fibreboard, all agreements relating thereto, and all organizational documents of Sierra Corp. and Fibreboard shall be consistent with the provisions of the Company's Schedule 14D-1 and the Offer to Purchase; and (i) except for changes disclosed (but only to the extent disclosed) in the Quarterly Reports to the SEC on Form 10-Q for the quarter ended March 31, 1997 of the Company and Fibreboard and the Annual Reports to the SEC on Form 10-K for the year ended December 31, 1996 of the Company and Fibreboard, no material adverse change in the business, assets, liabilities, condition (financial or other), results of operations, or business or financial prospects of the Company and its Consolidated Subsidiaries, taken as a whole, or Fibreboard and its Consolidated Subsidiaries, taken as a whole, shall have occurred since December 31, 1996. Section 6.02 Conditions to Each Credit Extension. The obligation of each Bank or Canadian Lending Bank to make each Loan (other than (x) a Revolving Loan made pursuant to subsection 1.04(c)(iii) if the aggregate Dollar Equivalent Amount of the outstanding Revolving Loans of each Bank and Canadian Lending Bank is not thereby increased, or (y) a Revolving Loan made pursuant to a notice of Swing Line Revolving Refunding pursuant to subsection 3.04(a)) on the occasion of each Borrowing, the obligation of the Swing Line Bank to make each Swing Line Loan and the obligation of each Issuing Bank to issue each Letter of Credit is subject to the fulfillment of each of the following conditions: (a) all of the Representations and Warranties shall be true and correct at and as of the time of such Credit Extension, with and without giving effect to such Credit Extension and to the application of the proceeds thereof; (b) no Default shall have occurred and be continuing at such time or after giving effect to such Credit Extension; (c) such Bank, the Swing Line Bank or such Issuing Bank, as the case may be, shall have received all materials as it may have requested pursuant to Section 9.01(d)(ii) that may reasonably be produced prior to the time of such Credit Extension; (d) such Credit Extension will not contravene any Applicable Law applicable to such Bank, the Swing Line Bank or such Issuing Bank, as the case may be, including Regulation U; (e) in the case of the issuance of a Letter of Credit, or the making of a Revolving Loan that is a Belgian Loan, no Bank Default with respect thereto shall have occurred and be continuing at such time with respect to any Bank; -38- (f) if the Borrower requesting such Loan or Letter of Credit is not the Company, Sierra Corp. or Fibreboard, the conditions specified in Section 6.03 shall have been satisfied; and (g) if the Borrower requesting such Loan or Letter of Credit is Fibreboard, the conditions specified in Section 6.04 shall have been satisfied. Except to the extent that the Borrower shall have disclosed in the Notice of Borrowing or the Letter of Credit Request, or in a subsequent notice given to the Banks prior to 5:00 p.m. (New York time) on the Business Day before the requested date for the making of the requested Loan or Loans, or the issuance of the requested Letter of Credit or Letters of Credit, that a condition specified in clause (a) or (b) above will not be fulfilled as of the requested time for the making of such Loan or Loans, or the issuance of such Letter of Credit or Letters of Credit, the Borrower shall be deemed to have made a Representation and Warranty as of the time of the making of such Loan or Loans or the issuance of such Letter of Credit or Letters of Credit that the conditions specified in such clauses have been fulfilled as of such time. No such disclosure by the Borrower that a condition specified in clause (a) or (b) above will not be fulfilled as of the requested time for the making of the requested Loan or Loans or the issuance of the requested Letter of Credit or Letters of Credit shall affect the right of each Bank to not make the Loan or Loans, or the right of the Issuing Bank not to issue the Letter of Credit or Letters of Credit requested to be made or issued by it if, in such Bank's or such Issuing Bank's determination, such condition has not been fulfilled at such time. Section 6.03 Conditions of the Initial Credit Extension to Certain Borrowers. The obligations of each Bank or Canadian Lending Bank to make its initial Credit Extension to a Borrower other than the Company, Sierra Corp. or Fibreboard hereunder (whether such initial Credit Extension shall be a Loan or the issuance of a Letter of Credit) is subject to the fulfillment of the following conditions: (a) the Agent shall have received, with respect to each Loan Party that is not a Borrower, each of the following, in form and substance, and, in the case of the documents referred to in clauses (i), (ii) and (iii) below, certified in a manner, satisfactory to the Agent: (i) a certificate of the Secretary or an Assistant Secretary of each such Loan Party, dated on or before the date of such Loan or Letter of Credit, but not before the Agreement Date, substantially in the form of Schedule 6.01(b)(i), to which shall be attached copies of the resolutions and by-laws referred to in such certificate; -39- (ii) a copy of the certificate of incorporation of each such Loan Party, certified as of a recent date by the Secretary of State or other appropriate official of such Loan Party's jurisdiction of incorporation; and (iii) a good standing certificate with respect to each such Loan Party, issued as of a recent date by the Secretary of State or other appropriate official of such Loan party's jurisdiction of incorporation; and (b) the Agent shall have received, with respect to the Borrower requesting such Credit Extension, each of the following, in form and substance, and, in the case of the documents referred to in clauses (i), (ii), and (iii) below, certified in a manner, satisfactory to the Agent: (i) a certificate of the Secretary or an Assistant Secretary of such Borrower Loan Party, dated on or before the date of such Loan or Letter of Credit, but not before the Agreement Date, substantially in the form of Schedule 6.01(b)(i), to which shall be attached copies of the resolutions and by-laws or similar documents, if available under Applicable Law, referred to in such certificate; (ii) a copy of the certificate of incorporation or similar document of such Borrower, certified as of a recent date by the Secretary of State or other appropriate official of such Borrower's jurisdiction of incorporation, if such certificate is available under Applicable Law; (iii) a good standing certificate or similar document with respect to such Borrower, issued as of a recent date by the Secretary of State or other appropriate official of the jurisdiction of such Borrower's incorporation, if such certificate is available under Applicable Law; (iv) an opinion of counsel, acceptable to the Agent, with respect to such Borrower, dated the date of such Loan or Letter of Credit, in the form of Annex L, with such changes as the Agent shall approve. (c) each such Bank, if it shall have requested the same, shall have received a duly prepared and executed Note or Notes of the Borrower requesting such credit extension. Section 6.04 Conditions to Initial Credit Extension to Fibreboard. The obligations of each Bank or Canadian Lending Bank to make the initial Credit Extension to Fibreboard hereunder following consummation of the Merger (whether such initial Credit Extension shall be a Loan or the issuance of a Letter of Credit) is subject to fulfillment of the following conditions: -40- (a) The Agent shall have received each of the following, in form and substance, and, in the case of the document referred to in clause (i) below, certified in a manner, satisfactory to the Agent: (i) a certificate of the Secretary or an Assistant Secretary of Fibreboard, dated the date of such Loan or Letter of Credit, substantially in the form of Schedule 6.01(b)(i) (but limited to paragraphs 1 and 4 of such Schedule), to which shall be attached copies of the by- laws referred to in such certificate; (ii) an opinion of counsel, for Fibreboard, reasonably acceptable to the Agent, covering in substance the matters covered in paragraphs 1.3(a), 4(a) and 6(a) of Schedule 6.01(b)(iv)-(A), recognizing that Fibreboard will have become bound by the Agreement not by its execution and delivery but by virtue of the Merger; (b) each such Bank, if it shall have requested the same, shall have received a duly prepared and executed Note or Notes of Fibreboard. ARTICLE 2. CERTAIN REPRESENTATIONS AND WARRANTIES In order to induce the Agent, each Bank, each Canadian Lending Bank, the Swing Line Bank and the Issuing Banks to enter into this Agreement and to make each Credit Extension, the Company represents and warrants as follows (with, in the case of the initial Credit Extension, "Subsidiaries" and "Consolidated Subsidiaries" being deemed to include Fibreboard and its Subsidiaries except with respect to Section 7.06): Section 7.01 Organization; Power; Qualification; Subsidiaries. The Company and each Subsidiary are corporations duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation, have the corporate power and authority to own their respective properties and to carry on their respective businesses as now being and hereafter proposed to be conducted and are duly qualified and are in good standing as foreign corporations, and authorized to do business, in all jurisdictions in which the character of their respective properties or the nature of their respective businesses requires such qualification or authorization, except for qualifications and authorizations the lack of which, singly or in the aggregate, has not had and will not have a Materially Adverse Effect upon the Company and the Consolidated Subsidiaries taken as a whole. Schedule 7.01 is a complete and correct list of all Subsidiaries as of the Agreement Date, with all Consolidated Subsidiaries being identified as such. The Company owns, with unrestricted right to vote, all of the issued and -41- outstanding shares of the capital stock of each such Subsidiary to the extent set forth in such Schedule, and all such shares of capital stock have been duly authorized and issued and are fully paid and nonassessable. Section 7.02 Authorization and Compliance; Regulatory Approvals. (a) Each of the Company and the other Loan Parties has the corporate power, and has taken all necessary corporate (including stockholder, if necessary) action to authorize it, to execute, deliver and perform the Loan Documents to which it is a party in accordance with their respective terms and, in the case of each Borrower, to borrow or have Letters of Credit issued hereunder in the maximum amount permitted under the terms hereof. This Agreement has been, and each other Loan Document when executed and delivered will be, duly executed and delivered by the Company and each other Loan Party that is a party thereto. This Agreement is, and each of the other Loan Documents when delivered will be, the legal, valid and binding obligation of the Company and the other Loan Parties that are parties thereto. The execution, delivery and performance in accordance with their respective terms by the Company and each other Loan Party of this Agreement and the other Loan Documents, each Borrowing or issuance of a Letter of Credit, whether or not in the amount of the unused Commitments or Canadian Commitments, as the case may be, do not and will not (i) require any Governmental Approval or any consent or approval of the stockholders of the Company or of any Subsidiary, other than Governmental Approvals and stockholders' consents and approvals that have been obtained, are in full force and effect and are listed on Schedule 7.02, (ii) violate or conflict with, result in a breach of, or constitute a default under, (A) any Contract to which the Company or any Subsidiary is a party or by which any of them or any of their respective properties may be bound or (B) any Applicable Law, or (iii) result in or require the creation of any Lien upon any assets of the Company or any Consolidated Subsidiary except for Liens, if any, arising hereunder or in cash collateral provided in accordance herewith. (b) Each of the Company, Fibreboard and the other Persons that are parties thereto has the corporate power, and has taken all necessary corporate (including stockholder, if necessary, other than stockholder approval of the Merger) action to authorize it, to execute, deliver and perform the Merger Agreement and the Tender Offer Documents in accordance with their respective terms. The Merger Agreement has been duly executed and delivered by the Persons that are parties thereto and is a legal, valid and binding obligation of such Persons. The execution, delivery and performance in accordance with their respective terms by the Company, Fibreboard and the other Persons that are parties thereto of the Merger Agreement and the Tender Offer Documents, and the consummation of the transactions contemplated by the Tender Offer Documents and the Merger Agreement, do not and will not (i) require any Governmental Approval or any consent or approval of the stockholders of the -42- Company, Fibreboard or any other Person that is a party thereto, other than (A) stockholder approval of the Merger, (B) Governmental Approvals and other stockholders' consents and approvals that have been obtained or made (and are in full force and effect) or can and will be obtained or made in a timely manner, and (C) Governmental Approvals and shareholders' consents and approvals the failure to obtain or make which, singly, in the aggregate, or when aggregated with the violations, conflicts, breaches and defaults referred to in clause (ii) below, will not have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole, (ii) violate or conflict with, result in a breach of, or constitute a default under, (A) any Contract to which the Company or any of its Subsidiaries, Fibreboard or any of its Subsidiaries or any other Person that is a party thereto is a party or by which any of them or any of their respective properties may be bound or (B) any Applicable Law, other than violations, conflicts, breaches and defaults which, singly, in the aggregate, or when aggregated with the failures referred to in clause (i) above, will not have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole, or (iii) result in, or require the creation of, any Lien upon any assets of the Company, Fibreboard or any other Person that is a party thereto except for Liens, if any, arising hereunder or in cash collateral provided in accordance herewith. Section 7.03 Litigation. Except as set forth on Schedule 7.03, there are not, in any court or before any arbitrator of any kind or before or by any governmental or non- governmental body, any actions, suits or proceedings pending or (to the knowledge of the Company) probable of assertion against or in any other way relating to or affecting the Company or any Subsidiary, the business or any property of the Company or any Subsidiary or this Agreement or the Notes, except actions, suits or proceedings that could not reasonably be expected, singly or in the aggregate, to have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole or this Agreement or the Notes. Section 7.04 Burdensome Provisions. Neither the Company nor any Subsidiary is a party to or bound by any Contract or Applicable Law that could reasonably be expected to have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole. Section 7.05 Requirements of Law; Environmental Matters. (a) The Company and each Subsidiary is in compliance with all requirements of Applicable Law applicable to its business or any of its Properties, except where noncompliance would not, singly or together with all other incidents of non- compliance, have a Materially Adverse Effect on (i) the Company and the Consolidated Subsidiaries taken as a whole or (ii) this Agreement or the Notes. -43- (b) Without limiting the generality of paragraph (a) above, in the ordinary course of its business the Company conducts an ongoing review of the effect of Environmental Laws on the business, operations and Properties of the Company and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up, remediation or closure of Properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Company has reasonably concluded that Environmental Laws are unlikely to have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole. Section 7.06 No Adverse Change. Since March 31, 1997, no change has occurred in the business, assets, liabilities, condition (financial or other), results of operations, or business or financial prospects of the Company and its Consolidated Subsidiaries taken as a whole that would have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole. Section 7.07 No Adverse Fact. Except for facts and circumstances disclosed on Schedule 7.07 or in the financial statements referred to in Section 9.02(a), no fact or circumstance is known to the Company that, either alone or in conjunction with all other such facts and circumstances, is reasonably likely to have in the future a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole or on this Agreement or the Notes. If one or more facts or circumstances disclosed on such Schedule or in such financial statements, or if one or more actions, suits or proceedings disclosed in Schedule 7.03, either singly or in the aggregate, should in the future have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole or on this Agreement or the Notes, such Materially Adverse Effect shall be a change or event subject to Section 7.06 notwithstanding such disclosure. Section 7.08 No Undisclosed Material Loss Contingency. There is no loss contingency required by Generally Accepted Accounting Principles to be reflected in or disclosed on a financial statement that has not been so reflected in or disclosed on the financial statements referred to in Section 9.02(a), or, to the extent such loss contingency arises subsequent to December 31, 1996, it is not reflected in or -44- disclosed on a financial statement for the relevant period, as applicable. Section 7.09 Margin Stock. Not more than 25 percent of the value of the assets subject to Section 8.08 is represented by margin stock (within the meaning of Regulations G, T, U and X of the Board of Governors of the Federal Reserve System). ARTICLE 8. COVENANTS From the Agreement Date until the Repayment Date, A. Affirmative Covenants. The Company shall and shall cause each Subsidiary to: Section 8.01 Preservation of Existence and Properties, Scope of Business, Compliance With Law, Payment of Taxes and Claims. (a) Preserve and maintain its corporate existence and all of its other franchises, licenses, rights and privileges, (b) preserve, protect and maintain all OC Intellectual Property, and preserve and maintain in good repair, working order and condition all other Properties, required for the conduct of its business, (c) engage principally in the businesses conducted on the Agreement Date by the Company and its Subsidiaries and, after they have become Subsidiaries, Fibreboard and its Subsidiaries and in businesses reasonably related thereto, (d) comply with all Applicable Laws, and (e) pay or discharge when due all Taxes and all claims that might become a Lien on any Properties of the Company or any such Subsidiary, except that this Section 8.01 (other than clause (a), in so far as it requires the Company to preserve its corporate existence, and clause (c)) shall not apply in any circumstance where noncompliance, either singly or together with all other incidents of non-compliance, would not have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole. Section 8.02 Accounting Methods, Financial Records and Disclosure to Auditors. (a) Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete), as may be required or necessary to permit the preparation of financial statements in accordance with Generally Accepted Accounting Principles. (b) Disclose to its independent certified public accountants in a timely manner all loss contingencies of a type requiring disclosure to auditors under accounting standards promulgated by the Financial Accounting Standards Board. Section 8.03 Insurance. Maintain insurance with responsible insurance companies against such risks and in such amounts as is customarily maintained by similar businesses, or as may be required by Applicable Law or reasonably requested by the Majority Banks. Section 8.04 Visits and Inspections. Permit representatives (whether or not officers or employees) of each Bank, at the expense of such Bank (subject to Section 13.02(c)), from time to time, as often as may be reasonably requested, but only during normal business hours, to (a) visit and inspect any Properties of the Company and each Subsidiary, (b) inspect and make extracts from their books and records, including, but not limited to, management letters prepared by the Company's independent accountants, and (c) discuss with their principal officers and their independent accountants their respective businesses, assets, liabilities, financial conditions, results of operations, and business and financial prospects. Section 8.05 Use of Proceeds of Loans and Letters of Credit. Use the proceeds of the Loans and the Letters of Credit only for (a) the financing of the purchase of the Shares pursuant to the Offer and the Merger in an amount not to exceed $550,000,000, (b) the payment of interest and fees hereunder, (c) to pay other fees and expenses relating to the Offer and the Merger in an amount not to exceed $40,000,000, (d) the refinancing of Debt of Fibreboard and its Subsidiaries set forth on Schedule 6.01(d), (e) the repayment of Debt under the 1993 Credit Agreement, (f) the repayment of Debt under the Canadian Credit Agreement, and (g) working capital and other general corporate purposes. Except for the purchase of Shares pursuant to the Offer and the Merger, none of the Letters of Credit or the proceeds of any of the Loans shall be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations G, T, U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any margin stock. If requested by any Bank, the Company will, and will cause each other Borrower to, furnish to such Bank statements in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U. Section 8.06 Additional Guarantors. The Company shall, (a) not later than 45 days after the date on which it forms or acquires any new Domestic Subsidiary, if such Domestic Subsidiary is a Significant Subsidiary, and (b) not later than 45 days after any Domestic Subsidiary becomes a Significant Subsidiary, cause such Domestic Subsidiary to become a Guarantor by executing and delivering to the Agent a Guarantor Supplement. B. Negative Covenants. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly: Section 8.07 Liens. Create, assume or incur, or permit or suffer to exist or to be created, assumed or incurred, any Lien upon any of its assets of any character, whether now -46- owned or hereafter acquired, or upon any income or profits therefrom, except for (the "Permitted Liens"): (a) Tax, Mechanic, Landlord, etc. A Lien securing a tax, assessment or other governmental charge or levy (excluding any Lien arising under any of the provisions of ERISA or any environmental law) or the claim of a materialman, mechanic, carrier, warehouseman or landlord for labor, materials, supplies or rentals incurred in the ordinary course of business, but only if payment thereof shall not at the time be required to be made in accordance with Section 8.01(e) and foreclosure, distraint, sale or other similar proceedings shall not have been commenced; (b) Property and Assets of Subsidiary. A Lien on the assets of a Subsidiary of the Company securing Debt owing to the Company; (c) Legislation Related Liens. A Lien consisting of a deposit or pledge made, in the ordinary course of business, in connection with, or to secure payment of, obligations under worker's compensation, unemployment insurance or similar legislation; (d) Zoning, Easements, etc. A Lien constituting an encumbrance in the nature of zoning restrictions, easements, and rights or restrictions of record on the use of real property which does not materially detract from the value of such real property or impair the use thereof in the business of the Company or any Subsidiary; (e) Lease or Sublease. A Lien constituting a lease or sublease granted by the Company or any Subsidiary to others in the ordinary course of business; (f) Lessor Liens. A Lien on any asset constituting the interest of the lessor of such asset or secured by the interest of the lessor of such asset; (g) Commercial Letters of Credit. A Lien created pursuant to an application or reimbursement agreement pertaining to a commercial letter of credit that encumbers only the goods, or documents of title covering the goods, that were sold or shipped in the transaction for which such letter of credit was issued; (h) Government Contracts. A Lien in favor of the United States of America, or any agency, department or other instrumentality thereof, to secure progress, advance or other payments pursuant to any contract or provision of any statute; (i) Surety, Performance Bonds, etc. A Lien incurred or deposit made in the ordinary course of business -47- to secure (or obtain letters of credit or surety, appeal or performance bonds that secure) the performance of bids, tenders, statutory obligations, leases, purchase, construction or sales contracts and other similar obligations, in each case not incurred in connection with the borrowing of money, the obtaining of advances or the payment of the deferred purchase price of assets; (j) Sales of Accounts Receivable. A Lien on accounts receivable (and proceeds thereof) constituting the interest of, or securing the obligations of the Company or any Subsidiary to, a purchaser of such accounts receivable or undivided interests therein; (k) Property of Foreign Subsidiary. A Lien on assets of a Foreign Subsidiary to secure Debt of such Foreign Subsidiary or a Guaranty by such Foreign Subsidiary, provided that the aggregate principal amount of Debt secured by such Liens shall not exceed $135,000,000 in respect of all Foreign Subsidiaries; (l) Property Purchase Option. A Lien on any asset constituting the interest of the holder of a purchase option on such property so long as the disposition of such property pursuant to such purchase option would not violate Section 8.10; (m) Acquired Property. A Lien existing on (i) any asset of any Person at the time such Person becomes a Subsidiary or (ii) any asset prior to the acquisition thereof by the Company or a Subsidiary, but only, in the case of either (i) or (ii), if such Lien was not created in contemplation thereof and so long as the obligation secured by such Lien is not in default and such Lien is and will remain confined to the asset subject to it at the time such Person becomes a Subsidiary or such asset is acquired and to fixed improvements thereafter erected on such assets consisting of real property; (n) Existing Debt. A Lien securing Existing Debt or other Existing and Substitute Debt; provided that (i) the property subject to such Lien together with all other property subject to all other Liens securing Existing Debt or other Existing and Substitute Debt is limited to property subject to Liens in existence on the Agreement Date and set forth on Schedule 8.07(n) that secure Existing Debt on the Agreement Date ("Existing Liens") and to fixed improvements then or thereafter erected thereon, and (ii) the principal amount of Debt secured by such Lien, together with the aggregate principal amount of Debt secured by all other Liens securing Existing Debt and other Existing and Substitute Debt does not exceed the aggregate amount of Existing Debt secured by Existing Liens on the Agreement Date; -48- (o) Purchase Money Debt. A Lien securing Purchase Money Debt but only if, in the case of each such Lien: (i) such Lien shall at all times be confined solely to the asset the purchase price of which was financed through the incurrence of the Purchase Money Debt secured by such Lien and to fixed improvements then or thereafter erected on such asset; (ii) such Lien attached to such asset within 30 days of the acquisition of such property; and (iii) the aggregate principal amount of Purchase Money Debt secured by such Lien at no time exceeds an amount equal to 75% of the lesser of (A) the cost (including the principal amount of Debt assumed in connection with the acquisition of such asset to the extent reflected as a reduction in the purchase price of such asset) to the Company or a Subsidiary of the asset subject to such Lien and (B) the fair market value of such asset at the time of such acquisition; (p) Renewal, Extension or Replacement of Lien. A Lien constituting a renewal, extension or replacement of a Lien constituting a Permitted Lien by virtue of Section 8.07(m), (n) or (o), but only, in the case of each such renewal, extension or replacement Lien, to the extent that the principal amount of indebtedness secured by such Lien does not exceed the principal amount of such indebtedness so secured at the time of the extension, renewal or replacement, and that such renewal, extension or replacement Lien is limited to all or a part of the asset that was subject to the Lien extended, renewed or replaced and to fixed improvements then or thereafter erected on any such asset constituting real property; (q) Legal Process. A Lien arising pursuant to an order of attachment, distraint or similar legal process arising in connection with legal proceedings; provided that if the amount of indebtedness secured by such Lien and all other such Liens equals or exceeds $1,000,000 at any time outstanding in the aggregate for the Company and the Subsidiaries, the execution or other enforcement of such Liens is not unstayed for more than 30 days; (r) This Agreement or Cash Collateral. A Lien arising hereunder or in cash collateral provided in accordance herewith; (s) Jackson Transaction. Liens on the Jackson Real Estate and the Jackson Equipment arising pursuant to the Jackson Transaction; (t) India Project. A Lien constituting a pledge, for purposes of securing the India Project Debt, of the stock or other equity interests owned by the Company, a Subsidiary or an Affiliate in (i) the India Joint Venture and/or (ii) any entity established for the sole purpose of owning all or any portion of the India Joint Venture; -49- (u) Fibreboard. Liens on assets of Fibreboard and its Subsidiaries securing obligations in an aggregate amount not exceeding $15,000,000; and (v) Other Lien. Any other Lien so long as the amount of indebtedness secured by such Lien and all other Liens that do not otherwise constitute Permitted Liens does not exceed $20,000,000 at any time outstanding in the aggregate for the Company and all Subsidiaries; provided, however, that if, notwithstanding this Section 8.07, any Lien (other than a Permitted Lien) shall be created or arise, the Loans, the Notes, the L/C Participations and the Canadian L/C Participations shall be secured by such Lien equally and ratably with the other Debt secured thereby, and the holder of such other Debt, by accepting such Lien, shall be deemed to have agreed thereto and to share with the Banks, on that basis, the proceeds of such Lien, whether or not the Banks' security interest shall be perfected; provided further, however, that notwithstanding such equal and ratable securing and sharing, the existence of such Lien shall constitute a Default by the Company in the performance or observance of this Section 8.07. Section 8.08 Restricted Payments. Declare or make any Restricted Payment, except for, if after giving effect thereto no Default would exist, (a) the acquisition of shares of the Company's capital stock pursuant to any compensation or benefit plan of the Company in effect from time to time, (b) dividends and other distributions on any shares of the Company's common stock in an aggregate principal amount not to exceed $15,000,000 in any fiscal year of the Company, (c) any dividend or other distribution on any shares of the Company's preferred stock issued subsequent to the Agreement Date, (d) redemptions of any security convertible into, or any option, warrant or other right to acquire, shares of the Company's capital stock; provided that (i) the conversion right in respect of such security or right is then exercisable, (ii) at the time a notice of redemption is issued with respect thereto, the market price per share of such capital stock which can be obtained upon such conversion or exercise exceeds the conversion or exercise price per share provided in the instrument being redeemed, and (iii) if, at the time a notice of redemption is issued with respect thereto, the market price per share of such capital stock shall be less than 1.25 times such conversion or exercise price per share, the Company shall, at such time of notice have entered into a hedging transaction or hedging transactions with responsible counterparties pursuant to which, in the event that any or all of such security shall not be converted or such right shall not be exercised following such notice of redemption, the Company shall have the right to sell a number of shares of its capital stock up to the number of shares of such capital stock that it would have issued upon conversion or exercise in full of such security or exercise in full of such right for a price per share not less than such conversion or exercise price, and, provided, further, -50- that in the event the Company shall be required to make any payment in connection with the redemption of such security or right, such payment, net of any net amounts received by the Company pursuant to such hedging transactions, shall constitute a Restricted Payment, (e) the repurchase, cancellation or other termination, not more than ten days after the Company enters into a Stock Purchase Contract or any TRUPS Trust issues any TRUPS (any such Stock Purchase Contract and/or TRUPS being referred to herein as the "New Issue"), of Stock Purchase Contracts for consideration equal to not more than the proceeds of the New Issue; and (f) other Restricted Payments by the Company and its Subsidiaries not exceeding the sum of (i) the sum (which may be negative), for all years ending after the Agreement Date but prior to the time such Restricted Payments are declared or made, of the amount calculated as follows for each such year: (A)(1) if Adjusted Consolidated Net Income for such year is positive, 20% of Adjusted Consolidated Net Income up to $75,000,000, plus 30% of the amount, if any, of Adjusted Consolidated Net Income that exceeds $75,000,000, or (2) if Adjusted Consolidated Net Income for such year is negative, 20% of the amount, if any, of Adjusted Consolidated Net Income (losses) up to $75,000,000 of losses, plus 30% of the amount, if any, of Adjusted Consolidated Net Income (losses) in excess of $75,000,000 of losses, minus (B) the aggregate amount of dividends and other distributions on any shares of the Company's common stock made in such year up to $15,000,000, plus (ii) 35% of the net cash proceeds from the issuance of any shares of the Company's common stock issued by the Company subsequent to the Agreement Date not previously applied in the calculation of Restricted Payments for any year, plus (iii) $125,000,000. Section 8.09 Mergers, Consolidations and Acquisitions. (a) Merge or consolidate with any Person, except for, if after giving effect thereto no Default would exist, (i) the Merger, (ii) any merger or consolidation of the Company or any Subsidiary with any other Person; provided that (A) the Company or such Subsidiary, as the case may be, shall be the continuing Person, and (B) in the case of a merger or consolidation with any Subsidiary, the other Person shall not be a Subsidiary, (iii) any merger or consolidation of any Subsidiary that is not a Loan Party with and into any one or more other Subsidiaries, and (iv) any merger or consolidation of any Subsidiary that is a Loan Party with any one or more other Subsidiaries that are Loan Parties; or (b) Acquire all or substantially all of the capital stock or other ownership interest of, or all or substantially all of the assets and business of, any other business entity, unless after giving effect to such transaction, no Default would exist. Section 8.10 Disposition of Assets. Sell, lease, transfer or otherwise dispose of any asset having a book value at the time of disposition that represents a percentage of the consolidated assets of the Company and its Consolidated -51- Subsidiaries at such time that, when added together with all of the like percentages at the respective times of disposition represented by the book values of all other assets disposed of by the Company and the Subsidiaries since the Agreement Date, would exceed 10%, except that (a) any asset leased by the Company or any Subsidiary shall cease to be deemed to have been disposed of for the purposes of this Section 8.10 at such time, if any, as such asset shall cease to be subject to such lease and shall again be owned by the Company or such Subsidiary free of any leasehold interest or other Lien except a Permitted Lien, and (b) the determination of whether the disposition of any other asset is prohibited by this Section shall exclude consideration of, (i) sales of inventory and sales or other dispositions of fixed assets in the ordinary course of business, (ii) sales of accounts receivable or undivided interests therein for fair value, and (iii) sales or other dispositions of TRUPS or TRUPS Notes held by the Company or any Subsidiary. Section 8.11 [Intentionally Omitted] Section 8.12 Transactions With Affiliates. Effect any transaction with any Affiliate (other than a Subsidiary) on a basis less favorable to the Company or such Subsidiary than would be the case if such transaction had been effected with a Person that was not an Affiliate, except that this Section 8.12 shall not prohibit customary compensation arrangements with officers and directors of the Company or such Subsidiary. Section 8.13 [Intentionally Omitted] C. Financial Covenants. The Company shall not at any time: Section 8.14 Fixed Charge Coverage Ratio. Permit the ratio of Consolidated Cash Flow Available for Fixed Charges to Consolidated Fixed Charges to be less than 1.0 to 1.0: (a) for the two fiscal quarters ending December 31, 1997; (b) for the three fiscal quarters ending March 31, 1998; (c) for the four fiscal quarters ending June 30, 1998; or (d) for the four fiscal quarters ending with the last day of each fiscal quarter of the Company succeeding the fiscal quarter ending June 30, 1998; (treating each such period of two, three and four consecutive fiscal quarters as a single period for the purpose of determining such ratio). -52- Section 8.15 Interest Coverage Ratio. Commencing with the fiscal quarter ending September 30, 1997, permit the ratio of Consolidated Adjusted EBITDA to Consolidated Interest Expense as of the last day of any fiscal quarter to be less than 3.0 to 1.0 for the period of four consecutive fiscal quarters of the Company ending on the last day of such fiscal quarter (treating those four consecutive fiscal quarters as a single period for the purpose of determining such ratio). Section 8.16 Leverage Ratio. Permit the Leverage Ratio to be greater than the following respective amounts at any time during the following respective periods: Leverage Period Ratio ------ -------- Closing Date through June 30, 1998 4.0 to 1.0 July 1, 1998 through June 30, 1999 3.5 to 1.0 July 1, 1999 and thereafter 3.0 to 1.0
D. Non-Loan Party Subsidiary Covenants. The Company shall not permit any Non-Loan Party Subsidiary to, directly or indirectly: Section 8.17 Debt. Create, assume, incur or otherwise become or remain obligated in respect of, or permit to exist or to be created, assumed or incurred or to be outstanding, any Debt, except: (a) Permitted Intercompany Debt, (b) Existing Debt of such Subsidiary, (c) Existing and Substitute Debt of such Subsidiary, (d) Debt consisting of Guaranties which are permitted by Section 8.18, (e) India Project Debt in an aggregate principal amount not exceeding $60,000,000, (f) Debt of any entity existing at the time such entity is acquired by such a Subsidiary, provided that such Debt shall not have been incurred in contemplation of such acquisition and not later than 45 days after the closing of such acquisition such Subsidiary shall become a Guarantor or such Debt shall have been repaid, (g) Purchase Money Debt not exceeding $25,000,000 in aggregate principal amount for all Non-Loan Party Subsidiaries, and (h) other Debt not exceeding, together with, without duplication, Guarantees referred to in Section 8.18(h), $200,000,000 in aggregate principal amount for all such Subsidiaries. Section 8.18 Guaranties by Non-Loan Party Subsidiaries. Become or remain liable with respect to any Guaranty of any Debt or Liability of any other Person, except that this Section 8.18 shall not apply to, and the Non-Loan Party Subsidiaries shall be permitted to become or remain liable with respect to: (a) Existing Guaranties by such Non-Loan Party Subsidiary, -53- (b) Guaranties by such Non-Loan Party Subsidiary arising in the ordinary course of business, (c) Guaranties of Debt of the Company or any other Loan Party, other than Guaranties of Existing Debt of the Company, (d) Guaranties by a Non-Loan Party Subsidiary that is a Domestic Subsidiary of the obligations of account debtors with respect to accounts receivable sold by such Non- Loan Party Subsidiary, in favor of Persons that purchase such accounts receivable or undivided interests therein from such Non-Loan Party Subsidiary, (e) Guaranties by a Non-Loan Party Subsidiary that is a Foreign Subsidiary arising in connection with the sale of accounts receivable (and notes or other obligations receivable from customers in respect thereof) by such Non-Loan Party Subsidiary; provided that the amount of obligations Guaranteed pursuant to this clause (e) does not exceed $40,000,000 at any time outstanding in the aggregate for all Non-Loan Party Subsidiaries that are Foreign Subsidiaries, (f) Guaranties of (i) obligations of Affiliated Entities to manufacture and deliver goods in the ordinary course of business, and (ii) obligations of Affiliated Entities that are product warranties given in the ordinary course of business with respect to such goods, or are in the nature of, and not exceeding in general scope, product warranties that would otherwise be given in the ordinary course of business with respect to such goods, (g) Guaranties of not more than $60,000,000 aggregate principal amount of India Project Debt, and (h) additional Guaranties (other than Guaranties of Existing and Substitute Debt) in an aggregate principal amount not exceeding, together with, without duplication, the Debt referred to in Section 8.17(g), $200,000,000 in aggregate principal amount at any time outstanding. E. TRUPS Notes. Section 8.19 TRUPS Notes. (a) The Company shall be permitted to have outstanding from time to time TRUPS Notes in an aggregate principal amount outstanding at any time not in excess of $600,000,000, of which the Company shall not have outstanding at any time in excess of $350,000,000 aggregate principal amount of TRUPS Notes that are not subordinated to the indebtedness of the Company under this Agreement on terms identical in all substantive respects to the terms set forth in Annex M; provided that TRUPS Notes that are not so subordinated shall further be limited to an aggregate principal amount from time to time -54- outstanding not in excess of the aggregate amount, if any, receivable by the Company pursuant to Stock Purchase Contracts having a mandatory settlement date prior to the stated maturity of such TRUPS Notes; and provided, further, that TRUPS Notes may be repaid in accordance with the last sentence of Section 15.02. (b) TRUPS Notes other than those permitted in accordance with Section 8.19(a) shall constitute "Debt" of the Company. ARTICLE 9. INFORMATION Section 9.01 Information to Be Furnished. From the Agreement Date until the Repayment Date, the Company shall furnish to each Bank: (a) Quarterly Financial Statements. As soon as available and in any event within 55 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Company, a consolidated balance sheet of the Company and the Consolidated Subsidiaries as at the end of such quarterly period and the related consolidated statements of income, retained earnings and changes in financial position of the Company and the Consolidated Subsidiaries for such quarterly period, setting forth in each case in comparative form the figures for the corresponding periods of the previous fiscal year, each of which shall be accompanied by a certificate of the chief financial officer or treasurer of the Company in the form of Schedule 9.01(a). (b) Audited Year-End Statements; No Default Certificate. As soon as available and in any event within 100 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and the Consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, retained earnings and changes in financial position of the Company and the Consolidated Subsidiaries for such fiscal year, setting forth in comparative form the figures as at the end of and for the previous fiscal year, in each case audited by Arthur Andersen LLP or other independent certified public accountants of recognized standing reasonably satisfactory to the Majority Banks. Together with such financial statements the Company shall deliver (i) a report of such accountants on such financial statements, which report shall be unqualified as to going concern and scope of audit and shall state that such financial statements present fairly the financial position of the Company and the Consolidated Subsidiaries as at the dates indicated and the results of their operations and changes in financial position for the periods indicated in conformity with generally accepted accounting principles applied on a basis consistent with prior years except -55- as noted therein and that the examination by such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and (ii) a certificate of such accountants addressed to the Banks (A) stating that (1) the Company is authorized to deliver such financial statements and their report thereon to the Banks pursuant to this Agreement and (2) they have caused this Agreement to be reviewed and that, in making the examination necessary for their report on such financial statements, nothing has come to their attention to lead them to believe that any Default exists and, in particular, they have no knowledge of any Default under the provisions of Article 8 or, if such is not the case, specifying such Default and its nature, when it occurred and whether it is continuing and (B) confirming the calculations set forth in the officer's certificate delivered concurrently therewith pursuant to Section 9.01(c). (c) Officer's Certificate. At the time the financial statements are furnished pursuant to Sections 9.01(a) and 9.01(b), a certificate of its chief financial officer or treasurer, in the form of Schedule 9.01(c). (d) Additional Materials. (i) Reports and Filings. (A) Promptly upon receipt thereof, copies of all reports, if any, submitted to the Company or its Board of Directors by its independent certified public accountants, including, without limitation, any management report; (B) as soon as practicable after the transmittal or filing thereof, copies of all such financial statements and reports as the Company shall send to its stockholders and of all registration statements and all regular or periodic reports that the Company shall file with the SEC or any successor commission. (ii) Requested Materials. From time to time and reasonably promptly upon the request of any Bank, such data, certificates, reports, statements, opinions of counsel, documents and further information regarding this Agreement, any Loan, any Letter of Credit, any Note or the business, assets, liabilities, condition (financial or other), results of operations, or business or financial prospects of the Company and the Subsidiaries (including any new Domestic Subsidiary that the Company may form) as such Bank may reasonably request in writing, in each case in form and substance and certified in a manner reasonably satisfactory to such Bank. (iii) Investment Rating. Promptly upon any change in the Investment Rating of the senior unsecured debt of the Company, a copy of the statement or report from the applicable rating agency. -56- (e) Notice of Defaults, Litigation and Other Matters. Prompt notice of (i) any Default; (ii) any event or condition referred to in clauses (i) through (v) of Section 11.01(g), whether or not such event or condition shall constitute an Event of Default; (iii) the commencement of any actions, suits or proceedings or investigations in any court or before any arbitrator of any kind or by or before any governmental or non- governmental body against or in any other way relating adversely to or affecting (A) the Company or any of its Subsidiaries or any of their respective businesses or properties, that could reasonably be expected, singly or in the aggregate, to have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole or (B) this Agreement or the Notes; and (iv) any amendment of the certificate of incorporation or by- laws of the Company. Section 9.02 Accuracy of Information. (a) Historical Financial Information. The Company hereby represents and warrants to each Bank that (i) the financial statements listed on Schedule 9.02(a) are complete and correct and present fairly, in accordance with Generally Accepted Accounting Principles consistently applied throughout the periods involved, the consolidated financial position of the Company and its Consolidated Subsidiaries as at their respective dates and the consolidated financial position of Fibreboard and its Consolidated Subsidiaries as at their respective dates, and the consolidated results of operations, retained earnings and changes in financial position of the Company and its Subsidiaries or Fibreboard and its Consolidated Subsidiaries, as the case may be, for the respective periods to which such statements relate, and (ii) except as disclosed or reflected in such financial statements, as at December 31, 1996, neither the Company nor any Subsidiary had any liabilities, contingent or otherwise, and there were no unrealized or anticipated losses of the Company or any Subsidiary, that, singly or in the aggregate, have had or are reasonably likely to have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole. (b) Future Information. All data, certificates, reports, statements, opinions of counsel, documents and other information furnished to the Agent or any Bank pursuant to any provision of this Agreement or in connection with or pursuant to any amendment or modification of, or waiver under, this Agreement, shall, at the time the same are so furnished, but in the case of information dated as of a prior date, as of such date, (x) in the case of any such prepared in the ordinary course of business, be complete and correct in the light of the purpose prepared, and (y) in the case of any such requested by the Agent or any Bank, be complete and correct in all material respects to the extent necessary to give the Agent or such Bank true and accurate knowledge of the subject matter thereof, and the furnishing of the same to the Agent or any Bank shall constitute a representation and warranty by the Company made on the date the -57- same are furnished to the Agent or such Bank to the effect specified in clause (x) or (y), as applicable. ARTICLE 10. GUARANTIES Section 10.01 Guaranty. Each of the Guarantors hereby (a) guarantees to each Guaranteed Person the due and punctual payment and performance of all of the Guaranteed Obligations (other than those that constitute liabilities of such Guarantor, whether as Guarantor or Borrower) in accordance with their respective terms and when and as due (whether at maturity, by reason of acceleration or otherwise), or deemed to be due pursuant to Section 10.03, and (b) agrees to pay the same when so due, or deemed to be due, upon demand. Section 10.02 Limitation on Guaranty. It is the intention of the Guaranteed Persons that the obligations of each Guarantor hereunder shall be in, but not in excess of, the maximum amount permitted by Applicable Law. To that end, but only to the extent such obligations would otherwise be void, voidable or otherwise unenforceable, the obligations of each Guarantor hereunder shall be limited to the maximum amount that would not make such obligations void, voidable or otherwise unenforceable. This Section 10.02 is intended solely to preserve the rights of the Guaranteed Persons to the maximum extent permitted by Applicable Law, and no Guarantor nor any other Person shall have any right under this Section 10.02 that it would not otherwise have under Applicable Law. Section 10.03 Continuance and Acceleration of Guaranteed Obligations Upon Certain Events. If: (a) any Event of Default that this Agreement states is to result in the automatic acceleration of any Guaranteed Obligations shall occur; (b) any injunction, stay or the like that enjoins any acceleration or demand for the payment of any Guaranteed Obligations that would otherwise be required or permitted hereunder shall become effective; or (c) any Guaranteed Obligations shall be or be determined to be or become discharged, disallowed, invalid, illegal, void or otherwise unenforceable (whether by operation of any present or future law or by order of any court or governmental agency), other than by payment thereof; then (i) such Guaranteed Obligations shall, for all purposes hereof, be deemed (A) in the case of clause (c), to continue to be outstanding and in full force and effect notwithstanding the unenforceability thereof and (B) if such is not already the case, -58- to have thereupon become immediately due and payable and, if subject thereto, to have commenced bearing interest at the Post- Default Rate, and (ii) any Guaranteed Person to whom such Guaranteed Obligations are owing may, with respect to such Guaranteed Obligations, exercise all of the rights and remedies under this Agreement or any other Loan Document that would be available to it during an Event of Default. Section 10.04 Recovered Payments. The Guaranteed Obligations shall be deemed not to have been paid, and each Guarantor's obligations hereunder in respect thereof shall continue and not be discharged, to the extent that any payment thereof by any Person is recovered from or paid over by or for the account of any Guaranteed Person for any reason, including as a preference or fraudulent transfer or by virtue of any subordination (whether present or future or contractual or otherwise) of the Guaranteed Obligations, whether such recovery or payment over is effected by any judgment, decree or order of any court or governmental agency, by any plan of reorganization or by settlement or compromise by such Guaranteed Person (whether or not consented to by any Guarantor or any other guarantor) of any claim for any such recovery or payment over. Each Guarantor hereby expressly waives the benefit of any applicable statute of limitations and agrees that it shall be liable hereunder with respect to any Guaranteed Obligation whenever such a recovery or payment over thereof occurs. Section 10.05 Evidence of Guaranteed Obligations. The records of each Guaranteed Person shall be conclusive evidence, absent manifest error, of the Guaranteed Obligations owing to it and of all payments in respect thereof. Section 10.06 Binding Nature of Certain Adjudications. Each Guarantor shall be conclusively bound by the final adjudication in any action or proceeding, legal or otherwise, involving any controversy arising under, in connection with, or in any way related to, any of the Guaranteed Obligations, and by a final judgment, award or decree entered therein. Section 10.07 Nature of Guarantor's Obligations. Each Guarantor's obligations hereunder (a) are absolute and unconditional, (b) are unlimited in amount except as provided in Section 10.02, (c) constitute a guaranty of payment and not a guaranty of collection, (d) are as primary obligor and not as a surety only, (e) shall be a continuing guaranty of all present and future Guaranteed Obligations and all promissory notes and other documentation given in evidence, extension or renewal of, or substitution for, any of the Guaranteed Obligations, and (f) shall be irrevocable. Section 10.08 No Release of Guarantor. THE OBLIGATIONS OF EACH GUARANTOR UNDER THIS ARTICLE 10 SHALL NOT BE REDUCED, LIMITED OR TERMINATED, NOR SHALL SUCH GUARANTOR BE DISCHARGED FROM ANY SUCH OBLIGATIONS, FOR ANY REASON WHATSOEVER -59- (other than, subject to Section 10.04 hereof, the payment and performance in full of the Guaranteed Obligations, and other than pursuant to the proviso to Section 13.05(a)(v) hereof), including (and whether or not the same shall have occurred or failed to occur once or more than once and whether or not such Guarantor shall have received notice thereof) ANY ACT OR FAILURE TO ACT OR ANY OTHER EVENT OR CIRCUMSTANCE THAT (a) VARIES THE RISK OF SUCH GUARANTOR HEREUNDER, OR (b) BUT FOR THE PROVISIONS HEREOF, WOULD, AS A MATTER OF STATUTE OR RULE OF LAW OR EQUITY, OPERATE TO REDUCE, LIMIT OR TERMINATE THE OBLIGATIONS OF SUCH GUARANTOR HEREUNDER OR DISCHARGE SUCH GUARANTOR FROM ANY THEREOF. Section 10.09 Certain Waivers. Each Guarantor waives ALL DEFENSES UNDER APPLICABLE LAW THAT WOULD, BUT FOR THIS SECTION 10.09, BE AVAILABLE TO SUCH GUARANTOR AS A DEFENSE AGAINST, OR A REDUCTION OR LIMITATION OF, ITS OBLIGATIONS HEREUNDER. Section 10.10 Additional Guarantors. Any Domestic Subsidiary and any Designated Foreign Subsidiary may become a party hereto as a Guarantor by executing and delivering to the Agent a Guarantor Supplement. Each Domestic Subsidiary that becomes a Significant Subsidiary shall execute and deliver to the Agent a Guarantor Supplement. Each Subsidiary delivering a Guarantor Supplement shall thereafter be a Guarantor for all purposes hereof. ARTICLE 11. DEFAULT Section 11.01 Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary, or within or without the control of the Company or any Subsidiary, or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or nongovernmental body: (a) Any payment of principal of or interest on any of the Loans, the Notes or the Drawings or of any fee payable hereunder, or any cash collateralization of any L/C Participation, any Canadian L/C Participation, Contingent Reimbursement Obligation or Canadian Contingent Reimbursement Obligation shall not be made when and as due (whether at maturity, by reason of notice of prepayment or acceleration or otherwise) and in accordance with the terms of this Agreement and the Notes, and such default shall continue unremedied for three Business Days; (b) Any Representation and Warranty shall at any time prove to have been incorrect or misleading in any material respect when made; -60- (c) The Company shall default in the performance or observance of (i) any term, covenant, condition or agreement contained in Section 8.01(a) (insofar as such Section requires the preservation of the corporate existence of the Company), the second sentence of Section 8.05, Sections 8.07 through 8.18, or Section 9.01(e); or (ii) any term, covenant, condition or agreement contained in this Agreement (other than a term, covenant, condition or agreement a default in the performance or observance of which is elsewhere in this Section specifically dealt with), and such default shall continue unremedied for a period of, in the case of Section 8.04, five days after the Agent shall have notified the Company thereof, and, in the case of any other term, covenant, condition or agreement subject to this clause (ii), 30 days after the Agent shall have notified the Company thereof; (d) The Company or any Subsidiary shall fail to pay, in accordance with its terms and when due and payable, any principal of or interest on any Debt having an aggregate principal amount in excess of $5,000,000 (other than the Loans, Notes or Drawings or Debt payable to the Company or any Subsidiary), or the maturity of any such Debt shall have been accelerated, or any such Debt shall have been required to be prepaid prior to the stated maturity thereof, in accordance with the provisions of any Contract evidencing, providing for the creation of or concerning such Debt, or any event shall have occurred and be continuing that permits (or, with passage of time or the giving of notice or both, would permit) any holder or holders of such Debt, any trustee or agent acting on behalf of such holder or holders or any other Person so to accelerate such maturity or require any such prepayment; (e) (i) Any Loan Party or any Significant Subsidiary shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for, or consent to, or fail to contest in a timely and appropriate manner the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or the like of itself or of a substantial part of its assets, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts (other than those that are the subject of bona fide disputes) as they become due, (F) make a general assignment for the benefit of creditors, or (G) take any corporate action for the purpose of effecting any of the foregoing; or -61- (ii) A case or other proceeding shall be commenced against any Loan Party or any Significant Subsidiary in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or any Significant Subsidiary, or of all or any substantial part of the assets, domestic or foreign, of the Company or any Significant Subsidiary, and such case or proceeding shall continue undismissed or unstayed for a period of 60 days, or an order granting the relief requested in such case or proceeding against the Company or any Significant Subsidiary (including, but not limited to, an order for relief under such Federal bankruptcy laws) shall be entered; (f) A judgment or order for the payment of money shall be entered against the Company or any Subsidiary by any court, and such judgment or order shall continue undischarged or unstayed for a period of 30 days in which the aggregate amount of all such judgments or orders exceeds $5,000,000; (g) (i) a Termination Event with respect to a Plan shall occur, (ii) the Company or any ERISA Affiliate shall participate in any Prohibited Transaction involving any Plan, (iii) an Accumulated Funding Deficiency, whether or not waived, shall exist with respect to any Plan, (iv) the Company or any ERISA Affiliate shall be in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments due to a Multiemployer Plan resulting from the Company's or such ERISA Affiliate's complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Plan, or (v) any other event or condition shall occur or exist with respect to a Single Employer Plan, except that no event or condition referred to in any of the clauses (i) through (v) shall constitute an Event of Default if it, together with all other such events or conditions at the time existing, would not subject the Company or any Consolidated Subsidiary to any Tax, penalty, Debt or liability that, alone or in the aggregate, would have a Materially Adverse Effect on the Company and the Consolidated Subsidiaries taken as a whole; (h) A Person (including, for the purposes of this paragraph, a partnership, limited partnership, syndicate or other group deemed a "person" for the purposes of Section 13(d) of the Securities Exchange Act of 1934) shall in any way acquire beneficial ownership of securities of the Company that, together with all other securities of the Company then beneficially owned by such Person, constitute 35% or more of the securities having ordinary voting power to elect a majority of the Company's Board of Directors, except for any such acquisition of beneficial ownership by Persons who are employees of the Company as of the Agreement Date or by employee plans sponsored by the Company; or -62- (i) Persons who have not been nominated by the Company's Board of Directors shall be elected to fill a majority of the positions on such Board; (j) the Merger shall not have been consummated by the date which is nine months after the Agreement Date; (k) any Loan Party asserts, or any Loan Party institutes any proceedings seeking to establish, that any provision of any Guarantor Guaranty is invalid, not binding or unenforceable or that such Guarantor Guaranty is limited in amount pursuant to Section 10.02; or (l) any Guaranteed Obligation is not paid by the relevant Guarantor when and as due and in accordance with the terms of this Agreement, and such default shall continue unremedied for three Business Days. Section 11.02 Remedies Upon Event of Default. Upon the occurrence and during the continuance of any Event of Default (other than one specified in Section 11.01(e)) and in every such event, the Agent, upon notice to the Company, may, and shall, if directed by the Majority Banks, do any or all of the following: (a) declare the principal of and interest on the Loans and the Notes and all other amounts owing under this Agreement to be, and the Loans and the Notes and all such other amounts shall thereupon become, due and payable to the Banks, (b) demand that the Company deliver cash collateral to the Agent in an amount equal to the aggregate amount of Contingent Reimbursement Obligations and Canadian Contingent Reimbursement Obligations to be held in accordance with Section 13.18, and thereupon such amount shall become so due and payable to the Agent, and (c) terminate the Commitments and the Canadian Commitments. Upon the occurrence of an Event of Default specified in Section 11.01(e), automatically and without any notice to the Company, (a) the principal of and interest on the Loans and the Notes and all other amounts owing under this Agreement shall be due and payable to the Banks, (b) an amount equal to the aggregate amount of Contingent Reimbursement Obligations and Canadian Contingent Reimbursement Obligations shall be due and payable to the Agent to be held in accordance with Section 13.18 and (c) the Commitments and the Canadian Commitments shall terminate. Presentment, demand, protest or notice of any kind (other than the notice provided for in the first sentence of this Section 11.02) are hereby expressly waived. ARTICLE 12. THE AGENT Section 12.01 Appointment and Powers. Each Bank hereby irrevocably appoints and authorizes CSFB to act as its agent and representative (within the meaning of Section 9-105(m) -63- of the Uniform Commercial Code) of such Bank under this Agreement with such powers as are specifically delegated to the Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement, shall not be required to take any act not specifically required of it by the terms of this Agreement if it determines that such action is other than a mere ministerial act. The Agent shall not be required under any circumstances to take any action that, in its judgment, (a) is contrary to any provision of this Agreement or Applicable Law or (b) would expose it to any liability or expense against which it has not been indemnified to its satisfaction. The Agent shall not by reason of this Agreement be a trustee or other fiduciary for any Bank. Section 12.02 Limitation on Agent's Liability. Neither the Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them under this Agreement or in connection with this Agreement, except for its or their own gross negligence or willful misconduct or knowing violation of law. The Agent shall not be responsible to any of the Banks for any recitals, statements, representations or warranties contained in this Agreement or in any certificate or other document referred to or provided for in, or received by any of the Banks under, this Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any such certificate or other document or for any failure by the Company or any other Loan Party to perform any of its obligations under this Agreement. The Agent may employ agents and attorneys- in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact so long as the Agent was not grossly negligent in selecting such agents or attorneys-in-fact. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. As to any matters not expressly provided for by this Agreement, the Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with instructions by the Majority Banks (except for action or inaction which requires the unanimous consent or instruction of the Banks), and such instructions of the Majority Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. Section 12.03 Defaults. The Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment to it of commitment fees, letter of credit fees, or principal of or interest on Loans or Drawings) unless the Agent has received notice from a Bank or from the Company specifying such Default and stating that such notice is a "Notice of Default". In the event that the Agent has knowledge of such a non-payment or receives such a notice of the occurrence of a Default, the Agent shall give prompt notice thereof to the Banks. In the event of any Default, the Agent shall (a) in the case of a Default that constitutes an Event of Default, take any or all of the actions referred to in clauses (a),(b) or (c) of the first sentence of Section 11.02 if so directed by the Majority Banks and (b) in the case of any Default, take such other action with respect to such Default as shall be reasonably directed by the Majority Banks; provided that, unless and until the Agent shall have received such directions, the Agent may take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Banks. Section 12.04 Rights as a Bank. With respect to its Commitment, its Canadian Commitment, the Loans to be made by it and the L/C Participations, Canadian L/C Participations and participations in Belgian Loans to be acquired by it, CSFB in its capacity as a Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not acting as the Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include CSFB in its individual capacity. CSFB and its Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Company (and any of its Affiliates) as if it were not acting as the Agent, and CSFB may accept fees and other consideration from the Company for services in connection with this Agreement or otherwise without having to account for the same to the Banks. Section 12.05 Indemnification. (a) The Banks agree to indemnify the Agent (to the extent not reimbursed under Section 13.02), ratably on the basis of the respective principal amounts of the Loans outstanding made by the Banks (or, if no Loans are at the time outstanding, ratably on the basis of their respective Commitments), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including the costs and expenses that the Company is obligated to pay under Section 13.02) in any way relating to or arising out of this Agreement or any other Loan Documents or other document contemplated hereby or referred to herein or the transactions contemplated hereby or the enforcement of any of the terms hereof or of any such other document; provided that no Bank shall be liable for any of the foregoing to the extent (a) it is subject to the indemnity contemplated by the penultimate sentence of Section 13.09 or (b) it arises from gross negligence, willful misconduct or a knowing violation of law by the Agent. -65- (b) Notwithstanding any other provision of this Agreement, the Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall be indemnified to its satisfaction by the Banks against any and all liabilities and expenses that may be incurred by it by reason of taking or continuing to take any such action. Section 12.06 Non-Reliance on Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Company and its Subsidiaries and Fibreboard and its Subsidiaries and its own decision to enter into this Agreement, and that it will, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. The Agent shall not be required to keep itself informed as to the performance or observance by the Company of this Agreement or any other document referred to or provided for herein or to inspect the properties or books of the Company or any Subsidiary. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent under this Agreement, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Company or any of its Subsidiaries or Affiliates that may come into the possession of the Agent or any of its Subsidiaries or Affiliates. Section 12.07 Resignation of the Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Banks and the Company. Upon any such resignation, the Majority Banks shall have the right to appoint a successor Agent, which, so long as no Event of Default is continuing, shall be reasonably satisfactory to the Company. If no successor Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be reasonably satisfactory to the Company. Upon the acceptance of any appointment as Agent by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations as Agent under this Agreement. After any retiring Agent's resignation as Agent, the provisions of this Article 12 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. -66- ARTICLE 13. MISCELLANEOUS Section 13.01 Notices. (a) All notices and other communications under this Agreement, including but not limited to materials delivered pursuant to Article 9, shall be in writing (which shall include communications by telex and telecopy), except that notices under Sections 1.02, 1.04(c), 2.02(a), 2.02(b), 3.02, 3.04(a), 4.02 and 11.02 may be by telephone, promptly, in the case of each notice other than the one under Section 11.02, confirmed in writing. In the event of a discrepancy between any telephonic notice and any written confirmation thereof, such written confirmation shall be deemed the effective notice except to the extent that the Agent has acted in reliance on such telephonic notice. All written notices and communications shall be sent by registered or certified mail, postage prepaid, return receipt requested, by prepaid telex, by telecopier or by courier service, or shall be delivered by hand. (b) Except as otherwise provided herein, all notices and other communications under this Agreement shall be given at the following respective addresses and telex, telecopier and telephone numbers and to the attention of the following Persons: (i) if to a Loan Party, to it at: Owens Corning Owens Corning World Headquarters One Owens Corning Parkway Toledo, Ohio 43659 Telecopier No.: (419) 248-1720 Telephone No.: (419) 248-8465 Attention: Treasurer (ii) if to the Agent, to it at: Credit Suisse First Boston 11 Madison Avenue New York, New York 10010-3629 Telex No.: 420149 CRESWIS Telecopier No.: (212) 325-____ Telephone No.: (212) 325-____ Attention: with a copy to: Credit Suisse First Boston 11 Madison Avenue New York, New York 10010-3629 -67- Telex No.: 420149 CRESWIS Telecopier No.: (212) 325-____ Telephone No.: (212) 325-____ Attention: and a copy to: Credit Suisse First Boston Canada 525 University Avenue Suite 1300 Toronto, Ontario, Canada M5G 2K6 Telex No.: 0623620 Telecopier No.: (416) 351-3640 Telephone No.: (416) 351-3553 Attention: Syndicated Finance (iii) if to any Bank (or to any Canadian Lending Bank that is an Affiliate of such Bank), to it at the address or telex, telecopier or telephone number, and to the attention of the Person, set forth under such Bank's name on Annex A-1 or A-2, as applicable, as the notice address for such Bank; or at such other address or telex, telecopier or telephone number or to the attention of such other Person as the party to which such information pertains may hereafter specify for the purpose in a notice specifically captioned "Notice of Change of Address" given to (x) if the party to which such information pertains is a Loan Party, the Agent and each Bank, (y) if the party to which such information pertains is the Agent, the Company and each Bank and (z) if the party to which such information pertains is a Bank, the Company and the Agent. (c) Each notice and other communication under this Agreement shall be effective or deemed delivered or furnished (i) if sent by registered or certified mail, postage prepaid, return receipt requested, on the third Business Day after such notice, communication or material, addressed as above provided, is delivered to a United States post office and a receipt therefor is issued thereby, (ii) if given by telex or telecopier, when such communication is transmitted to the appropriate number determined as above provided in Section 13.01(b) and the appropriate answer-back is received or receipt is otherwise acknowledged, (iii) if given by courier service or by hand delivery, when delivered to the address of the addressee addressed as above provided, and (iv) if given by telephone, when communicated to the Person or to the holder of the office specified as the Person or officeholder to whose attention communications are to be given; provided that, in the case of notice by the Agent to the Company under Section 11.02 given by telephone, if such Person or officeholder is unavailable at the time, such notice shall be effective when communicated to any -68- other officer of the Company with whom the Agent has had previous communications with respect to this Agreement. Notwithstanding the foregoing, (i) notices of a change of address, telex, telecopier or telephone number shall not be effective until received, and (ii) notices to the Agent under Sections 1.02, 1.04(c), 2.02(a) and (b), 2.04, 3.02, 3.04(a), 4.02, 5.01, 5.01(a) and 5.02(a) shall not be deemed given or furnished on any day unless physically received by the officer of the Agent or such Bank, as the case may be, who is at the time responsible for the administration of this Agreement, not later than 10:00 a.m. (New York time) on such day. Section 13.02 Expenses and Indemnification. Whether or not any Loans are made or Letters of Credit are issued hereunder, the Company shall, on demand, (a) pay or reimburse the Agent and the Banks for all transfer, documentary, stamp and similar taxes, and all recording and filing fees, payable in connection with, arising out of or in any way related to any execution, delivery and performance of this Agreement, any other Loan Document, the making of the Loans, or the issuance of the Letters of Credit, (b) pay or reimburse the Agent for all of the Agent's costs and expenses (including reasonable fees and disbursements of legal counsel and other experts employed or retained by the Agent) incurred in connection with (i) the negotiation, preparation, execution and delivery of (A) this Agreement and the other Loan Documents and (B) (whether or not executed) any waiver, amendment or consent hereunder or hereto, (ii) the administration of and any operations under this Agreement or any other Loan Document, (iii) consulting with respect to any matter in any way arising out of, relating to, or connected with, this Agreement or any other Loan Document, including, but not limited to, the enforcement by the Agent of any of its rights hereunder, and (iv) protecting, preserving, exercising or enforcing any of the rights of the Agent hereunder, (c) pay or reimburse the Banks for all of their costs and expenses (including reasonable fees and disbursements of legal counsel and other experts employed or retained by any Bank), incurred during the continuance of or related to a Default in connection with (i) the negotiation, preparation, execution, delivery or performance of this Agreement or any other Loan Document or any waiver, amendment or consent hereunder or thereunder, (ii) consulting with respect to any matter in any way arising out of, relating to, or connected with, this Agreement or any other Loan Document, including, but not limited to, the enforcement by the Banks of their rights hereunder, under the Notes or under any other Loan Document and (iii) protecting, preserving, exercising or enforcing any of the rights of the Banks hereunder, and under the Notes or under any other Loan Document, and (d) indemnify and hold the Agent and the Banks harmless from and against all losses suffered, and pay or reimburse the Agent and the Banks for all of its and their costs and expenses (including reasonable fees and disbursements of legal counsel and other experts employed or retained by the Agent or any Bank) incurred, in connection with any claim (whether -69- asserted by the Company or any other Person) and the investigation or defense thereof, in any manner related to or arising out of this Agreement, the Notes, the Letters of Credit or any other Loan Document or the relationship established hereunder or thereunder, or any investigation, governmental or otherwise, arising out of, related to, or in any way connected with, this Agreement, any other Loan Document or the relationships established hereunder or thereunder, except that the foregoing indemnity shall not be applicable to any loss suffered or any cost or expense incurred by the Agent or any Bank to the extent such loss, cost or expense is determined by the judgment of a court that is binding on the parties hereto, final and not subject to review or appeal to be the result of acts or omissions on the part of the Agent or such Bank, as the case may be, constituting recklessness, willful misconduct or a violation of law. The Company's obligation under this Section 13.02 shall survive the repayment of the Loans, the Notes and the Drawings. Section 13.03 Rights Cumulative. The rights and remedies of the Agent and the Banks under this Agreement and the other Loan Documents shall be cumulative and not exclusive of or limiting on any rights or remedies that they otherwise have, and no failure or delay by the Agent or any Bank in exercising any right shall operate as a waiver of such right, nor shall any single or partial exercise of any power or right preclude its other or further exercise or the exercise of any other power or right. Section 13.04 Confidentiality. Each of the Agent and the Banks agrees to use reasonable efforts (e.g., procedures substantially comparable to those applied by the Agent or such Bank in respect of non-public information as to the business of the Agent or such Bank) to keep confidential any financial reports and other information previously or from time to time supplied to it by the Company hereunder to the extent that such information is not and does not become publicly available through or with the consent or acquiescence of the Company, was not already in the Agent's or any Bank's possession on a non-confidential basis, or is not given to the Agent or any Bank on a non-confidential basis by a Person who, in so doing, has not violated a duty of confidentiality owing to the Company, and will use such financial reports and other information only in connection with the transactions contemplated by this Agreement and for no other purpose; provided that the Agent and each Bank may disclose any such information (a) to the Agent or any other Bank, (b) to the extent required by Applicable Law, (c) to counsel for the Agent or any Bank or to their respective accountants, each of whom shall also be bound by the confidentiality obligations set forth herein, (d) to bank examiners and auditors and appropriate government examining authorities, (e) to the extent necessary or appropriate in connection with any litigation to which the Agent or such Bank is a party, or (f) to any Affiliate of such Bank or to any actual or prospective participant in or assignee of all or any part of such -70- Bank's interest in its Loans, L/C Participations, Canadian L/C Participations, Commitment, Canadian Commitment and other rights or obligations hereunder; provided that (i) each such Affiliate and each such actual or prospective participant or assignee has agreed in writing that it will comply with the restrictions contained in this Section to the same extent as if it were a Bank, and (ii) each such prospective participant or assignee has agreed in writing to promptly return to such Bank all such non- public information if it fails to become a participant or assignee. The determination by the Agent or any Bank as to the application of the circumstances described in the foregoing clauses (a) through (f) shall be conclusive if made in good faith. If any Bank shall assign all of its interest in its Loans, L/C Participations, Canadian L/C Participations, Commitment, Canadian Commitment and other rights and obligations hereunder, such Bank shall promptly return to the Company all such non-public information that such Bank has retained in its possession and has not delivered to its assignee. Upon the Repayment Date, each of the Agent and the Banks shall promptly return to the Company, or continue to keep confidential in accordance with this Section 13.04, all such non-public information that it then has in its possession. Section 13.05 Waivers; Amendments. (a) Any term, covenant, agreement or condition of this Agreement or any other Loan Document may be amended or waived, and any departure therefrom may be consented to, if, but only if, such amendment, waiver or consent is in writing and is signed by (I) the Majority Banks, and (II) if the rights or duties of the Agent, the Swing Line Bank, the Belgian Lending Bank or an Issuing Bank are affected thereby, by such Person, and (III) to the extent that the rights or duties of the Canadian Lending Banks only are affected thereby or to the extent that the rights or duties of the Canadian Lending Banks are affected disproportionately, by the Canadian Majority Banks, and (IV) in the case of an amendment, by the Company; provided, that no amendment, waiver or consent shall, unless in writing and signed by each Bank and each Canadian Lending Bank affected thereby, do any of the following: (i) increase the stated amount of such Bank's Commitment or such Canadian Bank's Canadian Commitment, (ii) reduce the principal of or the stated amount of interest on such Bank's or such Canadian Lending Bank's Loans, Notes, L/C Participations or Canadian L/C Participations or the stated amount of any fees payable to such Bank or Canadian Lending Bank hereunder, (iii) postpone any date fixed (other than as a result of a prepayment that is not a prepayment required pursuant to the first sentence of Section 5.02(b)) for any payment of principal of or interest on such Bank's or such Canadian Lending Bank's Loans, Notes, L/C Participations or Canadian L/C Participations or any fees or other amounts payable to such Bank in accordance with the terms hereof, (iv) amend Section 5.09, this Section 13.05, Section 13.07, the definition of "Majority Banks", or any provision requiring the consent or other action of all of the Banks or Canadian Lending Banks; provided, however, that no amendment, -71- waiver or consent shall, unless in writing and signed by each Canadian Lending Bank, amend the definition of "Canadian Majority Banks", or (v) release the Company, Sierra Corp. (prior to the consummation of the Merger), Fibreboard, Norandex Inc., Stone Products Corporation, Fabwel, Inc. or Pabco Metals Corporation as a Guarantor pursuant to Article 10 hereof; provided, further, that any Guarantor which is sold, transferred or otherwise disposed of for fair value in a transaction permitted under Section 8.10 hereof shall be automatically released as a Guarantor pursuant to Article 10 hereof. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. (b) No election not to exercise, failure to exercise or delay in exercising any right, nor any course of dealing or performance, shall operate as a waiver of any right of the Agent or any Bank under this Agreement, any other Loan Document or Applicable Law, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right of the Agent or any Bank under this Agreement, any other Loan Document or Applicable Law. (c) If (i) a Bank or a Canadian Lending Bank declines to execute an amendment or waiver required of it pursuant to the proviso to Section 13.05(a) that has been approved by the Majority Banks or, in the case of those relating to Canadian Lending Banks, the Canadian Majority Banks, and so long as no Default exists, the Agent, the Company, the Guarantors and such Bank and Canadian Lending Bank agree, if requested by the Company, to attempt to locate an Eligible Assignee that will accept the assignment of the Loans, the Commitment, the related Canadian Commitment, if any, of such Bank or Canadian Lending Bank, and the other rights and obligations hereunder and under the other Loan Documents of such Bank or such Canadian Lending Bank, and (ii) if such an Eligible Assignee is located, such Bank and Canadian Lending Bank agree to assign its interest in its Loans, Commitment, and Canadian Commitment, and its other rights and obligations hereunder and under the other Loan Documents to such Eligible Assignee in accordance with Section 13.08, for a purchase price equal to the unpaid principal amount of such Bank's or such Canadian Lending Bank's Loans, together with interest thereon and fees accrued to the date of payment. If Loans to be so assigned include Eurocurrency Loans or Canadian Loans that are Canadian Cost of Funds Loans or Canadian Bankers' Acceptances, the assignment thereof shall occur on the last day of the then current Interest Period in respect of such Eurocurrency Loans or Canadian Cost of Funds Loans or, in the case of Canadian Bankers' Acceptances, the last day of the then current term thereof. Section 13.06 Set-Off. Upon and after the occurrence of any Default, each Bank and each of its branches and offices is hereby authorized by each Loan Party, at any time and from time -72- to time, without notice, (a) to set off against, and to appropriate and apply to the payment of, the obligations and liabilities of each Loan Party, including such Loan Party under this Agreement, and the other Loan Documents (whether matured or unmatured, fixed or contingent or liquidated or unliquidated and including amounts to which a Bank is entitled with respect to its L/C Participations and Canadian L/C Participations) any and all amounts owing by such Bank or any such office or branch to such Loan Party or any of its Consenting Subsidiaries (whether payable in Dollars or any other currency, whether matured or unmatured, and, in the case of deposits, whether general or special, time or demand and however evidenced and whether maintained at a branch or office located within or without the United States), and (b) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such obligations and liabilities and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as such Bank in its sole discretion may elect. Section 13.07 Sharing of Recoveries. (a) Each Bank agrees that (i) if it shall exercise any right of counterclaim, set-off, banker's lien or similar right or if under any applicable bankruptcy, insolvency or other similar law, it receives a secured claim, the security for which is a debt owed by it to any Loan Party, including a secured claim deemed secured under Section 506 of the Bankruptcy Code, and (ii) if, as a result of the exercise of a right or the receipt of a secured claim described in clause (i) of this Section 13.07 or otherwise, it shall receive payment of a proportion of the aggregate amount due and payable to it hereunder and under the other Loan Documents as principal, interest, fees or expense reimbursements that is greater than the proportion received by any other Bank in respect of the aggregate of such amounts due and payable to such other Bank hereunder and under the other Loan Documents, the Bank receiving such proportionately greater payment shall purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the rights of the other Banks hereunder and under the other Loan Documents so that all such recoveries with respect to such amounts due and payable hereunder and under the other Loan Documents by all of the Banks shall be pro rata; provided that if all or part of such proportionately greater payment received by the purchasing Bank is thereafter recovered by or on behalf of the Company from such Bank, such purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such Bank to the extent of such recovery, but without interest (unless the purchasing Bank is required to pay interest on the amount recovered to the Person recovering such amount, in which case the selling Bank shall be required to pay interest at a like rate). Any Bank receiving any such secured claim shall exercise its rights in respect of such secured claim in a manner consistent with the rights of the Banks entitled under this Section to share in the benefits of any recovery on such secured claim. -73- (b) Each Loan Party expressly consents to the arrangements set forth in this Section 13.07 and agrees that any holder of a participation in any rights hereunder or under any other Loan Document so purchased or acquired pursuant to this Section 13.07 may exercise any and all rights of set-off and any other rights with respect to such participation as fully as if such holder were a direct creditor of such Loan Party in the amount of such participation. Section 13.08 Assignment. (a) Each Bank and each Canadian Lending Bank may, at any time or from time to time, with (in the case of an assignment to any Eligible Assignee other than another Bank or, in the case of an assignment of a Canadian Commitment and a Canadian L/C Participation, the Canadian Lending Bank Affiliate of another Bank) the prior consent of the Agent and (so long as an Event of Default described in Section 11.01(e) shall not have occurred or be continuing) the Company, which consents shall not be unreasonably withheld, assign all or any portion of its interest in its Loans, L/C Participations, Canadian L/C Participations, Commitment, Canadian Commitment and other rights and obligations as a Bank and a Canadian Lending Bank hereunder to an Eligible Assignee; provided that (i) no such assignment shall involve an amount of such Bank's Commitment less than $10,000,000, (ii) no Issuing Bank may assign all or any portion of its rights and obligations as issuer of Letters of Credit without the prior written consent of the Company and the Majority Banks, (iii) a Bank which is, or whose Affiliate is, a Canadian Lending Bank may not assign, or permit its Canadian Lending Bank Affiliate to assign, its Canadian Commitment or Canadian Loans to an Eligible Assignee that is not a Person with respect to which payments of principal, interest and other amounts by the Canadian Borrower would not, at the time of such assignment, be subject to Canadian withholding tax at a rate higher than that then applicable to the assignor, (iv) the Belgian Lending Bank may not assign any Belgian Loan to an Eligible Assignee that is not a Person with respect to which payments of principal, interest and other amounts by the Belgian Borrower would not, at the time of such assignment, be subject to Belgian withholding tax at a rate higher than that then applicable to the assignor, and (v) except in the case of an assignment by the Bank that is the Agent, no such assignment shall be effective unless and until the Agent shall have been paid an assignment fee of $3,500; provided that no assignee shall be entitled to any amounts that would otherwise be payable to it under Section 14.02 with respect to its assigned interest unless (x) such amounts are payable in respect of a Regulatory Change Enacted after the date the applicable assignment agreement was executed, or (y) such amounts would have been payable to the Bank or the Canadian Lending Bank that made such assignment if such assignment had not been made; provided, further, that the assignment by a Bank of its Canadian Commitment, or the assignment by its Canadian Lending Bank Affiliate of its Canadian Commitment, shall constitute the assignment of a like amount of such Bank's Commitment; provided, further that a Bank may not -74- assign its Commitment, in an amount such that after such assignment its, or its Canadian Lending Bank Affiliate's, Canadian Commitment would exceed such Bank's remaining Commitment, unless such Bank or its Canadian Lending Bank Affiliate shall also assign, subject to clause (iii) of the immediately preceding proviso, an amount of its Canadian Commitment equal to such excess amount to the assignee of such Bank's Commitment or an Affiliate of such assignee. In connection with each such assignment, (i) the assignor Bank or Canadian Lending Bank and the assignee shall execute and deliver to the Agent a duly completed Assignment and Acceptance in the form of Annex K hereto, and, if required by this Section 13.08(a), the Company and the Agent shall approve such assignee and the Agent shall record such assignment in its records with respect to this Agreement, (ii) the Company shall issue a Note to the assignee if requested by it (and to the assignor Bank or Canadian Lending Bank, in the case of a partial assignment by a Bank or a Canadian Lending Bank that was the holder of a Note), against receipt of the existing Note or Notes, if any, of the assignor or assignors, such amendment and new Notes to appropriately reflect such assignment, and (iii) in the case of an assignment of a Registered Note, such Registered Note shall have been surrendered for registration of assignment duly endorsed by (or accompanied by a written instrument of assignment duly executed by) the Registered Holder and such assignment shall have been recorded on the Loan Register. Notwithstanding anything to the contrary contained herein, each Bank and each Canadian Lending Bank may at any time or from time to time, without the consent of the Agent, the Company or any other Bank, pledge all or any portion of its rights hereunder to a Federal Reserve Bank. (b) The Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank, and no such assignment or transfer of any such obligation shall release the Company therefrom unless the Agent and each Bank shall have consented to such release in a writing specifically referring to the obligation from which the Company is to be released. Section 13.09 Participations. Each Bank, and each Canadian Lending Bank, may from time to time sell or otherwise grant participations in its Loans, L/C Participations, Canadian L/C Participations and Notes to any commercial bank or other financial institution, and the holder of any such participation (a) shall, with respect to its participation, be entitled to all of the rights of a Bank and, if applicable, a Canadian Lending Bank under Sections 5.08, 13.02, 13.05, 14.02 and 14.04, and (b) may exercise any and all rights of set-off or banker's lien with respect thereto, in each case as fully as though the applicable Loan Party were directly indebted to the holder of such participation in the amount of such participation; provided that (i) no Bank or Canadian Lending Bank may grant to any such holder the right to require such Bank or Canadian Lending Bank to take -75- or omit to take any action hereunder, except that a Bank or Canadian Lending Bank may grant to any such holder the right to require such holder's consent to (A) reduce the principal of or the stated amount of interest on such Bank's or such Canadian Lending Bank's Loans, Notes, L/C Participations or Canadian L/C Participations or the stated amount of commitment fees or letter of credit fees payable to such Bank or Canadian Lending Bank hereunder or (B) postpone any date fixed (other than as a result of a prepayment) for any payment of principal of or interest on such Bank's or such Canadian Lending Bank's Loans, Notes, L/C Participations or Canadian L/C Participations or fees payable to such Bank or Canadian Lending Bank hereunder, (ii) no holder of a participation shall be entitled to any amounts that would otherwise be payable to it under Section 5.08 or 14.02 with respect to its participation, unless (x) such amounts are payable in respect of a Regulatory Change Enacted after the date the applicable participation agreement was executed or (y) such amounts would have been payable to the Bank or Canadian Lending Bank that granted such participation if such participation had not been granted, (iii) the applicable participation agreement (A) shall provide that the participant shall be subject to the obligations set forth in the first sentence of Section 14.03(a) to the same extent as if it were a Bank and (B) shall provide that if an event occurs with respect to such participant that makes Section 14.02 applicable and if the efforts of the participant fail to eliminate the applicability of Section 14.02, the Bank or the Canadian Lending Bank that granted the participation shall, at the request of the Company, repurchase the participation (such repurchase to occur promptly, in the case of Base Rate Loans, L/C Participations and Canadian L/C Participations, and no later than on the last day of the applicable Interest Period, in the case of Fixed Rate Loans), (iv) no participation may be sold or granted in any Canadian Loan except to a Person with respect to which payments of principal, interest and other amounts by a Canadian Loan Borrower would not, at the time of sale or grant, be subject to Canadian withholding tax at a rate higher than that then applicable to the seller or grantor, (v) no participation may be sold or granted in any Belgian Loan except to a Person with respect to which payment of principal, interest and other amounts by a Belgian Borrower would not, at the time of such sale or grant, be subject to Belgian withholding tax at a rate higher than that applicable to the seller or grantor. Each Bank and each Canadian Lending Bank selling or granting a participation shall indemnify the Company, each Canadian Borrower and the Agent for any Taxes and liabilities that they may sustain as a result of such Bank's or such Canadian Lending Bank's failure to withhold and pay any Taxes applicable to payments by such Bank or such Canadian Lending Bank to its participant in respect of such participation. Each Bank that is not a Canadian Lending Bank hereby guarantees the payment and performance of the obligations hereunder of its Affiliate that is a Canadian Lending Bank. This Section 13.09 shall not apply to participations in Belgian Loans granted pursuant to Section 1.06 hereof, participations in Swing Line -76- Loans granted pursuant to Section 3.04, or participations in Letters of Credit and Canadian Letters of Credit granted pursuant to Section 4.04 hereof. Section 13.10 Governing Law. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS (INCLUDING MATTERS RELATING TO THE MAXIMUM PERMISSIBLE RATE) SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. Section 13.11 Judicial Proceedings; Waiver of Jury Trial. Any judicial proceeding brought against the Company or any other Loan Party with respect to this Agreement, the Notes or any other Loan Document may be brought in any state or federal court of competent jurisdiction in the Borough of Manhattan in the City of New York and, by execution and delivery of this Agreement, each of the Company and the other Loan Parties (a) accepts, generally and unconditionally, the nonexclusive jurisdiction of such courts and any related appellate court, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement, the Notes or any other Loan Document and (b) irrevocably waives any objection it may now or hereafter have as to the venue of any such suit, action or proceeding brought in such a court or that such court is an inconvenient forum. Each of the Company and the other Loan Parties hereby waives personal service of process and consents that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of Section 13.01, and service so made shall be deemed completed on the third Business Day after such process is deposited in the mail. Nothing herein shall affect the right of the Agent or any Bank to serve process in any other manner permitted by law or shall limit the right of the Agent or any Bank to bring proceedings against the Company or any other Loan Party in the courts of any other jurisdiction. Any judicial proceeding by the Company or any Loan Party against the Agent or any Bank involving, directly or indirectly, any matter in any way arising out of, related to, or connected with this Agreement or the Notes shall be brought only in a court located, in the case of the Agent, in the City and State of New York and, in the case of a Bank, the jurisdiction in which such Bank's principal United States office is located. THE COMPANY, EACH OTHER LOAN PARTY, THE AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, THE NOTES, ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIPS ESTABLISHED HEREUNDER OR THEREUNDER. Section 13.12 Limitation of Liability. No claim may be made by the Company or any other Loan Party against the Agent or any Bank or any of their respective Affiliates, directors, officers, employees, attorneys or agents for any special, -77- indirect, consequential or punitive damages in respect of any breach or wrongful conduct (whether the claim therefor is based on contract, tort or duty imposed by law) in connection with, arising out of or in any way related to the transactions contemplated and relationship established by this Agreement or any other Loan Document, or any act, omission or event occurring in connection therewith; and each of the Company and the other Loan Parties hereby waives, releases and agrees not to sue upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 13.13 Change of Funding Offices. Each Bank may at any time and from time to time change any of its Funding Offices and shall give notice of any such change to the Agent and the Company; provided that, except in the case of a change in the Funding Offices made at the request of the Company, (a) no Bank shall designate a new Funding Office if such designation would make operable the provisions of clause (c) or (d) of Section 14.01 and (b) no Bank shall be entitled to receive any greater amount under Section 13.02 as a result of any such change in Funding Offices than such Bank would be entitled to had such change in Funding Offices not occurred. Section 13.14 Severability of Provisions. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by Applicable Law, each of the Company and the Loan Parties hereby waives any provision of Applicable Law that renders any provision hereof prohibited or unenforceable in any respect. Section 13.15 Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Section 13.16 Entire Agreement. This Agreement and the Notes embody the entire agreement between the Company, each other Loan Party, the Agent and the Banks and supersede all prior agreements, representations and understandings, if any, relating to the subject matter hereof. Section 13.17 Successors and Assigns. All the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 13.18 Cash Collateral. If, at any time, payment or prepayment of any Canadian Bankers' Acceptance, Contingent Reimbursement Obligation or Canadian Contingent Reimbursement Obligation that is not prepayable, shall be -78- required pursuant to any provision of this Agreement, such payment or prepayment shall be made by deposit of funds, in the amount of such payment or prepayment, into an interest bearing cash collateral account at the Agent's Office, which account shall be under the dominion and control of the Agent and shall be pledged to the Banks and the Canadian Lending Banks as security for the payment of such Canadian Bankers' Acceptance, Contingent Reimbursement Obligation or Canadian Contingent Reimbursement Obligation, as the case may be, and any other amounts that may become payable hereunder in respect thereof. Funds deposited in such account, and any income thereon, shall be applied by the Agent against amounts payable under this Agreement when such amounts become due. Any funds remaining in such account when all Canadian Bankers' Acceptances, Contingent Reimbursement Obligations, Canadian Contingent Reimbursement Obligations and any other amounts payable hereunder secured thereby have been paid shall be promptly remitted to the Company. Section 13.19 Rating Services. In the event that either (a) Moody's or S&P shall cease to exist and shall not thereupon be succeeded by a successor entity performing similar functions, or (b) either such corporation (or any such successor entity) shall at any time cease to maintain a Moody's Rating or S&P Rating, as the case may be, the Company, each other Loan Party, each Bank and the Agent agree to enter into negotiations promptly thereafter in good faith with a view toward amending this Agreement to provide for an alternate mechanism (including, without limitation, providing for a replacement rating agency and range of ratings of the Company's long-term unsecured debt) for determining the facility fee, the letter of credit fee and the Eurocurrency Margin so as to achieve, as nearly as possible, the same economic basis for determining such fees and such margins as exists on the date of this Agreement; provided that pending an agreement as to such alternate mechanism, the Company, each other Loan Party, each Bank and the Agent agree (i) that the Utilization Fee, the Facility Fee Rate and the Eurocurrency Margin shall be determined on the basis of whichever of the Moody's Rating or the S&P Rating is still maintained, if either, or (ii) if both Moody's or S&P shall cease to exist or each shall cease to maintain a Moody's Rating or S&P Rating, as the case may be, that the Utilization Fee, the Facility Fee Rate and the Eurocurrency Margin shall be determined on the basis of the last Moody's Rating and the last S&P Rating maintained by Moody's and S&P, as the case may be. Section 13.20 Amounts Payable Due Upon Request for Payment. All amounts payable by a Loan Party under Section 13.02 and under the other provisions of the Loan Documents to which such Loan Party is a party shall, except as otherwise expressly provided, be immediately due upon request for the payment thereof. Section 13.21 Remedies of the Essence. The various rights and remedies of the Agent and the Banks under this -79- Agreement, the Notes and the other Loan Documents are of the essence, and the Agent and the Banks shall be entitled to obtain a decree requiring specific performance of each such right and remedy. Section 13.22 Registered Notes. A Bank that is a Non-US Bank and that has complied with Section 5.08(a)(iv)(A)(1) may have its Notes issued as Registered Notes. Once issued, Registered Notes may not be exchanged for Notes that are not Registered Notes, and the ownership of Registered Notes, and of the Loans evidenced thereby, may be transferred only in accordance with the provisions of clause (iii) of the second sentence of Section 13.08(a). Section 13.23 Judgment Currency. If in connection with determining the amount of a judgment to be rendered in a currency (a "Judgment Currency") other than the currency in which the relevant amount was due under this Agreement or a Note, it is necessary to convert a sum payable by the Company or any other Loan Party under this Agreement or the Notes in a Currency other than such Judgment Currency into such Judgment Currency, then, unless another rate of exchange is required under Applicable Law, the rate of exchange used shall be the Agent's spot rate of exchange in New York on the Business Day preceding the day on which final judgment is to be rendered. The obligations of the Company or the applicable Loan Party in respect of any such sum payable by it under the Loan Documents in a Currency other than such Judgment Currency shall, notwithstanding any such judgment in such Judgment Currency, be discharged only to the extent that on the Business Day following actual receipt by the Agent or Banks of the amount of the judgment in such Judgment Currency, such Person is able to purchase the relevant Currency in New York with such sum of Judgment Currency, whether or not at the Agent's spot rate of exchange. As a separate obligation and notwithstanding any such judgment, the Company or the applicable Loan Party shall pay such Person on demand in the relevant Currency any difference between the amount originally payable by the Company or such Loan Party to such Person in the relevant Currency and the amount of the relevant Currency that may be so purchased. In the event that the amount that may be so purchased exceeds the amount originally payable, such Person shall promptly remit such excess to the Company or the applicable Loan Party. ARTICLE 14. ADDITIONAL CREDIT FACILITY PROVISIONS Section 14.01 Mandatory Suspension and Conversion of Fixed Rate Loans. A Bank's obligations to make, maintain or convert into Fixed Rate Loans shall be suspended, all such Bank's outstanding Fixed Rate Loans (other than CA Loans) shall be converted on the last day of their applicable Interest Periods (or, if earlier, in the case of clause (c) below, on the last day -80- such Bank may lawfully continue to maintain Fixed Rate Loans or, in the case of clause (d) below, the day determined by such Bank to be the last Business Day before the effective date of the applicable restriction) into, and all pending requests for the making of or conversion into Fixed Rate Loans by such Bank shall be deemed requests for, Base Rate Loans or, in the case of Canadian Loans that are Canadian Cost of Funds Loans or Canadian Bankers' Acceptances, Canadian Prime Rate Loans, if: (a) prior to the determination of an interest rate for a Fixed Rate Loan, the Agent, in the case of Fixed Rate Loans (other than CA Loans), and the Bank committed to make such Loans, in the case of CA Loans, determines that for any reason appropriate information is not available to it for purposes of determining the interest rate for a Fixed Rate Loan; (b) on or prior to the first day of any Interest Period for a Fixed Rate Loan (other than a CA Loan), or the first day of the term of a Canadian Bankers' Acceptance, such Bank determines that the Eurocurrency Rate, the Canadian Cost of Funds Rate or the Discount Rate, as applicable as determined by the Agent for such Interest Period or term, would not accurately reflect the cost to such Bank of making, maintaining or converting into such Fixed Rate Loan; (c) at any time such Bank determines that any Regulatory Change makes it unlawful or impracticable for such Bank to make or maintain any Fixed Rate Loan, or to comply with its obligations hereunder in respect thereof; or (d) such Bank determines that by reason of any Regulatory Change it is restricted, directly or indirectly, in the amount that it may hold of (i) a category of liabilities that includes deposits by reference to which, or on the basis of which, the interest rate applicable to such Fixed Rate Loans is directly or indirectly determined, or (ii) the category of assets that includes such Fixed Rate Loans. The Agent shall promptly notify the Company and each Bank of the existence or occurrence of any condition or circumstance specified in clause (a) above, and each Bank shall promptly notify the Company and the Agent of the existence or occurrence of any condition or circumstance specified in clause (b), (c) or (d) above applicable to such Bank's Loans, but the failure by the Agent or such Bank to give any such notice shall not affect such Bank's rights hereunder. Section 14.02 Regulatory Changes. If in the determination of any Bank (a) any Regulatory Change Enacted after, in the case of Fixed Rate Loans (other than CA Loans), the Agreement Date or, in the case of a CA Loan, the time such Bank -81- shall have submitted its CA Loan Offer to make such CA Loan, shall directly or indirectly (i) reduce the amount of any sum received or receivable by such Bank with respect to such Loan or the return to be earned by such Bank on such Loan, (ii) impose a cost on such Bank or any Affiliate of such Bank that is attributable to the making or maintaining of, or such Bank's commitment to make, such Loan, (iii) require such Bank or any Affiliate of such Bank to make any payment on or calculated by reference to the gross amount of any amount received by such Bank under this Agreement or its Note or any Letter of Credit or (iv) reduce, or have the effect of reducing, the rate of return on any capital of such Bank or any Affiliate of such Bank that such Bank or such Affiliate is required to maintain on account of such Loan or such Bank's Commitment to make such Loan and (b) such reduction, increased cost or payment shall not be fully compensated for by an adjustment in the applicable rates of interest payable under this Agreement or its Note or any Letter of Credit, then the Company shall pay to such Bank such additional amounts as such Bank determines will, together with any adjustment in the applicable rates of interest payable hereunder, fully compensate for such reduction, increased cost or payment. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 days after request by such Bank for such payment and, in the case of those applicable to future periods, on the dates specified, or determined in accordance with a method specified, by such Bank. Each Bank will promptly notify the applicable Borrower of any Regulatory Change that will entitle such Bank to compensation pursuant to this Section 14.02, but the failure to give such notice shall not affect such Bank's right to compensation. Section 14.03 Mitigation by Banks. (a) If any event occurs with respect to any Bank or Canadian Lending Bank that makes Section 14.01 or 14.02 applicable, such Bank or Canadian Lending Bank shall, if requested by the Company, use its best efforts to eliminate or reduce the applicability of such Sections and any costs to the Company related thereto; provided that such Bank or Canadian Lending Bank shall not have any obligation under this Section 14.03 to take any action that is inconsistent with Applicable Law or such Bank's or Canadian Lending Bank's internal policy or, in the reasonable judgment of such Bank, would be disadvantageous to such Bank. If the efforts of such Bank or Canadian Lending Bank fail to eliminate the applicability of Section 14.01 or 14.02, as the case may be, and the costs to the Company related thereto, (i) the Agent and such Bank or Canadian Lending Bank agree, if requested by the Company, to attempt to locate a commercial bank or other financial institution (A) the assignment to which of the Loans, L/C Participations, Commitment (or, in the case of a Canadian Lending Bank, its Canadian Commitment and Canadian L/C Participations) and other rights and obligations hereunder of such Bank or Canadian Lending Bank would eliminate or reduce the applicability of such Sections and (B) that desires to accept such assignment and (ii) if such a bank or institution is located, such Bank or Canadian Lending Bank agrees -82- to assign its interest in its Loans, L/C Participations, Commitment (or, in the case of a Canadian Lending Bank, its Canadian Commitment and Canadian L/C Participations) and other rights and obligations hereunder to such bank or institution in accordance with Section 13.08(a), for an amount equal to the aggregate amount owing to such Bank (or such Canadian Lending Bank) under this Agreement at the time of such assignment (including the aggregate principal amount of such Bank's Loans and such Bank's Borrowing Percentage (or such Canadian Lending Bank's Canadian Borrowing Percentage) of Drawings with respect to which it has made its required payments under Section 4.04(a), accrued interest, and all fees and other amounts accrued or payable to such Bank or Canadian Lending Bank). If no such assignment is arranged, the Company may, upon 10 days' prior notice to such Bank or Canadian Lending Bank, terminate such Bank's Commitment or such Canadian Bank's Canadian Commitment and thereupon promptly prepay such Bank's or Canadian Lending Bank's Loans and all other amounts payable to such Bank or Canadian Lending Bank hereunder and cash collateralize its L/C Participations or Canadian L/C Participations; provided that prepayments of Fixed Rate Loans may be made on the last day of the applicable Interest Periods. (b) If any event occurs with respect to any participant in any Bank's or Canadian Lending Bank's Loans, L/C Participations, Canadian L/C Participations, Commitment, Canadian Commitment and other rights and obligations hereunder that makes Section 14.02 applicable and if the efforts of such participant fail to eliminate the applicability of such Section and the costs to the Company or any other Loan Party related thereto, (i) such Bank or Canadian Lending Bank agrees, if requested by the Company, to attempt to locate a commercial bank or other financial institution (A) the ownership by which of the participation of such participant would eliminate or reduce the applicability of Section 14.02 and (B) that desires to purchase such participation and (ii) if such a bank or institution is located, such Bank or Canadian Lending Bank agrees to repurchase such participation from such participant and to resell such participation to such bank or institution in accordance with Section 13.09. If no such transfer of such participation is arranged, such Bank or Canadian Lending Bank shall, upon 10 days' prior notice by the Company, repurchase such participation from such participant whereupon, at the option of such Bank or Canadian Lending Bank, such Bank's Commitment or such Canadian Lending Bank's Canadian Commitment shall be reduced, its Loans and other amounts payable to it hereunder shall be prepaid and its L/C Participations and Canadian L/C Participations shall be cash collateralized, by the amount of such participation (such prepayments to be made promptly except that prepayments with respect to Fixed Rate Loans may be made on the last day of the applicable Interest Periods). Section 14.04 Funding Losses. The Company shall pay to each Bank, upon request, such amount or amounts as such Bank -83- determines are necessary to compensate it for any loss, cost or expense incurred by it as a result of (a) any payment, prepayment or conversion of a Fixed Rate Loan on a date other than the last day of an Interest Period for, or term of, such Fixed Rate Loan or, in the case of a CA Loan, its maturity date or (b) a Fixed Rate Loan for any reason not being made or converted, or any payment of principal thereof or interest thereon not being made, on the date therefor determined in accordance with the applicable provisions of this Agreement. At the election of such Bank, and without limiting the generality of the foregoing, but without duplication, such compensation on account of losses may include an amount equal to the excess of (i) the interest that would have been received from the applicable Borrower under this Agreement on any amounts to be reemployed during an Interest Period or its remaining portion over (ii) the interest component of the return that such Bank determines it could have obtained had it placed such amount on deposit in the interbank market for the relevant currency selected by it for a period equal to such Interest Period, or term, or any remaining portion thereof. Section 14.05 Determinations. In making the determinations contemplated by Sections 14.01, 14.02 and 14.04, each Bank may make such reasonable estimates, assumptions, allocations and the like that such Bank in good faith determines to be appropriate, but such Bank's selection thereof in accordance with this Section 14.05, and the determinations made by such Bank on the basis thereof, shall be final, binding and conclusive upon the applicable Borrower, except, in the case of such determinations, for manifest errors in computation or transmission. Each Bank requesting payment under this Article 14 shall furnish to the Company upon request a certificate outlining in reasonable detail the computation of any amounts claimed by it under this Article 14 and the assumptions underlying such computations. ARTICLE 15. INTERPRETATION Section 15.01 Interpretation. (a) Defined Terms. For the purposes of this Agreement: "Acceptance Fee" means the fee payable at the time of the acceptance of a Canadian Bankers' Acceptance established by multiplying the face amount of such Canadian Bankers' Acceptance by the BA Margin as of the date of issue and acceptance of such Canadian Bankers' Acceptance and by multiplying the product so obtained by a fraction having a numerator equal to the number of days in the term of such Canadian Bankers' Acceptance and a denominator of 365. -84- "Accumulated Funding Deficiency" has the meaning ascribed to that term in Section 302 of ERISA. "Adjusted Consolidated Net Income" means, for any period, Consolidated Net Income for such period, plus (i) any amount deducted in the computation thereof for additions to reserves with respect to actions, suits or proceedings against the Company or any Subsidiary with respect to claims arising out of the use of or exposure to asbestos products, minus (ii) any amount added in the computation thereof for reductions in such reserves, minus (iii) to the extent not deducted or added, as appropriate, in the computation of Consolidated Net Income for such period, the net after-tax amount of (A) actual cash disbursements during such period made with respect to claims arising out of the use of or exposure to asbestos products, minus (B) actual cash payments (including under insurance policies) received during such period with respect to claims arising out of the use of or exposure to asbestos products. "Administrative Schedule" means Annex B to this Agreement, which contains administrative information in respect of each Currency and each Type of Loan. "Affiliate" means, with respect to a Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person. "Affiliated Entity" means a Subsidiary, an Affiliate, or a Person that uses technology supplied by, or whose operations are supervised by, the Company or its Subsidiaries or Affiliates. "Agent" means CSFB, as agent for the Banks hereunder, and includes CSFB Canada, as Agent for the Canadian Lending Banks hereunder with respect to Canadian Bankers' Acceptances only, and any replacement Agent appointed pursuant to Section 12.07. "Agent's Office" means the address of the Agent specified in or determined in accordance with the provisions of Section 13.01. "Aggregate Non-Canadian Exposure" means at any date, the aggregate Dollar Equivalent Amount of (i) the outstanding principal amount of all Loans then outstanding that are not Canadian Loans or CA Loans and (ii) all L/C Obligations then outstanding. "Agreement" means this Agreement, as amended from time to time, and after giving effect to all waivers and departures from the terms hereof that have been consented to, but only, in the case of each such amendment, waiver or consent, to the extent it complies with the provisions of Section 13.05. -85- "Agreement Date" means the date set forth as such on the signature pages hereof, which date is the date executed copies of this Agreement were delivered by all parties hereto, and, accordingly, the date this Agreement became effective and the Banks, the Canadian Lending Banks and the Issuing Banks first became, except with respect to CA Loans, committed to make the Credit Extensions contemplated by this Agreement. If no such date is there set forth, the Agreement Date shall be the date as of which this Agreement is dated. "Applicable Law" means, anything in Section 13.10 to the contrary notwithstanding, all applicable provisions of all (a) constitutions, statutes, treaties, rules, regulations and orders of governmental bodies, (b) Governmental Approvals and (c) orders, decisions, judgments and decrees of all courts and arbitrators, except that, for purposes of Section 5.04, Applicable Law means only the law of the State of New York applicable to maximum permitted rates of interest and any applicable pre-emptive Federal law. "Arranger" means CSFB and its successors. "Assignment and Acceptance" means an assignment and acceptance in the form of Annex K. "Available Foreign Currency" means Belgian Francs, Pounds Sterling, Canadian Dollars and, but only with respect to CA Loans, any other available and freely-convertible non-Dollar currency selected by the Company and approved by the Agent. "BA Margin" means, at any time, the rate per annum equal to the sum of (i) the applicable Utilization Fee at such time, plus (ii) the rate per annum determined at such time based upon the S&P Rating and Moody's Rating at such time set forth under the relevant column heading below opposite such Investment Ratings: Investment Rating Rating Margin 1. S&P Rating not lower than BBB+, 0.20% and Moody's Rating not lower than Baa1 2. S&P Rating lower than BBB+ or 0.25% Moody's Rating lower than Baa1, but S&P Rating not lower than BBB and Moody's Rating not lower than Baa2 3. S&P Rating lower than BBB or 0.275% Moody's Rating lower than Baa2, but S&P Rating not lower than BBB- and Moody's Rating not lower than Baa3 -86- 4. S&P Rating lower than BBB- or 0.50% Moody's Rating lower than Baa3, but S&P Rating not lower than BB+ and Moody's Rating not lower than Ba1 5. S&P Rating lower than BB+ or 0.525% Moody's Rating lower than Ba1
"Bank" means each of (i) the institutions listed on Annexes A-1 and A-2, and (ii) each additional institution that shall become a "Bank" party hereto in accordance with Section 13.08. For purposes of this Agreement, "Bank" includes the Swing Line Bank, each Issuing Bank and each Canadian Lending Bank, unless the context otherwise requires. "Bank Default" means (i) the inability or refusal of any Bank or Canadian Lending Bank to acquire any L/C Participation or Canadian L/C Participation pursuant to Section 4.04(a) or to make any payment required by it under Section 4.04(a), (ii) the inability or refusal of any Bank to acquire a participation pursuant to Section 1.06(a) in Belgian Loans made by the Belgian Lending Bank or to make any payment required by it under Section 1.06(a) or (iii) the giving by any Bank or Canadian Lending Bank to the Issuing Bank or the Belgian Lending Bank of any notice (which has not been retracted) of its intention not to so acquire any L/C Participation, Canadian L/C Participation, or participation in a Belgian Loan, or to make any such required payment; provided that, for purposes of Section 5.11(b), the exercise by a Bank of its rights under Section 6.02(d) shall not constitute a Bank Default. "Bank Tax" means any Tax based on or measured by net income, any franchise Tax and any doing business Tax imposed on any Bank or the Agent by any jurisdiction (or any political subdivision thereof) in which such Bank, the Agent or any Funding Office is located or would otherwise be subject to such a Tax without giving effect to this Agreement or the transactions contemplated hereby. "Base Rate" means at any time the higher of (i) the Prime Rate in effect at such time and (ii) the Federal Funds Rate as in effect at such time plus 0.50% per annum. "Base Rate Loan" means a Loan the interest on which is, or is to be, as the context may require, computed on the basis of the Base Rate. "Belgian Borrower" means (i) a Borrower designated on Annex A-3 as a Belgian Borrower and (ii) after the Agreement Date, each Designated Subsidiary Borrower that is specified to be a "Belgian Borrower". -87- "Belgian L/C Obligation" means, at any time, an amount equal to the sum of the Dollar Equivalent Amount of (i) the aggregate then undrawn and unexpired amount of the then outstanding Belgian Letters of Credit and (ii) the aggregate amount of drawings under Belgian Letters of Credit which have not then been reimbursed pursuant to Section 4.05(a). "Belgian Lending Bank" means the Bank listed on Annex A-2 (as Annex A-2 may be amended from time to time). For purposes of this Agreement, "Bank" includes the Belgian Lending Bank unless the context otherwise requires. "Belgian Letter of Credit" means a Letter of Credit issued by the Belgian Lending Bank as Issuing Bank for the account of a Belgian Borrower pursuant to Section 4.01. "Belgian Loan" means a Loan to a Belgian Borrower. "Borrower" means any of the Company and each Designated Subsidiary Borrower. "Borrowing" means any borrowing of Loans on a given date, consisting, collectively, of all Loans made or to be made by the Banks on such date. "Borrowing Date" means any Business Day on which the Company or any other Borrower requests the Banks, the Canadian Lending Banks, the Belgian Lending Bank, the Swing Line Bank or any Issuing Bank to make a Loan or Loans hereunder or to issue a Letter of Credit or Canadian Bankers' Acceptance. "Borrowing Percentage" means, with respect to any Bank, at any time, the ratio (expressed as a percentage) of the amount of such Bank's Non-Canadian Commitment at such time to the aggregate amount of the Non-Canadian Commitments of all the Banks at such time, or, in the case of a Bank that is, or whose Affiliate is, a Canadian Lending Bank, at any time when Aggregate Non-Canadian Exposure equals or exceeds the aggregate of the Non- Canadian Commitments, such Bank's or such Affiliate's Canadian Borrowing Percentage. "Business Day" means (i) when such term is used in respect of a day on which a Eurocurrency Loan is to be made or an interest rate applicable thereto is to be set, a payment is to be made in respect of such a Loan, an Exchange Rate is to be set in respect of an Available Foreign Currency or any other dealing in an Available Foreign Currency is to be carried out pursuant to this Agreement, such term shall mean a London Banking Day which is also a day on which banks are open for general banking business in the city which is the principal financial center of the country of such Currency, (ii) when such term is used in respect of a day on which a Canadian Loan is to be made or an interest rate with respect thereto is to be set, a payment is to be made in respect of a Canadian Loan, an Exchange Rate is to be -88- set in respect of Canadian Dollars or any other dealing in Canadian Dollars is to be carried out pursuant to this Agreement, such term shall mean a day on which banks in Toronto, Canada are open for general banking business, other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, (iii) when such term is used to describe a day on which a request is to be made to an Issuing Bank for issuance of a Letter of Credit or on which a Letter of Credit is to be issued, such term shall mean a day other than a Saturday, Sunday or other day on which commercial banks in the city in which the Issuing Bank's Issuing Office is located are authorized or required by law to close, and (iv) when such term is used in any other context in this Agreement, such term shall mean a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "CA Loan" has the meaning set forth in Section 2.01(a). "CA Loan Exposure" means, at any time, the Dollar Equivalent Amount of the CA Loans outstanding at that time. "CA Loan Offer" means, with respect to any CA Loan Request in any Currency, an offer from a Bank or Canadian Lending Bank in respect of such CA Loan Request, containing the information in respect of such CA Loan Offer and delivered to the Person, in the manner and by the time specified for a CA Loan Offer in respect of such Currency in the Administrative Schedule. "CA Loan Request" means, with respect to any CA Loan in any Currency, a Notice of CA Loan Borrowing from the Borrower in respect of such Loan, containing the information in respect of such CA Loan specified for a CA Loan Request in respect of such Currency in the Administrative Schedule. "Canadian Bankers' Acceptance" means a Revolving Loan which is a Canadian Loan in the form of a non-interest bearing bill of exchange denominated in Canadian Dollars, drawn and endorsed by a Canadian Borrower and accepted by a Canadian Lending Bank pursuant to this Agreement, having a term of one month to six months, and maturing on a Business Day on or before the Termination Date. "Canadian Borrower" means (i) a Borrower designated on Annex A-3 as a Canadian Borrower and (ii) after the Agreement Date, each Designated Subsidiary Borrower that is specified to be a "Canadian Borrower". "Canadian Borrowing Percentage" means, as to any Canadian Lending Bank at any time, the percentage which such Bank's Canadian Commitment then constitutes of the aggregate Canadian Commitments (or, at any time after the Canadian Commitments shall have expired or terminated, the percentage which the amount of such Canadian Lending Bank's Canadian -89- Exposure at such time constitutes of the aggregate amount of the Canadian Exposure of all the Canadian Lending Banks at such time). "Canadian Commitment" means, as to any Canadian Lending Bank, (i) the obligation of such Canadian Lending Bank to make Revolving Loans that are Canadian Loans hereunder, and to issue or acquire participating interests in Canadian Letters of Credit hereunder, in an aggregate Dollar Equivalent Amount at any one time outstanding not to exceed the amount set forth opposite such Bank's name on Annex A-2, as such amount may be changed from time to time in accordance with the provisions of this Agreement, or (ii) as the context may require, such amount as it may be so changed. The Canadian Commitment of a Bank that is a Canadian Lending Bank or of a Canadian Lending Bank that is an Affiliate of a Bank is a sub-limit of the Commitment of such Bank and not an additional commitment. "Canadian Contingent Reimbursement Obligation" means the contingent obligation of a Canadian Borrower to reimburse the Issuing Bank for any Drawings that may in the future be made under outstanding Canadian Letters of Credit. The principal amount of the Canadian Contingent Reimbursement Obligation at any time shall be deemed to be the aggregate amount available to be drawn under all outstanding Canadian Letters of Credit at such time. "Canadian Cost of Funds Loan" means a Revolving Loan which is a Canadian Loan bearing interest based or to be based upon the Canadian Cost of Funds Rate. "Canadian Cost of Funds Rate" means, with respect to each day during each Interest Period pertaining to a Canadian Cost of Funds Loan, the annual rate of interest determined by the Agent as being the arithmetic average (rounded upwards, if necessary, to the nearest whole multiple of 0.0625%) of the rates of interest (as supplied to the Agent at its request) which the Canadian Reference Banks, in accordance with their normal practice, would respectively be prepared to offer in the Toronto interbank market as at approximately 9:30 a.m. (Toronto time) on the first day of the related Interest Period for Canadian Dollar deposits in amounts comparable to each Canadian Reference Bank's Canadian Borrowing Percentage of such Canadian Cost of Funds Loan for a period comparable to such Interest Period applicable thereto. "Canadian Credit Agreement" means the Loan Agreement made as of July 29, 1994, as amended, among Owens Corning Canada Inc. (formerly "Fiberglas Canada Inc."), Owens Corning (formerly "Owens-Corning Fiberglas Corporation"), Credit Suisse First Boston Canada (formerly "Credit Suisse Canada"), as Agent, and the Lenders named in Schedule A thereto, and the Guarantee Agreement, made as of July 29, 1994, as amended, among the Company and CSFB Canada, as agent. -90- "Canadian Exposure" means, at any date, (i) as to all the Canadian Lending Banks, the aggregate Dollar Equivalent Amount of (A) the outstanding principal amount of all Canadian Loans then outstanding, plus (B) all Canadian L/C Obligations then outstanding, and (ii) as to any Canadian Lending Bank, the aggregate Dollar Equivalent Amount of (A) the outstanding principal amount of all Revolving Loans and CA Loans made by such Bank that are Canadian Loans, plus (B) such Bank's Canadian Borrowing Percentage of the outstanding principal amount of all Canadian L/C Obligations. "Canadian Interest Rate" means the Discount Rate and/or the Canadian Cost of Funds Rate, as the context may require. "Canadian Issuing Bank" means with respect to any Canadian Letter of Credit, the Canadian Lending Bank that issues or is to issue such Canadian Letter of Credit. The Canadian Issuing Bank shall be CSFB Canada or such other Canadian Lending Bank as the Agent shall approve, such approval not to be unreasonably withheld so long as such other Canadian Lending Bank shall have established adequate administrative arrangements with the Agent to provide for the proper issuance and administration of Canadian Letters of Credit. For purposes of this Agreement, the term "Canadian Lending Bank" includes a Canadian Lending Bank that is a Canadian Issuing Bank, both in its capacity as a Canadian Lending Bank and in its capacity as a Canadian Issuing Bank unless the context otherwise requires. "Canadian Lending Bank" means each of (i) the institutions listed on Annex A-2, and (ii) each additional institution that shall become a Canadian Lending Bank party hereto in accordance with Section 13.08. A Canadian Lending Bank shall cease to be a "Canadian Lending Bank" when it has assigned all of its Canadian Commitments in accordance with Section 13.08. For purposes of this agreement, "Bank" includes each Canadian Lending Bank unless the context otherwise requires. "Canadian Letter of Credit" means a letter of credit payable in Canadian Dollars that is issued by a Canadian Issuing Bank for the account of a Canadian Borrower pursuant to Section 4.01. "Canadian L/C Obligation" means, at any time, an amount equal to the sum of the Dollar Equivalent Amount of (i) the aggregate then undrawn and unexpired amount of the then outstanding Canadian Letters of Credit and (ii) the aggregate amount of drawings under Canadian Letters of Credit which have not then been reimbursed pursuant to Section 4.05(a). "Canadian L/C Participant" means in respect of each Canadian Letter of Credit, each Canadian Lending Bank (other than the Issuing Bank in respect of such Letter of Credit) in its capacity as the holder of a participating interest in such Canadian Letter of Credit. -91- "Canadian L/C Participation" of any Canadian Lending Bank in any Canadian Letter of Credit, means the participation interest of such Canadian Lending Bank in such Canadian Letter of Credit and any Drawings thereunder acquired pursuant to Section 4.04 or, in the case of the Issuing Bank, its retained interest in such Canadian Letter of Credit and Drawings. The principal amount of the Canadian L/C Participation of a Canadian Lending Bank in any Canadian Letter of Credit at any time shall be the amount equal to such Canadian Lending Bank's Canadian Borrowing Percentage of the sum of (i) the aggregate unpaid principal amount of all Drawings thereunder at such time and (ii) the aggregate principal amount of the Canadian Contingent Reimbursement Obligation with respect thereto at such time. "Canadian Loan" means a Loan that is to, or is to be made to, a Canadian Borrower. "Canadian Majority Banks" means, at any time, Canadian Lending Banks having more than 50% of the total Canadian Commitments or, if the Canadian Commitments have been terminated, having more than 50% of the aggregate outstanding amount of the Canadian Loans and Canadian L/C Participations. "Canadian Outstanding Exposure" means, as to any Canadian Lending Bank, the sum of (i) the aggregate Dollar Equivalent Amount of the principal amount of all outstanding Revolving Loans that are Canadian Loans made by such Canadian Lending Bank, plus (ii) such Canadian Lending Bank's Canadian Borrowing Percentage of the aggregate Dollar Equivalent Amount of the face amount of all outstanding Canadian L/C Obligations. "Canadian Prime Rate" means at any time the higher of (i) the per annum floating rate of interest established from time to time by CSFB Canada as being its reference rate then in effect for determining interest rates on commercial loans in Canadian Dollars made in Canada by CSFB Canada, and (ii) the annual rate of interest equal to the sum of (A) the CDOR Rate and (B) 0.90% per annum. The Canadian Prime Rate shall be adjusted automatically, without notice, on the effective date of any change in such rate. The Canadian Prime Rate is not necessarily CSFB Canada's lowest rate of interest. "Canadian Prime Rate Loan" means a Canadian Loan the interest on which is, or is to be, as the context may require, computed on the basis of the Canadian Prime Rate. "Canadian Reference Banks" means CSFB Canada, The Bank of Nova Scotia and Societe Generale (Canada) or, as the case may be, any other Canadian Lending Bank appointed as such by the Agent in replacement of one of the said Canadian Lending Banks. "Capital Expenditure" means (i) an expenditure that is required to be capitalized for financial reporting purposes in accordance with Generally Accepted Accounting Principles, and -92- (ii) whether or not so required, expenditures made in connection with rebuilding furnaces. "Capital Security" means, with respect to any Person, (i) any share of capital stock of such Person or (ii) any security convertible into, or any option, warrant or other right to acquire, any share of capital stock of such Person. "CDOR Rate" means, on any day, the annual rate of interest which is the arithmetic average (rounded upwards, if necessary, to the nearest 0.01%) of the discount rates applicable to 30-day Canadian Dollar bankers' acceptances appearing on the "Reuters Screen CDOR Page" (as defined in the International Swap and Derivatives Association, Inc. definitions, as modified and amended from time to time) at approximately 10:00 a.m. (Toronto time) on such day, or if such day is not a Business Day, then on the immediately preceding Business Day; provided, however, that if such rates do not appear on the Reuters Screen CDOR Page as contemplated, then the CDOR Rate on any day shall be calculated as the arithmetic average of the discount rates applicable to 30-day Canadian Dollar bankers' acceptances quoted by the Canadian Banks as of 10:00 a.m. (Toronto time) on such day, or if such day is not a Business Day, then on the immediately preceding Business Day. If less than all of the Canadian Banks quote the aforementioned rate on the days and at the times described above, the "CDOR Rate" shall be such other rate or rates as to which the parties may agree. "Code" means the Internal Revenue Code of 1986, as amended. "COF Margin" means, at any time, the rate per annum equal to the sum of (i) the applicable Utilization Fee at such time, plus (ii) the rate per annum determined at such time based upon the S&P Rating and Moody's Rating at such time set forth under the relevant column heading below opposite such Investment Ratings: Investment Rating Rating Margin 1. S&P Rating not lower than 0.20% BBB+, and Moody's Rating not lower than Baa1 2. S&P Rating lower than BBB+ or 0.25% Moody's Rating lower than Baa1, but S&P Rating not lower than BBB and Moody's Rating not lower than Baa2 3. S&P Rating lower than BBB or 0.275% Moody's Rating lower than Baa2, but S&P Rating not lower than BBB- and Moody's Rating not lower than Baa3 -93- 4. S&P Rating lower than BBB- or 0.50% Moody's Rating lower than Baa3, but S&P Rating not lower than BB+ and Moody's Rating not lower than Ba1 5. S&P Rating lower than BB+ or 0.525% Moody's Rating lower than Ba1
"Commitment" means, as to any Bank as the context may require, either (i) the obligation of such Bank to make or acquire participating interests in Revolving Loans that are not Canadian Loans, or in Swing Line Loans hereunder and to issue or acquire participating interests in Letters of Credit that are not Canadian Letters of Credit in an aggregate Dollar Equivalent Amount at any one time outstanding not to exceed the amount set forth opposite such Bank's name on Annex A-1 or set forth in the Schedule to the Assignment and Acceptance pursuant to which such Bank became a party to this Agreement, as such amount may be changed from time to time in accordance with the provisions of this Agreement, or (ii) such amount as it may be so changed. "Commitment Period" means the period from and including the Agreement Date to but not including the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. "Company" means Owens Corning, a Delaware corporation. "Company's Schedule 14D-1" means the Schedule 14D-1, filed by the Company and Sierra Corp. with the SEC on May 30, 1997, as amended, but only if such amendment shall have been consented to in writing by, if such amendment shall have been effected prior to the Agreement Date, CSFB, as Arranger, and, if such amendment shall have been effected after the Agreement Date, the Majority Banks. "Consenting Subsidiary" means a Subsidiary that has executed and delivered a Subsidiary Consent in the form of Schedule 6.01(b)(viii). "Consolidated Adjusted EBITDA" means, for any period, (i) Consolidated EBITDA for such period, minus (ii) to the extent not deducted in the computation of EBIT for such period, the net after-tax amount of actual cash payments during such period made with respect to claims arising out of the use of or exposure to asbestos products, plus (iii) to the extent not added in the computation of EBIT for such period, the net after tax amount of actual cash payments (including under insurance policies) received during such period with respect to claims arising out of the use of or exposure to asbestos products, minus (iv) to the extent not deducted in the computation of EBIT for such period, the amount of actual cash payments to the extent that such -94- payments are charged against any reserves established by the Company and its Subsidiaries referred to in clause (iii) of the definition of Consolidated EBITDA. "Consolidated Adjusted Interest Expense" means, for any period, Consolidated Interest Expense for such period, minus that portion of interest expense consisting of the interest component applicable to capital leases. "Consolidated Capital Expenditures" means, for any period, the consolidated Capital Expenditures of the Borrower and the Consolidated Subsidiaries for such period. "Consolidated Cash Flow Available for Fixed Charges" means, for any period, without duplication, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Adjusted Interest Expense, (iii) charges against income for all federal, state and local taxes, (iv) depreciation expense, (v) Consolidated Rental Payments (to the extent deducted in the determination of Consolidated Net Income), (vi) amortization expense, (vii) other non-cash charges and expenses, (viii) any losses arising outside of the ordinary course of business that have been included in the determination of Consolidated Net Income, and (ix) any increases in the LIFO reserve, minus (x) any gains arising outside of the ordinary course of business that have been included in the determination of Consolidated Net Income, (y) any decreases in the LIFO reserve, and (z) any amount added in the computation of EBIT for such period for reductions in the reserves referred to in clause (i)(B) of the definition of Consolidated EBITDA, all as determined on a consolidated basis for the Company and the Consolidated Subsidiaries. "Consolidated Debt" means, at any time, the consolidated Debt of the Company and the Consolidated Subsidiaries at such time, other than (i) the OC Insurance Settlement Notes in a principal amount not in excess of $180,000,000, less repayments from time to time of the principal amount thereof, and having no payment of principal due prior to the Termination Date, (ii) Mandatorily Redeemable Stock of the Company and the Consolidated Subsidiaries, (iii) Permitted Intercompany Debt, and (iv) TRUPS Notes permitted in accordance with Section 8.19(a). "Consolidated EBITDA" means, for any period, EBIT for such period plus (i) any amount deducted in the computation of EBIT for such period for (A) depreciation and amortization expense, and (B) additions to reserves with respect to actions, suits or proceedings against the Company or any Subsidiary with respect to claims arising out of the use of or exposure to asbestos products, minus (ii) any amount added in the computation of EBIT for such period for reductions in the reserves referred to in clause (i)(B), plus (iii) to the extent deducted in the computation of EBIT for such period, the amount of any -95- restructuring or other reserves (other than reserves for uncollectible accounts receivable and other reserves created in the ordinary course of business) established by the Company and its Subsidiaries, minus (iv) to the extent added in the computation of EBIT for such period, the amount of any reductions in the reserves referred to in the preceding clause (iii). "Consolidated Fixed Charges" means, for any period, without duplication, the sum of the amounts for such period of (i) Consolidated Adjusted Interest Expense, (ii) Consolidated Rental Payments, (iii) Consolidated Capital Expenditures, (iv) mandatory payments of principal of Debt (excluding capital lease payments and payments of the principal of Debt (the "Prior Debt") that is refinanced by replacement Debt that (A) has no principal payment due on or before the Termination Date, (B) is incurred not more than 6 months prior or subsequent to the date such Prior Debt is repaid, and (C) is identified by the Company to the Agent as replacement Debt for such Prior Debt at the time such replacement Debt is incurred), and (v) any dividends or other distributions (other than a distribution of TRUPS Notes to holders of TRUPS) on any shares of preferred stock in excess of $15,000,000 in any year during such period, all as determined on a consolidated basis for the Company and the Consolidated Subsidiaries. "Consolidated Interest Expense" means, for any period, total interest expense, whether paid or accrued, (including that attributable to capital leases) of the Company and the Consolidated Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Contracts, but excluding, however, the interest component of tax payments or accruals. "Consolidated Net Income" means, for any period, the amount of consolidated net income (or net loss) of the Company and the Consolidated Subsidiaries for such period (taken as a cumulative whole); provided that there shall be excluded: (i) the income (or loss) of any Affiliate of the Company or other Person (other than a Subsidiary) in which any Person (other than the Company or any Subsidiary) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Subsidiary by such Affiliate or other Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Company or any Subsidiary or on which its assets are acquired by the Company or any Subsidiary, and (iii) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary. -96- "Consolidated Rental Payments" means, for any period, the aggregate amount of all amounts paid or accrued under all capital leases and Operating Leases of the Company and the Consolidated Subsidiaries as lessee (net of sublease income), all as determined on a consolidated basis. "Consolidated Subsidiary" means, with respect to any Person, at any time, any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements as of such time. Unless otherwise specified, "Consolidated Subsidiary" means Consolidated Subsidiary of the Company. "Contingent Reimbursement Obligation" means the contingent obligation of a Borrower to reimburse the Issuing Bank for any Drawings that may in the future be made under outstanding Non-Canadian Letters of Credit. The principal amount of Contingent Reimbursement Obligation at any time shall be deemed to be the aggregate amount available to be drawn under all outstanding Non-Canadian Letters of Credit at such time. "Contract" means an indenture, agreement, other contractual restriction, lease, instrument, certificate of incorporation or charter, or by-law. "Credit Extension" means (i) the making by any Bank of any Loan, (ii) the making by any Canadian Lending Bank of any Canadian Loan, (iii) the making by the Swing Line Bank of any Swing Line Loan or (iv) the issuance by an Issuing Bank of any Letter of Credit. "CSFB" means Credit Suisse First Boston, a Swiss banking organization. "CSFB Canada" means Credit Suisse First Boston Canada, a Canadian chartered bank. "Currencies" means the collective reference to Dollars and Available Foreign Currencies. "Debt" of any Person means at any time, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, (iv) all obligations of such Person as lessee under capital leases, (v) all Mandatorily Redeemable Stock of such Person, (vi) an amount equal to the aggregate amount of all Debt secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, (vii) an amount equal to the aggregate amount of all Debt of others Guaranteed by such Person, and (viii) all non-contingent reimbursement or contribution obligations with respect to letters of credit or Guaranties directly or indirectly providing for or ensuring the -97- payment of any Debt, except that "Debt" shall not include (A) trade accounts payable that arise in the ordinary course of business and are payable on customary trade terms, (B) obligations of the Company or any Subsidiary under contracts entered into by the Company or such Subsidiary to protect against foreign currency exchange and interest rate risks in accordance with past practices, (C) the obligations of account debtors with respect to accounts receivable Guaranteed by a Guaranty of the Company or any Domestic Subsidiary in favor of Persons that purchase such accounts receivable, or undivided interests therein, from the Company or any Domestic Subsidiary, (D) reimbursement or contribution obligations with respect to letters of credit or Guaranties other than those referred to in clause (viii) above or (E) obligations of the Company or any Subsidiary as lessee under Operating Leases. "Default" means any condition or event that constitutes an Event of Default or that with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Designated Borrower Opinion" means a legal opinion of counsel to a Subsidiary addressed to the Agent and the Banks concluding that such Designated Subsidiary Borrower and the Loan Documents to which it is a party substantially comply with the matters listed on Annex L hereto, with such deviations therefrom as the Agent shall consent (such consent not to be unreasonably withheld). "Designated Foreign Subsidiary" means a Foreign Subsidiary that the Company has designated as a Foreign Subsidiary that will execute and deliver a Guarantor Supplement and thereby become a Guarantor. "Designated Subsidiary Borrower" means each Subsidiary of the Company listed as a Designated Subsidiary Borrower in Annex A-3, Fibreboard (as successor to Sierra Corp. after the Merger), and each other Subsidiary that may be approved as such (and, if requested by the Company, as a Belgian Borrower or a Canadian Borrower) by the Majority Banks. "Discount" means, with respect to any issue of Canadian Bankers' Acceptances, the amount by which the face value of such Canadian Bankers' Acceptances exceeds the Discounted Proceeds of such Canadian Bankers' Acceptances. "Discount Rate" means, with respect to an issue of Canadian Bankers' Acceptances, the rate determined by the Agent as being the arithmetic mean (rounded upward to the nearest multiple of 0.01%) of the discount rates, calculated on the basis of a year of 365 days, of the Canadian Reference Banks established in accordance with their normal practices at or about 9:30 a.m. (Toronto time) on the date of issue and acceptance of such Canadian Bankers' Acceptances, for bankers' acceptances -98- having a comparable face value of an identical maturity date to the face value and maturity date of the Canadian Bankers' Acceptances forming part of such issue to be respectively accepted by each Canadian Reference Bank. "Discounted Proceeds" means, in respect of any Canadian Bankers' Acceptance to be accepted by a Canadian Lending Bank on any day, an amount (rounded to the nearest whole cent, and with amounts of one-half of one cent or greater being rounded up) calculated on such day by multiplying: (i) the face amount of such Canadian Bankers' Acceptance by (ii) the price, where the price is determined by dividing one by the sum of one plus the product of: (A) the Discount Rate (expressed as a decimal); and (B) a fraction, the numerator of which is the number of days in the term of such Canadian Bankers' Acceptance and the denominator of which is 365; with the price as so determined being rounded up or down to the fifth decimal place, with a decimal number equal to or greater than .000005 being rounded up. "Dollar Equivalent Amount" means, with respect to (a) the amount of any Foreign Currency on any date, the equivalent amount in Dollars of such amount of Foreign Currency, as determined by the Agent using the Exchange Rate, and (b) any amount in Dollars, such amount. "Dollars" and the sign "$" mean the lawful money of the United States of America. "Domestic Subsidiary" means a Subsidiary organized under the laws of the United States of America, any state thereof or the District of Columbia. "Drawing" means (i) any amount disbursed by the Issuing Bank pursuant to a drawing under any Letter of Credit, or (ii) as the context may require, the obligation of a Borrower to reimburse the Issuing Bank for such disbursement. "EBIT" means, for any period, Consolidated Net Income for such period plus any amount deducted (or, in the case of extraordinary gains, minus any amount added) in the computation thereof for, without duplication, (i) charges against income for all federal, state and local taxes, (ii) Consolidated Interest -99- Expense, (iii) any extraordinary gains or losses, (iv) amortization of transaction costs incurred with respect to the merger and recapitalization of the Company effected pursuant to the Plan of Recapitalization and Agreement of Merger dated as of August 28, 1986 between Owens-Corning Recap Corp. and the Company, and (v) non-cash interest expense. "Eligible Assignee" means (i)(A) any commercial bank, savings and loan institution or savings bank, or (B) any Affiliate of any Bank, organized under the laws of the United States or any State thereof and having combined capital and surplus in excess of $100,000,000, (ii)(A) any commercial bank, or (B) any Affiliate of any Bank, organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development ("OECD"), or a political subdivision of any such country, and having combined capital and surplus (or the equivalent thereof under the accounting principles applicable thereto) in excess of $100,000,000; provided that such bank or Affiliate is acting through a branch, agency or Affiliate located in the country in which it is organized or another country that is also a member of the OECD, (iii) the central bank of any country that is a member of the OECD, or (iv) any insurance company, pension fund, mutual fund or other financial institution of recognized standing. "Enacted", as applied to a Regulatory Change, means the date such Regulatory Change first becomes effective or is implemented or first required or expected to be complied with, whether the same is (i) the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority, or otherwise or (ii) enacted, adopted, issued or proposed before or after the Agreement Date. "Environmental Laws" means any and all Applicable Laws regulating, relating to or imposing liability or standards of conduct concerning protection of human health or safety or the environment, as now or may at any time hereafter be in effect, including, without limitation, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendment and Reauthorization Act of 1986, the Emergency Planning and Community Right to Know Act, the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the Toxic Substances Control Act, and the Endangered Species Act, together, in each case, with each amendment, supplement or other modification thereto, the regulations adopted and publications promulgated thereunder and all substitutions therefor. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means a Person that controls or is under common control with the Company within the meaning of -100- Section 414(b) or (c) of the Code, including, but not limited to, a Person who is an Affiliate of the Company or a Subsidiary. "Eurocurrency Base Rate" means, in respect of Dollars or an Available Foreign Currency for an Interest Period, the rate per annum determined by the Agent at approximately 11:00 a.m. (London time) on the date which is two Business Days prior to the beginning of the relevant Interest Period (as specified in the applicable Notice of Revolving Borrowing, Notice of Continuation or Notice of Conversion) by reference to the "British Bankers' Association Interest Settlement Rates" for deposits in Dollars or the relevant Available Foreign Currency (as set forth by any service selected by the Agent which has been nominated by the British Bankers' Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period (rounded, if necessary, upward to the nearest whole multiple of 1/16th of 1%); provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the "Eurocurrency Base Rate" shall be the interest rate per annum determined by the Agent to be the average (rounded, if necessary, upward to the nearest whole multiple of 1/16th of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in Dollars or the relevant Available Foreign Currency are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Reference Banks at approximately 11:00 a.m. (London time) on the date which is two Business Days prior to the beginning of such Interest Period. If any of the Reference Banks shall be unable or shall otherwise fail to supply such rates to the Agent upon its request, the rate of interest shall, subject to the provisions of Section 14.01, be determined on the basis of the quotations of the remaining Reference Banks or Reference Bank. "Eurocurrency Loan" means any Loan bearing interest based upon a Eurocurrency Rate. "Eurocurrency Margin" means, at any time, the rate per annum equal to the sum of (i) the applicable Utilization Fee at such time, plus (ii) the rate per annum determined at such time based upon the S&P Rating and Moody's Rating at such time set forth under the relevant column heading below opposite such Investment Ratings: Investment Rating Rating Margin 1. S&P Rating not lower than BBB+, and 0.20% Moody's Rating not lower than Baa1 2. S&P Rating lower than BBB+ or 0.25% Moody's Rating lower than Baa1, but S&P Rating not lower than BBB and Moody's Rating not lower than Baa2 -101- 3. S&P Rating lower than BBB or 0.275% Moody's Rating lower than Baa2, but S&P Rating not lower than BBB- and Moody's Rating not lower than Baa3 4. S&P Rating lower than BBB- or 0.50% Moody's Rating lower than Baa3, but S&P Rating not lower than BB+ and Moody's Rating not lower than Ba1 5. S&P Rating lower than BB+ or 0.525% Moody's Rating lower than Ba1
"Eurocurrency Rate" means, with respect to each day during each Interest Period pertaining to a Eurocurrency Loan by a Bank, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurocurrency Base Rate for the Relevant Currency 1.00 - Reserve Requirement for such Bank Any change in the Eurocurrency Rate resulting from a change in the Reserve Requirement shall become effective at the opening of business on the day in which such change became effective. "Event of Default" means any of the events specified in Section 11.01. "Exchange Rate" means, with respect to any Foreign Currency on any date, the rate at which such Foreign Currency may be exchanged into Dollars, as may be agreed upon by the Agent and the Company or, in the absence of such agreement, such "Exchange Rate" shall instead be the Agent's spot rate of exchange in the interbank market where its foreign currency exchange operations in respect of such Foreign Currency are then being conducted, at or about 10:00 A.M., local time, on such date for the purchase of Dollars with such Foreign Currency, for delivery two Business Days later; provided that if at the time of any such determination, no such spot rate can reasonably be quoted, the Agent may use any reasonable method it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error (without prejudice to the determination of the reasonableness of such method). "Existing and Substitute Debt" means any Debt of any Non-Loan Party Subsidiary, other than Permitted Intercompany Debt, to the extent that (i) the aggregate amount of such Debt of all Non-Loan Party Subsidiaries having a given Scheduled Maturity Date does not exceed the aggregate amount as of the Agreement -102- Date of Existing Debt of the Non-Loan Party Subsidiaries having the same or an earlier Scheduled Maturity Date, and (ii) the aggregate amount of such Debt of the Non-Loan Party Subsidiaries does not exceed the aggregate amount as of the Agreement Date of Existing Debt of the Non-Loan Party Subsidiaries. "Existing Credit Commitments" means all lines of credit, revolving credit, working capital, term loan, letter of credit, bankers' acceptance and other credit facilities and commitments by financial institutions in favor of the Company, Fibreboard, or any of their respective Subsidiaries as of the Agreement Date, as set forth on Schedule 5.01(b)(iv) to this Agreement. "Existing Debt" means Debt of the Company or a Subsidiary (including Fibreboard and its Subsidiaries) (other than Debt under the 1993 Credit Agreement, the Canadian Credit Agreement and the Debt listed on Schedule 6.01(d)) that is issued and outstanding on the Agreement Date, to the extent set forth on Schedule 5.01(b)(i). "Existing Debt Reduction Amount" means the excess, if any, of (i) $300,000,000, over (ii) the Dollar Equivalent Amount of the sum of all permanent reductions, from and including the Agreement Date to the Existing Debt Reduction Date, in Existing Credit Commitments, excluding any reduction in the Commitments and any reduction in Existing Credit Commitments resulting from the termination of the 1993 Credit Agreement and the Canadian Credit Agreement. "Existing Guaranties" means (i) any Guaranty outstanding on the Agreement Date, to the extent set forth on Schedule 8.18, and (ii) any Guaranty that constitutes a renewal, extension or replacement of an Existing Guaranty, but only if (A) at the time such Guaranty is entered into and immediately after giving effect thereto, no Default would exist, (B) such Guaranty is binding only on the obligors under the Guaranty so renewed, extended or replaced, (C) the principal amount of the obligations Guaranteed by the renewal, extension or replacement Guaranty does not exceed the principal amount of the obligations Guaranteed by the Guaranty so renewed, extended or replaced, and (D) the obligations Guaranteed by such Guaranty bear interest at a rate per annum not exceeding the rate borne by the obligations Guaranteed by the Guaranty so renewed, extended or replaced except for any increase that is commercially reasonable at the time of such increase. "Exposure" means at any date, (i) as to all the Banks, the aggregate Dollar Equivalent Amount of (A) the outstanding principal amount of all Loans then outstanding that are not Canadian Loans and (B) all L/C Obligations then outstanding, and (ii) as to any Bank, the aggregate Dollar Equivalent Amount of (A) the outstanding principal amount of all Revolving Loans and CA Loans made by such Bank that are not Canadian Loans and (B) -103- such Bank's Borrowing Percentage of the outstanding principal amount of all Swing Line Loans, Belgian Loans that are not CA Loans and L/C Obligations. "Facility Fee" has the meaning set forth in Section 5.05. "Facility Fee Rate" means, at any time, a rate per annum determined at such time based upon the Investment Ratings in effect by S&P and Moody's at such time set forth under the relevant column heading below opposite such Investment Ratings: Investment Rating Facility Fee Rate 1. S&P rating not lower than BBB+, and 0.10% Moody's rating not lower than Baa1 2. S&P rating lower than BBB+ or 0.125% Moody's rating lower than Baa1, but S&P rating not lower than BBB and Moody's rating not lower than Baa2 3. S&P rating lower than BBB or 0.15% Moody's rating lower than Baa2, but S&P rating not lower than BBB- and Moody's rating not lower than Baa3 4. S&P rating lower than BBB- or 0.25% Moody's rating lower than Baa3, but S&P rating not lower than BB+ and Moody's rating not lower than Ba1 5. S&P rating lower than BB+ or 0.35% Moody's rating lower than Ba1
"Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the next higher 1/100 of 1%), equal to the weighted average of the rates of overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day which is a Business Day, the average of the rates quoted to the Agent by two or more New York Federal Funds dealers of recognized standing. "Fibreboard" means Fibreboard Corporation, a Delaware corporation, and its successors. "Fixed Rate Loans" means Revolving Eurocurrency Loans, Canadian Loans that are Canadian Cost of Funds Loans or Canadian -104- Bankers' Acceptances (other than Canadian Prime Rate Loans) and CA Loans. "Foreign Currency" means any currency other than Dollars. "Foreign Currency Exposure" means, at any date, in respect of any Type or Types of Loans and Drawings denominated in all Available Foreign Currencies or any Available Foreign Currency, as the context may require, the aggregate Dollar Equivalent Amount of (i) the outstanding principal amount of all Loans of the relevant Type or Types then outstanding which are denominated in the applicable currencies or currency other than Dollars, (ii) all L/C Obligations then outstanding which are denominated in such currency or currencies other than Dollars, and (iii) all Canadian L/C Obligations then outstanding. "Foreign Subsidiary" means a Subsidiary that is not a Domestic Subsidiary. "Funding Office" means, for the borrowing of each Type of Revolving Loan and each Currency, the office at which each Bank or Canadian Lending Bank shall make its Borrowing Percentage or Canadian Borrowing Percentage of such borrowing available to the Agent in the applicable Currency, as set forth in the Administrative Schedule. "Funding Time" means, for the borrowing of each Type of Revolving Loan and each Currency, the time by which each Bank shall make its Borrowing Percentage of such borrowing available to the Agent in the applicable Currency, as set forth in the Administrative Schedule. "Generally Accepted Accounting Principles" means generally accepted accounting principles as in effect in the United States of America from time to time; provided that (i) if any change in generally accepted accounting principles subsequent to the Agreement Date is material to either any Borrower or the Banks for the purpose of determining the Borrower's compliance with any covenant contained in this Agreement, then (A) such change shall not, without the consent of the Majority Banks, if such change makes such covenant less restrictive, or the Company, if such change makes such covenant more restrictive, be effected for the calculation of such covenant unless and until an amendment pursuant to clause (B) below with respect to such change and such covenant becomes effective, and (B) the Company and the Banks agree to enter into negotiations, at the request of the Company or the Majority Banks, in order to amend such covenant so as equitably to reflect such change with the desired result that the criteria for evaluating the Company's consolidated financial condition shall be the same after such change as before such change. -105- "Governing Documents" means, as to any Person, the certificate or articles of incorporation and by-laws or other organizational or governing documents of such Person. "Governmental Approval" means an authorization, consent, approval, license or exemption of, registration or filing with, or report or notice to, any governmental unit. "Guaranteed Obligations" shall mean all Liabilities of each Borrower and each Guarantor owing to, or in favor or for the benefit of, each Guaranteed Person under the Loan Documents, in each case (i) WHETHER NOW EXISTING OR HEREAFTER ARISING, AND (ii) WHETHER OR NOT ANY SUCH LIABILITY IS AN ALLOWABLE CLAIM AGAINST SUCH BORROWER OR SUCH GUARANTOR UNDER THE BANKRUPTCY CODE OR IS OTHERWISE ENFORCEABLE AGAINST SUCH BORROWER OR SUCH GUARANTOR, AND INCLUDING, IN ANY EVENT, INTEREST AND OTHER LIABILITIES ACCRUING OR ARISING AFTER THE FILING BY OR AGAINST SUCH BORROWER OR SUCH GUARANTOR OF A PETITION UNDER THE BANKRUPTCY CODE OR THAT WOULD HAVE SO ACCRUED OR ARISEN BUT FOR THE FILING OF SUCH A PETITION. "Guaranteed Person" means each Bank, each Canadian Lending Bank, the Belgian Lending Bank, the Swing Line Bank, each Issuing Bank and the Agent. "Guarantor" means (i) the Company, (ii) each Designated Subsidiary Borrower that is (A) a Domestic Subsidiary or (B) a Designated Foreign Subsidiary, and (iii) each other present or future Domestic Subsidiary (excluding Owens-Corning Capital L.L.C., Owens-Corning Funding Corporation and each TRUPS Trust) that is or becomes a Significant Subsidiary. "Guarantor Guaranty" means, as applied to any Guarantor, such Guarantor's liabilities under Article 10 hereof. "Guarantor Supplement" means a supplement to this Agreement in the form of Schedule 8.06. "Guaranty" of any Person means any obligation, contingent or otherwise, of such Person (i) to pay any liability of any other Person or to otherwise protect, or having the practical effect of protecting, the holder of any such liability against loss (whether such obligation arises by virtue of such Person being a partner of a partnership or participant in a joint venture or by agreement to pay, to keep well, to purchase assets, goods, securities or services or to take or pay, or otherwise) or (ii) incurred in connection with the issuance by a third Person of a Guaranty of any liability of any other Person (whether such obligation arises by agreement to reimburse or indemnify such third Person or otherwise). The term "Guarantee", used as a verb, has a correlative meaning. "India Joint Venture" means the entity or entities established in India by the Company and its joint venture -106- partners to construct, own and operate a facility for the manufacture of glass fiber reinforcement products and of which the Company, directly or indirectly, owns at least 49% of the outstanding equity. "India Project Debt" means Debt consisting of construction or term Debt incurred by the India Joint Venture in connection with the development, construction, and placement in service of a glass fiber reinforcement plant to be located in India. "Interest Payment Date" means the last Business Day of March, June, September and December of each year. "Interest Period" means a period commencing, in the case of the first Interest Period applicable to a Eurocurrency Loan or a Canadian Cost of Funds Loan, on the date of the making of, or conversion into, such Loan, and, in the case of each subsequent, successive Interest Period applicable thereto, on the last day of the immediately preceding Interest Period, and ending, at the election of the Borrower, on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, except that (i) any Interest Period that would otherwise end on a day that is not a Business Day shall, subject to clause (iii) below, be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period 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 in which such Interest Period ends) shall, subject to clause (iii) below, end on the last Business Day of a calendar month, and (iii) any Interest Period that begins prior to the Termination Date and that would otherwise end after the Termination Date shall end on the Termination Date. "Interest Rate Contract" means an interest rate cap agreement or other agreement the principal purpose of which is to provide interest rate protection. "Investment Rating" means the S&P Rating and/or the Moody's Rating, as the context may require. "Issuing Bank" means with respect to any Letter of Credit, the Bank or Canadian Lending Bank that issues or is to issue such Letter of Credit or Canadian Letter of Credit or that has issued any outstanding letter of credit under the 1993 Credit Agreement or listed on Schedule 4.09. The Issuing Bank shall be, in the case of Non-Canadian Letters of Credit, CSFB, any Bank whose letter of credit is listed on Schedule 4.09 or such other Bank and, in the case of Canadian Letters of Credit, CSFB Canada, or such other Canadian Lending Bank, in each case, as the Agent shall approve, such approval not to be unreasonably withheld so long as such other Bank or Canadian Lending Bank, as the case may -107- be, shall have established adequate administrative arrangements with the Agent to provide for the proper issuance and administration of Letters of Credit in the applicable Currency. For purposes of this Agreement, the term "Bank" includes a Bank that is an Issuing Bank, both in its capacity as a Bank and in its capacity as an Issuing Bank unless the context otherwise requires. "Issuing Office" means in respect of the Issuing Bank, the Issuing Office set forth for the Issuing Bank in Annex A-1 or A-2. "Jackson Equipment" means (a) the new manufacturing equipment acquired by the Jackson Industrial Development Board or other Persons that are not Affiliates of the Company for use on the Jackson Real Estate and (b) associated leasehold improvements made by the Jackson Industrial Development Board or other Persons that are not Affiliates of the Company on the Jackson Real Estate. "Jackson Real Estate" means the approximately 200 acres of land in Jackson, Tennessee and the buildings thereon transferred by the Company to the Jackson Industrial Development Board pursuant to the Jackson Transaction. "Jackson Transaction" means the transactions pursuant to which (i) the Company transferred the Jackson Real Estate to the Jackson Industrial Development Board ("JIDB") and such property was leased back to the Company, and (ii) JIDB or other Persons that are not Affiliates of the Company leased the Jackson Equipment to the Company. "L/C Obligation" means, at any time, an amount equal to the sum of the Dollar Equivalent Amount of (i) the aggregate then undrawn and unexpired amount of the then outstanding Non-Canadian Letters of Credit and (ii) the aggregate amount of drawings under Non-Canadian Letters of Credit which have not then been reimbursed pursuant to Section 4.05(a). "L/C Participant" means in respect of each Non-Canadian Letter of Credit, each Bank (other than the Issuing Bank in respect of such Letter of Credit) in its capacity as the holder of a participating interest in such Non-Canadian Letter of Credit. "L/C Participation" of any Bank in any Non-Canadian Letter of Credit, means the participation interest of such Bank in such Non-Canadian Letter of Credit and any Drawings thereunder acquired pursuant to Section 4.04 or, in the case of the Issuing Bank, its retained interest in such Non-Canadian Letter of Credit and Drawings. The principal amount of the L/C Participation of a Bank in any Non-Canadian Letter of Credit at any time shall be the amount equal to such Bank's Borrowing Percentage of the sum of (i) the aggregate unpaid principal amount of all Drawings -108- thereunder at such time and (ii) the aggregate principal amount of the Contingent Reimbursement Obligations with respect thereto at such time. "Letter of Credit" means a Non-Canadian Letter of Credit and/or a Canadian Letter of Credit, as the context may require. "Letter of Credit Request" means an application in the form of Annex H or, in such other form as the Issuing Bank may specify from time to time, requesting an Issuing Bank to issue a Letter of Credit. "Leverage Ratio" means, as of any date of determination, the ratio of (i) Consolidated Debt on such date to (ii) Consolidated EBITDA for the most recent period of four consecutive fiscal quarters ended prior to such date (treating those four consecutive fiscal quarters as a single period for the purpose of determining such ratio). For purposes of calculating Consolidated EBITDA for this ratio, results of Fibreboard and its Subsidiaries (as collectively constituted at the time of the Merger) and results of any other acquired entities that become Subsidiaries (as constituted at the time each such entity becomes a Subsidiary) shall be included on a pro forma basis for all relevant periods prior to their becoming Consolidated Subsidiaries. "Liability", as applied to a Person, means an obligation or liability, whether arising under Contract, Applicable Law or otherwise, in each case to the extent such obligation or liability does not otherwise constitute Debt of such Person. "Lien", as applied to the property or assets (or the income or profits therefrom) of any Person, means (in each case, whether the same is consensual or nonconsensual or arises by Contract, operation of law, legal process or otherwise): any mortgage, lien, pledge, attachment, levy, charge or other security interest or encumbrance of any kind in respect of any property of such Person, or upon the income or profits therefrom. For this purpose, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capitalized lease or other title retention agreement relating to such asset. "Loan" means any Revolving Loan, CA Loan or Swing Line Loan. "Loan Documents" means this Agreement, each Letter of Credit, each Guarantor Supplement, each Subsidiary Consent, and each Note, if any. -109- "Loan Party" means the Company, each Designated Subsidiary Borrower and each Guarantor. "Loan Register" has the meaning ascribed to that term in Section 5.10(b). "London Banking Day" means any day on which banks in London are open for general banking business, including dealings in foreign currency and exchange. "Majority Banks" means, at any time, Banks having more than 50% of the total Commitments or, if the Commitments shall have been terminated, Banks (including Canadian Lending Banks that are Affiliates of such Banks) having more than 50% of the aggregate outstanding amount of the Loans, L/C Participations and Canadian L/C Participations. "Mandatorily Redeemable Stock" means, as applied to a Person, any capital stock of such Person to the extent that it is redeemable, payable or required to be purchased or otherwise retired or extinguished prior to the date 366 days after the Termination Date (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person, such as a redemption required to be made out of future earnings; provided that Mandatorily Redeemable Stock shall not include the MIPS and TRUPS. "Materially Adverse Effect" means, (i) with respect to any Person, a materially adverse effect upon such Person's business, assets, liabilities, financial condition, or results of operations, (ii) with respect to a group of Persons "taken as a whole", a materially adverse effect upon such Persons' businesses, assets, liabilities, financial condition, or results of operations, taken as a whole, and (iii) with respect to any Contract or any other obligation, a materially adverse effect, as to any party thereto, upon the binding nature, validity or enforceability thereof. "Maximum Permissible Rate" means the rate of interest on Loans or Drawings that if exceeded could, under Applicable Law, result in civil or criminal penalties being imposed on a Bank, the Swing Line Bank or an Issuing Bank or result in any such Person's being unable to enforce payment or repayment of all or part of the principal of, or the interest due or to become due on, such Loans or Drawings. "Merger" means the merger of Sierra Corp. with Fibreboard, as contemplated by the Merger Agreement. "Merger Agreement" means the Agreement and Plan of Merger, dated as of May 27, 1997, among the Company, Sierra Corp. and Fibreboard. -110- "MIPS" means the preferred interests (ordinarily having no voting or management rights) having an aggregate liquidation value of $200,000,000 issued in May, 1995 by a Delaware limited liability company certain of whose obligations are guaranteed by the Company. "Moody's" means Moody's Investors Service, Inc. "Moody's Rating" means the rating of the Company's long- term senior unsecured debt most recently announced by Moody's. "Multiemployer Plan" means a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means, as applied to any Person, an amount equal to the cash proceeds received by such Person from or in connection with the incurrence or assumption of any Debt or the sale of any Capital Securities, less any underwriting fees and discounts and any other expenses reasonably incurred by such Person in respect thereof; provided that Net Cash Proceeds shall not include the cash proceeds of securities that: (i) at the time of issuance thereof are identified by the Company to the Agent as securities intended to qualify for the exclusion in this proviso, and (ii) where such net cash proceeds are applied either (A) within 30 days after receipt thereof to make payment for the acquisition of the capital stock or other ownership interest in, or the assets and business of, another business entity, or (B) at the time of receipt thereof to prepay or redeem other securities issued to make payment for such acquisition. "1993 Credit Agreement" means the Credit Agreement dated as of November 2, 1993, as amended through Amendment No. 4 thereto dated as of December 31, 1996 among the Company, the banks listed on Annex A thereto and Credit Suisse, as Agent. "Non-Canadian Commitment" means, at any time, as applied to any Bank, the amount, at such time, of such Bank's Commitment minus, in the case of a Bank that is, or whose Affiliate is, a Canadian Lending Bank, such Bank's or such Affiliate's Canadian Commitment. "Non-Canadian Letter of Credit" means a letter of credit that is not a Canadian Letter of Credit and that is (i) issued by an Issuing Bank pursuant to Section 4.01, or (ii) outstanding on the Agreement Date and issued under the 1993 Credit Agreement or listed on Schedule 4.09. "Non-Loan Party Subsidiary" means a Subsidiary that is not a Loan Party. "Non-US Bank" means a Person that is not a United States Person and that is not described in Section 881(c)(3) of the Code. -111- "Note" means a promissory note, substantially in the form of Annex J hereto, issued by a Borrower upon request by a Bank. "Notice of CA Loan Borrowing" means a notice from a Borrower in the form of Annex F in respect of a CA Loan containing the information in respect to such CA Loan and delivered to the Person, in the manner and by the time specified therein. "Notice of Continuation" means, with respect to a Revolving Eurocurrency Loan in any Currency, a Canadian Cost of Funds Loan or a Canadian Bankers' Acceptance, a notice from a Borrower in the form of Annex E in respect of such Loan, containing the information in respect of such Loan and delivered to the Person, in the manner and by the time specified for a Notice of Continuation in respect of such Currency in the Administrative Schedule. "Notice of Conversion" means with respect to a Revolving Loan in Dollars which a Borrower wishes to convert from a Eurocurrency Loan in Dollars to a Base Rate Loan, or from a Base Rate Loan to a Eurocurrency Loan in Dollars, from a Canadian Cost of Funds Loan to a Canadian Bankers' Acceptance, or from a Canadian Bankers' Acceptance to a Canadian Cost of Funds Loan, as the case may be, a notice from such Borrower in the form of Annex D setting forth the amount of such Loan to be converted, the date of such conversion and, in the case of the conversion of a Base Rate Loan to a Eurocurrency Loan, the length of the initial Interest Period applicable thereto. "Notice of Prepayment" means, with respect to prepayment of any Loan of any Type in any Currency, a notice from the Borrower in the form of Annex I in respect of such Loan, containing the information in respect of such prepayment and delivered to the Person, in the manner and by the time specified for a Notice of Prepayment in respect of such Currency and such Type of Loan in the Administrative Schedule. "Notice of Revolving Borrowing" means, with respect to a Revolving Loan of any Type in any Currency, a notice from a Borrower in the form of Annex C in respect of such Loan, containing the information in respect of such Loan and delivered to the Person, in the manner and by the time specified for a Notice of Revolving Borrowing in respect of such Currency and such Type of Loan in the Administrative Schedule. "Notice of Swing Line Borrowing" means a notice from the Company in the form of Annex G in respect of a Swing Line Loan containing the information in respect of such Swing Line Loan and delivered to the Person, in the manner and by the time agreed by the Company and the Swing Line Bank. -112- "Notice of Swing Line Refunding" means a notice from the Swing Line Bank containing the information, and delivered to the Person, in the manner and by the time, specified for a Notice of Swing Line Refunding in the Administrative Schedule. "OC Insurance Settlement Agreement" means the Settlement Agreement and Mutual Release, dated as of September 5, 1995, between the Company and an insurer made known to the Banks, as in effect on the Agreement Date. "OC Insurance Settlement Note" means the Promissory Note or Notes issued or to be issued by the Company pursuant to the OC Insurance Settlement Agreement in an aggregate principal amount not to exceed $180,000,000. "OC Intellectual Property" means, in each case whether registered or pending, (i) (A) all patents, patent rights, trademarks, trademark rights, trade names, trade name rights and copyrights and (B) all rights under applications relating to any of the foregoing, (ii) all rights under licenses (whether as licensor or licensee) relating to any of the foregoing and (iii) all other rights with respect to the foregoing, owned by the Company or a Subsidiary. "Offer" has the meaning ascribed to that term in the Offer to Purchase. "Offer Price" means the net purchase price set forth in the Offer to Purchase as of the Agreement Date. "Offer to Purchase" has the meaning ascribed to that term in the Company's Schedule 14D-1. "Operating Lease" means any lease of real or personal property other than a capital lease. "Outstanding Exposure" means, as to any Bank, the sum of (i) the aggregate Dollar Equivalent Amount of the principal amount of all outstanding Revolving Loans made by such Bank that are not Belgian Loans or Canadian Loans, plus (ii) such Bank's Borrowing Percentage of the aggregate Dollar Equivalent Amount of the principal or face amount of all outstanding Swing Line Loans, Belgian Loans that are not CA Loans and L/C Obligations; provided that, in the case of a Bank that is, or whose Affiliate is, a Canadian Lending Bank, the Outstanding Exposure of such Bank with respect to such Loans and L/C Obligations that arose while the Aggregate Non-Canadian Exposure equaled or exceeded the aggregate amount of the Non-Canadian Commitments shall be determined on the basis of such Bank's or Affiliate's Canadian Borrowing Percentage. "Payment Office" means, for each Type of Loan and each Currency, the Payment Office set forth in respect thereof in the Administrative Schedule. -113- "Payment Time" means, for each Type of Loan and each Currency, the Payment Time set forth in respect thereof in the Administrative Schedule. "PBGC" means the Pension Benefit Guaranty Corporation. "Permitted Intercompany Debt" means (a) Debt of the Company to any Subsidiary that is subordinated to the Debt of the Company hereunder on terms identical in all substantive respects to those set forth on Annex M, (b) Debt of any Subsidiary to the Company or any other Subsidiary, and (c) Debt of the Company to a TRUPS Trust that is not subordinated on the terms provided in the preceding clause (a) in a principal amount equal to the liquidation amount of the common interests in such TRUPS Trust owned directly or indirectly by the Company. "Permitted Lien" has the meaning set forth in Section 8.07. "Person" means an individual, corporation, partnership, trust or unincorporated organization, a government or any agency or political subdivision thereof and, for the purpose of the definition of "ERISA Affiliate", a trade or business. "Plan" means any pension plan that is covered by Title IV of ERISA and in respect of which the Company or an ERISA Affiliate is an "employer" as defined in Section 3(5) of ERISA. "Post-Default Rate" means (i) (A) in the case of Loans and Drawings, the rate otherwise applicable, and (B) in the case of all other amounts due and payable, the Base Rate in effect from time to time, plus (ii) in each case, 2%. "Prime Rate" means the prime commercial lending rate of CSFB, as publicly announced to be in effect from time to time. The Prime Rate shall be adjusted automatically, without notice, on the effective date of any change in such prime commercial lending rate. The Prime Rate is not necessarily CSFB's lowest rate of interest. "Prohibited Transaction" means a transaction that is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA. "Properties" means the parcels of real property owned or operated by the Company or any of its Subsidiaries "Purchase Money Debt" means (i) Debt of the Company or any Subsidiary that, within 30 days of such purchase is incurred or assumed to finance part or all of (but not more than) the purchase price of a tangible asset in which neither the Company nor any Subsidiary had, at any time prior to such purchase any interest other than a security interest or an interest as lessee -114- under an operating lease, but only if such Debt does not exceed $35,000,000 at any time outstanding in the aggregate for the Company and all Subsidiaries and (ii) renewals, extensions or refundings thereof, but not any increases in the principal amounts thereof or interest rates thereon, except for increases in interest rates upon the occasion of any such renewal, extension or refunding that are commercially reasonable at such time. "Quotation Day" means (i) in respect of the determination of the Eurocurrency Rate for any Interest Period for any Currency, the day on which quotations would ordinarily be given by prime banks in the London interbank market for deposits in such Currency for delivery on the first day of such Interest Period, (ii) in respect of the determination of the Canadian Cost of Funds Rate for any Interest Period, the day on which quotations would ordinarily be given by prime banks in the Toronto interbank market for deposits in Canadian Dollars for delivery on the first day of such Interest Period, or (iii) in respect of the determination of Discount Rate for any term of a Canadian Bankers' Acceptance, the day on which quotations would ordinarily be given by prime banks in the Toronto market for bankers' acceptances; provided that if quotations would ordinarily be given on more than one date, the Quotation Day for such Interest Period or term of bankers' acceptance shall be the last of such dates. On the date hereof, the Quotation Day in respect of any Interest Period for any Currency is customarily the last Business Day prior to the beginning of such Interest Period which is (i) at least two Business Days prior to the beginning of such Interest Period and (ii) a day on which banks are open for general banking business in the city which is the principal financial center of the country of such Currency, and the Quotation Day in respect of any term for a Canadian Bankers' Acceptance is customarily the Business Day of issue of such Canadian Bankers' Acceptance. "Reference Banks" means CSFB, The Chase Manhattan Bank and Royal Bank of Canada. "Refunding Date" has the meaning set forth in Section 3.04(b). "Registered Holder" means the Person in whose name a Registered Note is registered. "Registered Note" means a Note the name of the holder of which has been recorded on the Loan Register. The registration of a Note shall constitute the registration of the Loan evidenced thereby. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System and any successor regulation as in effect from time to time. -115- "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System and any successor regulation as in effect from time to time. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System and any successor regulation as in effect from time to time. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System and any successor regulation as in effect from time to time. "Regulatory Change" means any Applicable Law, interpretation, directive, request or guideline (whether or not having the force of law), or any change therein or in the administration or enforcement thereof, that is Enacted after the Agreement Date, including any such that imposes, increases or modifies any Tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement, but excluding any such that imposes, increases or modifies any Bank Tax. "Reimbursement Obligation" means, in respect of each Letter of Credit, the obligation of the account party thereunder to reimburse the Issuing Bank for all Drawings made thereunder in accordance with Section 4.05 hereof and the Application related to such Letter of Credit. "Repayment Date" means the latest of (i) the Termination Date or the cancellation or reduction to zero of the Commitments, (ii) the payment in full of the Loans, the Drawings and all other amounts payable hereunder and (iii) the expiration or termination of all outstanding Letters of Credit. "Reportable Event" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, except any such event as to which the provision for 30 days' notice to the PBGC is waived under subsections .13, .14, .16, .18, .19, .20 of PBGC Reg. 2615. "Representation and Warranty" means (i) each representation and warranty made pursuant to or under (A) Sections 6.02, Article 7, Section 9.02 or any other provision of this Agreement, or (B) any amendment of or waiver or consent under any Loan Document, and (ii) each statement contained in any certificate, financial statement, legal opinion or other instrument or document delivered by or on behalf of the Company pursuant to or in connection with any Loan Document or any such amendment, waiver or consent. "Requirement of Law" means, as to any Person, the Governing Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding -116- upon such Person or any of its property or to which such Person or any of its property is subject. "Reserve Requirement" means, at any time in respect of any Bank, the then current rate at which reserves (including any marginal, supplemental or emergency reserves), if any, are required under Regulation D to be maintained by such Bank against "Eurocurrency liabilities", as that term is used in Regulation D, incurred by such Bank in funding any Eurocurrency Loan hereunder. "Restricted Payment" means as to any Person (i) any dividend or other distribution on any shares of the Company's capital stock (other than dividends payable solely in shares of its capital stock), and (ii) any acquisition (other than from the Company) of (A) any shares of the Company's capital stock (except shares acquired solely upon the conversion thereof into other shares of its capital stock), or (B) any security convertible into, or any option, warrant or other right to acquire, shares of the Company's capital stock. "Revolving Base Rate Loan" means a Revolving Loan bearing interest based or to be based upon the Base Rate. "Revolving Eurocurrency Loan" means a Revolving Loan bearing interest based or to be based upon a Eurocurrency Rate. "Revolving Loan" means a loan made, or a Canadian Bankers' Acceptance accepted, on a revolving credit basis pursuant to Section 1.01(a) hereof. A Revolving Loan that is a Canadian Bankers' Acceptance shall be deemed "made" on the date such Canadian Bankers' Acceptance is purchased hereunder. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies. "S&P Rating" means the rating of the Company's long- term senior unsecured debt most recently announced by S&P. "Scheduled Maturity Date" means, with respect to any portion of the principal of any Debt of any Person, the earliest date as of which such portion may be redeemable, payable or required to be purchased or otherwise retired or extinguished, (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition that would not constitute an Event of Default, such as a redemption required to be made out of retained earnings. "SEC" means the United States Securities and Exchange Commission. "Shares" has the meaning ascribed to that term in the Company's Schedule 14D-1. -117- "Significant Subsidiary" means a Subsidiary having assets with an aggregate book value in excess of $30,000,000. "Single Employer Plan" means any Plan that is not a Multiemployer Plan. "Stock Purchase Contract" means a binding contract (not an option or other right exercisable at the election of the purchaser) to purchase shares of the Company's capital stock having a mandatory settlement date more than one year after the date of such contract. "Subsidiary" when used to determine the relationship of a Person to another Person, means any Person of which (i) securities having ordinary voting power to elect a majority of the board of directors (or other persons having similar functions), or (ii) other ownership interests ordinarily constituting a majority voting interest, are at the time, directly or indirectly, owned or controlled by such other Person, or by one or more other Subsidiaries, or by such other Person and one or more Subsidiaries; unless otherwise specified, "Subsidiary" means a Subsidiary of the Company. "Swing Line Bank" means CSFB and its successors. For purposes of this Agreement, the term "Bank" includes the Swing Line Bank unless the context otherwise requires. "Swing Line Limit" means an amount not to exceed $50,000,000. "Swing Line Loan" has the meaning set forth in Section 3.01. "Tax" means any Federal, State or foreign tax, assessment or other governmental charge or levy (including any withholding tax) upon a Person or upon its assets, revenues, income or profits other than, for the purposes of Section 14.02, capital, income and franchise taxes imposed upon any Bank or any Canadian Lending Bank by the jurisdictions (or any political subdivision thereof) in which such Bank or Canadian Lending Bank or its Funding Office is located. "Tender Offer Documents" means (i) the Offer to Purchase, (ii) the related letters of transmittal, (iii) all documents filed by or on behalf of the Company or Fibreboard or their respective Affiliates with the SEC in connection with the Offer and (iv) all amendments, modifications or supplements to any of the foregoing. "Termination Date" means the fifth anniversary of the Agreement Date. "Termination Event" means (i) a Reportable Event, (ii) the termination of a Single Employer Plan, or the treatment of a -118- Single Employer Plan amendment as a termination of such Plan under Section 4041 of ERISA, or the filing of a notice of intent to terminate a Single Employer Plan, (iii) the institution of proceedings to terminate a Single Employer Plan by the PBGC under Section 4042 of ERISA, or (iv) the appointment of a trustee to administer any Single Employer Plan pursuant to Section 4042 of ERISA. "Total Exposure" means, at any time, the sum of the Exposure plus the Canadian Exposure, in each case at such time. "Tranche" means the collective reference to (i) in the case of Revolving Eurocurrency Loans, Revolving Eurocurrency Loans in any Currency the then current Interest Periods with respect to all of which, (ii) in the case of Canadian Cost of Funds Loans, Canadian Cost of Funds Loans the then current Interest Periods with respect to all of which, and (iii) in the case of Canadian Bankers' Acceptances, Canadian Bankers' Acceptances the then current terms with respect to all of which, begin on the same date and end on the same later date (whether or not such Loans or Canadian Bankers' Acceptances shall originally have been made on the same day). "Transmittal Letter" has the meaning ascribed to that term in the Company's Schedule 14D-1. "TRUPS" means preferred securities, having no voting or management rights prior to the occurrence of certain designated events, issued by a TRUPS Trust. "TRUPS Note" means a promissory note, debenture or other obligation issued by the Company to a TRUPS Trust in connection with an issue of TRUPS by such TRUPS Trust and in an aggregate principal amount, and bearing interest at a rate substantially the same, as the total liquidation amount of, and the dividend payable on, such TRUPS, but shall not include such an obligation issued in connection with the issuance of common securities of the TRUPS Trust directly or indirectly to the Company. "TRUPS Trust" means a business trust, limited liability company or other person established solely for the purpose of issuing TRUPS and transactions related thereto, all of the securities of which (other than TRUPS) are owned directly or indirectly by the Company. "Type" means, in respect of any Loan, its character as a Revolving Loan, CA Loan or Swing Line Loan, as the case may be, and, in the case of a Revolving Loan, whether it is a Revolving Base Rate Loan, a Revolving Eurocurrency Loan, a Canadian Cost of Funds Loan or a Canadian Bankers' Acceptance. "Uniform Customs" means the Uniform Customs and Practice for Documentary Credits (1993 Revision), International -119- Chamber of Commerce Publication No. 500 as the same may be amended from time to time. "United States Person" means a corporation, partnership or other entity created, organized or incorporated under the laws of the United States of America or a State thereof (including the District of Columbia). "Utilization Fee" means, at any time, a rate per annum equal to (i) if the aggregate principal amount of the Dollar Equivalent Amount of Loans, L/C Participations and Canadian L/C Participations outstanding exceeds 50% of the amount of the Commitments at such time, (A) if the S&P Rating is higher than or equal to BBB- or the Moody's Rating is higher than or equal to Baa3, 0%, and (B) if the S&P rating is lower than BBB- and the Moody's Rating is lower than Baa3, 0.25%, or (ii) if the aggregate principal amount of the Dollar Equivalent Amount of Loans, L/C Participations and Canadian L/C Participations outstanding does not exceed 50% of the amount of the Commitments at such time, 0%. "Wholly-Owned" means, with respect to any Subsidiary, a Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are, directly or indirectly, owned or controlled by the Company or one or more Wholly-Owned Subsidiaries or by the Company and one or more Wholly-Owned Subsidiaries. (b) Other Definitional Provisions. (i) Except as otherwise specified herein, all references herein (A) to any Person, other than the Company, shall be deemed to include such Person's successors and assigns, (B) to the Company shall be deemed to include the Company's successors, (C) to any Applicable Law or Contract defined or referred to herein shall be deemed references to such Applicable Law or Contract as the same may be amended or supplemented from time to time, or, in the case of any such Contract, as the terms thereof may be waived or modified, but only in the case of each such waiver or modification, to the extent permitted by, and effected in accordance with, the terms thereof, and (D) to this Agreement or any Note shall be deemed references to such Agreement or Note (and, in the case of any Note or any other instrument, any instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified from time to time. (ii) When used in this Agreement, the words "herein", "hereof" and "hereunder", and words of similar import, shall refer to this Agreement as a whole and not to any provision of this Agreement, and the words "Articles", "Section", "Schedule", "Annex" and "Exhibit" shall refer to Articles and Sections of, and Schedules, Annexes and Exhibits to, this Agreement unless otherwise specified. -120- (iii) Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa. (iv) Any item or list of items set forth following the word "including", "include" or "includes" is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are "included", such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are "included" are limited to such items or to items similar to such items. (v) All terms defined in this Agreement shall have the defined meanings when used in the Notes or, except as otherwise expressly stated therein, any certificate, opinion or other document delivered pursuant hereto. (vi) Each authorization in favor of the Agent, the Banks or any other Person granted by or pursuant to this Agreement shall be deemed to be irrevocable and coupled with an interest. (vii) Except as otherwise specified herein, all references to the time of day shall be deemed to be to New York City time as then in effect. Section 15.02 Accounting Matters. Unless otherwise specified herein, all accounting determinations hereunder and all computations utilized by the Company in complying with the covenants contained herein shall be made, all accounting terms used herein shall be interpreted, and all financial statements required to be delivered hereunder shall be prepared, in accordance with Generally Accepted Accounting Principles, except, in the case of such financial statements, for departures from Generally Accepted Accounting Principles that may from time to time be approved in writing by the independent certified public accountants who are at the time, in accordance with Section 9.01(b), reporting on the Company's financial statements. Without limiting the generality of the foregoing, for purposes of establishing compliance with the financial or other covenants set forth in Article 8 hereof, if the Company or a Subsidiary makes a borrowing or issuance the proceeds of which are intended to be used for the repayment, on the same day, of another borrowing or issuance, the Company shall not be deemed to be not in compliance with a financial or other covenant solely by reason of the fact that for some period of time during such day both borrowings or issuances are outstanding, so long as the Company or such Subsidiary has irrevocably directed such repayment on such day, and such repayment actually occurs on such day. Section 15.03 Representations and Warranties. All Representations and Warranties shall be deemed made at and as of the Agreement Date (except for the Representations and Warranties -121- contained in Sections 7.02(a)(ii)(A) and 7.02(b)(ii)(A)), at and as of the time of each Credit Extension (in the case of the initial Credit Extension after giving effect to the application of any proceeds for purposes of Sections 7.02(a)(ii)(A) and Sections 7.02(b)(ii)(A), and, in addition, in the case of any particular Representation and Warranty, at such other time or times as such Representation and Warranty is made or deemed made in accordance with the provisions of this Agreement or the document pursuant to, under which, or in connection with which, such Representation and Warranty is made or deemed made. Section 15.04 Captions. Captions to Articles, Sections and subsections of, and Annexes, Schedules and Exhibits to, this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement. -122- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers all as of the day and year first written above. OWENS CORNING By _________________________________ Name: Title: By _________________________________ Name: Title: CREDIT SUISSE FIRST BOSTON, as Agent By _________________________________ Name: Title: By _________________________________ Name: Title: CREDIT SUISSE FIRST BOSTON, as a Bank By _________________________________ Name: Title: By _________________________________ Name: Title: ____________________________ By _________________________________ Name: Title: ____________________________ By _________________________________ Name: Title: EX-10 3 Owens Corning 1987 Stock Plan For Directors (as amended and restated February 6, 1997) SECTION 1. General Purpose of Plan; Definitions. The name of this plan is the Owens Corning 1987 Stock Plan for Directors (the "Plan"). The purpose of the Plan is to enable Owens Corning (the "Company") (i) to retain and attract Directors of the highest caliber, (ii) to reinforce the mutuality of interests between Directors and the stockholders of the Company, and (iii) to enable Directors to participate in the long-term success and growth of the Company. For purposes of the Plan, the following terms shall be defined as set forth below: a. "Annual Award" means an award of 500 shares of Stock free of any restrictions thereon and without any cash payment therefor, other than an amount equal to the par value of such shares of Stock. b. "Board" means the Board of Directors of the Company. c. "Cause" means a felony conviction of a participant or the failure of a participant to contest prosecution for a felony. d. "Change of Control" means the happening of any of the following: (i) when any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company or a Subsidiary or any employee benefit plan (including its trustee) of either the Company or a Subsidiary) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 30 percent or more of the combined voting power of the Company's then outstanding securities; or (ii) the occurrence of a transaction requiring stockholder approval for the acquisition of the Company by an entity other than the Company or a Subsidiary through purchase of assets, or by merger, or otherwise. e. "Change of Control Price" means the highest price per share of Stock paid in any transaction reported on the New York Stock Exchange Composite Tape at any time during the sixty day period immediately preceding such Change of Control or, if higher, the highest price per share of Stock paid or offered in connection with such Change of Control. f. "Code" means the Internal Revenue Code of 1986, as amended, or any successor thereto. g. "Company" means Owens Corning, a corporation organized under the laws of the State of Delaware (or any successor corporation). h. "Director" means any member of the Board who, on the date in question, is not an employee of the Company or a Subsidiary. i. "Disability" means long-term disability as determined under rules and procedures similar to those that apply to Company employees under the Company's long term disability programs or policies. j. "Early Retirement" means retirement from active service as a member of the Board on or after age 65 but before 70. k. "Fair Market Value" means, as of any given date, the closing sale price of the Stock on such date on the New York Stock Exchange Composite Tape. l. "Normal Retirement" means retirement from active service as a member of the Board on or after the Director's 70th birthday. m. "Option" means a "non-qualified" option to purchase 10,000 shares of Stock, priced at Fair Market Value on the date of grant. n. "Plan" means the 1987 Stock Plan for Directors, as may be amended from time to time. o. "Stock" means the Common Stock, $0.10 par value, of the Company. p. "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. SECTION 2. Administration. The Plan shall, to the extent possible, be self-effectuating. To the extent necessary, the Company shall administer the Plan and shall interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto). SECTION 3. Stock Subject to Plan. The total number of shares of Stock reserved and available for distribution under the Plan shall be 300,000. Effective as of April 17, 1997, this number shall be increased to 600,000. Such shares may consist, in whole or in part, of authorized and unissued shares of treasury shares. If any shares that have been optioned cease to be subject to option, such shares shall again be available for distribution in connection with future awards under the Plan. In the event of any merger, reorganization, consolidation, recapitalization, stock split or dividend, or other change in corporate structure affecting the Stock, the aggregate number of shares reserved for issuance under the Plan under this Section 3, the grant levels specified for Options and Annual Awards, and the number and option price of shares subject to outstanding Options previously granted under the Plan shall be adjusted appropriately, provided that the number of shares subject to any award shall always be a whole number. SECTION 4. Eligibility. Only Directors shall be granted Options and Annual Awards under the Plan. SECTION 5. Option Terms. Options shall be granted under the Plan as follows, subject to the terms and conditions set forth below. a. Grant Level and Option Price. Subject to stockholder ratification of the Plan and grants made hereunder in accordance with Section 9, each person who is a Director on August 20, 1987 shall receive an Option on such date. During the term of the Plan, each other person who is not an employee on the date he becomes a member of the Board, shall receive an Option on the date his services as a Director commence (or recommence, as the case may be). b. Option Term. The term of each Option shall be ten years from the date such Option is granted. c. Exercisability. An Option granted to a Director shall become exercisable on a cumulative basis in 20% installments on the first, second, third, fourth and fifth anniversaries of the date of such grant, subject to the acceleration provisions of this Section 5. d. Method of Exercise. If and to the extent exercisable under this Section 5, Options may be exercised in whole or in part at any time during the option period, subject to paragraphs (f), (g), (h), (i) and (j) of this Section 5, by giving written notice of exercise to the Company specifying the number of shares to be purchased, accompanied by payment in full of the purchase price either in cash or by check (including a personal check). Payment in full or in part may also be made in the form of unrestricted Stock already owned. An optionee shall generally have the rights to dividends or other rights of a stockholder with respect to shares subject to the Option when the optionee has given written notice of exercise, has paid in full for such shares, and, if requested, has given the representation described in Section 8(a). The minimum number of shares that may be purchased at any one time in connection with any Option exercise under this Plan is 100 shares. e. Non-Transferability of Options. No Option shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution, and all Options shall be exercisable, during the optionee's lifetime, only by the optionee. f. Termination by Death. If an optionee's services as a member of the Board terminate by reason of death, any Option held by such optionee may thereafter be exercised in full by the legal representative of the estate or by the legatee under the will of the optionee, for a period of one year from the date of such death or until the expiration of the stated term of any such Option, whichever period is shorter. g. Termination by Reason of Disability or Normal Retirement. If an optionee's services as a member of the Board terminate by reason of Disability or Normal Retirement, any Option held by such optionee shall be immediately exercisable in full for three years from the date of such termination in the case of a Disability termination and five years from the date of such termination in the case of Retirement or, in each case, until the expiration of the stated term of such Option, whichever period is shorter; provided, however, that if the optionee dies within such three-year or five- year period, any unexercised Option held by such optionee shall thereafter be exercisable by the legal representative of the estate or by the legatee under the will of the optionee for a period of one year from the date of such death or for the stated term of such Option, whichever period is shorter. h. Termination by Reason of Early Retirement. If an optionee's services as a member of the Board terminate by reason by Early Retirement, one-half of the portion of such optionee's Option which is not exercisable by reason of the limitations in Section 5(c) above as of the date of such termination shall become immediately exercisable. Any Option held by such optionee which is exercisable at such termination (including any portion which is exercisable solely by reason of the preceding sentence) shall be exercisable for five years from the date of such termination or the expiration of the stated term of such Option, whichever period is shorter; provided, however, that if the optionee dies within such five year period, any unexercised Option which could have been exercised by such optionee at the time of such optionee's death shall thereafter be exercisable by the legal representative of the optionee's estate or by the legatee under the will of the optionee for a period of one year from the date of such death or for the stated term of such Option, whichever period is shorter. To the extent that a portion of an optionee's Initial Grant is not and does not become exercisable at the time such optionee's services as a member of the Board terminate by reason of Early Retirement, such Option shall terminate at the date of such termination. i. Other Termination. If an optionee's services as a member of the Board terminate for any reason other than an event described in paragraphs (f), (g) and (h), any portion of any Option which is not then exercisable shall terminate and any portion of such Option which is exercisable may be exercised for the lesser of one year from the date of such termination or the balance of such Option's term. Notwithstanding the foregoing, if the optionee's services as a member of the Board are terminated for Cause, such optionee's Options shall terminate, regardless of whether then exercisable, on the date of such termination. j. Change of Control. Upon the occurrence of a Change of Control, each outstanding Option shall become fully exercisable and, except as provided in the next sentence, shall be cancelled in exchange for payment in cash of an amount equal to the product of (1) the number of shares of Stock subject to such Option and (2) the amount by which the Change of Control Price exceeds the exercise price of such Stock Option. Notwithstanding the foregoing, the cash out provisions (but not the acceleration provisions) of this subparagraph (j) shall be rendered without effect with respect to any optionee if in the opinion of counsel to the Company such optionee would incur a liability to the Company under Section 16(b) of the Securities Exchange Act of 1934 were such cash out provisions to apply to such optionee. SECTION 6. Annual Awards. (a) Subject to stockholder ratification of the Plan in accordance with Section 9, on the fourth Friday in April in each calendar year during the term of the Plan, each person who is a Director on such date shall receive an Annual Award, provided that no Director shall receive an Annual Award in the same calendar year as such Director receives the grant of an Option. The shares of Stock subject to an Annual Award shall be immediately vested. (b) A Director may elect to defer receipt of any Annual Award until termination of such Director's membership on the Board, provided that such election is made at least 6 months prior to the date on which such Annual Award will be granted. A Director shall be entitled to receive dividend equivalents on shares of Stock the receipt of which is deferred pursuant to the preceding sentence and such dividend equivalents shall automatically be invested in additional deferred shares of Stock payable at the same time as the shares initially deferred. SECTION 7. Amendments and Termination. The Board may amend, alter, or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made which would impair the rights of an optionee under an Option or Annual Award theretofore granted, without the participant's consent, or which, without the approval of the stockholders, would: (a) except as expressly provided in this Plan, increase the total number of shares reserved for the purpose of the Plan; (b) except as provided in Section 3 hereof, decrease the option price of any Option to less than 100% of the Fair Market Value on the date of the granting of the option; (c) change the class of Directors eligible to participate in the Plan; (d) extend the maximum option period under paragraph (b) of Section 5 of the Plan; or (e) otherwise materially increase any benefit or award for a Director. SECTION 8. General Provisions. (a) The Company may require each person acquiring Stock to represent to and agree with the Company in writing that such person is acquiring the Stock without a view to distribution thereof. The certificates for any shares of Stock acquired under the Plan may include any legend which the Company deems appropriate to reflect any restrictions on transfer. All certificates for shares of Stock delivered under the plan shall be subject to such stock-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed, and any applicable Federal or state securities law, and the Company may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) Nothing contained in this Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any Director any right to continue to be a Director. (c) No member of the Board, nor any officer or employee of the Company acting on behalf of the Board or the Company, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation. SECTION 9. Effective Date of Plan. The Plan, as amended on January 28, 1988, was effective on August 20, 1987, after ratification of the Plan by a majority vote of the Company's stockholders. The Plan, as amended and restated November 21, 1991, was effective on April 16, 1992, after ratification thereof by a majority vote of the Company's stockholders. The Amendment of February 6, 1997 extending the term of the Plan, and increasing the number of shares of Stock reserved and available for distribution hereunder, shall be effective upon ratification of the Amendment by a majority vote of the Company's stockholders. SECTION 10. Term of Plan. No Option or Annual Award shall be granted pursuant to the Plan on or after August 20, 2007 but awards theretofore granted may extend beyond that date. EX-11 4 - 27 - Exhibit (11) OWENS CORNING AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS Quarter Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 (In millions of dollars, except share data) Primary: Net income (loss) $ 63 $ (473) $ 105 $(434) Weighted average number of shares outstanding (thousands) 53,283 51,538 52,980 51,512 Weighted average common equivalent shares (thousands): Deferred awards 14 - 14 - Stock options using weighted average market price 543 - 625 - Primary weighted average number of common shares outstanding and common equivalent shares (thousands) 53,840 51,538 53,619 51,512 Primary per share amount $ 1.17 $(9.19) $ 1.96 $ (8.43) Fully Diluted: Net income (loss) $ 65 $ (473) $ 109 $ (434) Weighted average number of shares outstanding (thousands) 53,283 51,538 52,980 51,512 Weighted average common equivalent shares (thousands): Deferred awards 14 - 14 - Stock options using the higher of average market price or market price at end of period 611 - 677 - Shares from assumed conversion of preferred securities 4,566 - 4,566 - Fully diluted weighted average number of common shares outstanding and common equivalent shares (thousands) 58,474 51,538 58,237 51,512 Fully diluted per share amount $ 1.11 $ (9.19) $ 1.87 $ (8.43)
EX-27 5
5 This schedule contains summary financial information extracted from SEC form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000,000 6-MOS DEC-31-1996 JUN-30-1997 19 0 567 0 541 1,433 3,470 1,789 5,076 1,173 1,854 653 194 0 (1,006) 5,076 1,892 1,892 1,430 1,430 2 0 42 140 43 105 0 0 0 105 1.96 1.87
EX-99 6 Exhibit (99) State or Other Jurisdiction Under the Laws of Subsidiaries of Owens Corning (6/30/97) Which Organized Accord Vinyl Siding Inc. Ontario Aristocrat Window Company Delaware Barbcorp, Inc. Delaware Carriage Hill Stone Co. Ohio Crown Manufacturing Inc. Canada Dansk-Svensk Glasfiber A/S Denmark Deutsche Owens-Corning Glasswool GmbH Germany Engineered Yarns America, Inc. Massachusetts Eric Company Delaware European Owens-Corning Fiberglas, S.A. Belgium Fabwel, Inc. Indiana Falcon Foam Corporation Delaware Fibreboard Box & Millwork Corporation Delaware Fibreboard Corporation Delaware IPM, Inc. Delaware Kitsons Insulation Products Ltd. United Kingdom Knytex Company, LLC Delaware Lmp Impianti Srl Italy Mastic Pty, Limited Australia Matcorp, Inc. Delaware Norandex Inc. Delaware N.V. Owens-Corning S.A. Belgium OC Celfortec Inc. Canada O/C/FIRST CORPORATION Ohio OCFOGO, Inc. Delaware O.C. Funding B.V. The Netherlands O/C/SECOND CORPORATION Delaware OCW Acquisition Corporation (dba, Delsan) Delaware Owens-Corning A/S Norway Owens Corning Building Materials Espana S.A. Spain Owens-Corning Building Products (U.K.) Ltd. United Kingdom Owens Corning Canada Inc. Canada Owens-Corning Capital Holdings I, Inc. Delaware Owens-Corning Capital Holdings II, Inc. Delaware Owens-Corning Capital L.L.C. Delaware Owens Corning Cayman (China) Holdings Cayman Islands Owens-Corning Cayman Limited Cayman Islands Owens-Corning Changchun Guan Dao Company Ltd. PRC China Owens Corning Espana SA Spain Owens-Corning Fiberglas A.S. Limitada Brazil Owens-Corning Fiberglas Deutschland GmbH Germany Owens-Corning Fiberglas Espana, S.A. Spain Owens-Corning Fiberglas France S.A. France Owens-Corning Fiberglas (G.B.) Ltd. United Kingdom Owens-Corning Fiberglas (Italy) S.r.l. Italy Owens-Corning Fiberglas Norway A/S Norway Owens-Corning Fiberglas S.A. Uruguay Owens-Corning Fiberglas Sweden AB Sweden
State or Other Jurisdiction Under the Laws of Subsidiaries of Owens Corning (6/30/97) Which Organized Owens-Corning Fiberglas Sweden Inc. Delaware Owens-Corning Fiberglas Technology Inc. Illinois Owens-Corning Fiberglas (U.K.) Ltd. United Kingdom Owens-Corning Finance (U.K.) plc United Kingdom Owens-Corning FSC, Inc. Barbados Owens-Corning Funding Corporation Delaware Owens-Corning (Guangzhou) Fiberglas Co., Ltd. PRC China Owens-Corning Holdings Limited Cayman Islands Owens Corning HT, Inc. Delaware Owens-Corning Isolation France S.A. France Owens Corning (Japan) Ltd. Japan Owens-Corning Ontario Holdings Inc. Canada Owens-Corning Overseas Holdings, Inc. Delaware Owens-Corning (Overseas) Management Limited Cyprus Owens Corning Pipe (Africa) Pvt. Ltd. Zimbabwe Owens Corning Polyfoam UK Ltd. United Kingdom Owens Corning Polypan SPA Italy Owens-Corning Real Estate Corporation Ohio Owens Corning (Shanghai) Fiberglas Co., Ltd. PRC China Owens Corning (Singapore) PTE Ltd. Singapore Owens Corning South Africa (Pty) Ltd. South Africa Owens-Corning Trading, Ltd. British Virgin Islands Owens-Corning (UK) Holdings Limited United Kingdom Owens-Corning Veil Netherlands B.V. The Netherlands Owens-Corning Veil U.K. Ltd. United Kingdom Pabco Metals Corporation Delaware Pacific Coast Redevelopment Missouri Palmetto Products, Inc. Delaware Prestige Vinyl Siding Inc. Ontario Procanpol SP.Z.O.O. Poland Scanglas Ltd. United Kingdom Sierra Corporation Delaware Soltech, Inc. Kentucky Stone Products Corporation California UC Industries, Inc. Delaware Vytec Corporation Ontario Vytec Limited Australia Vytec Sales Corporation Delaware WD s.a. Belgium Western Fiberglass of Texas, Inc. Utah Willcorp, Inc. Delaware Wrexham A.R. Glass Ltd. United Kingdom 10110 Newfoundland Limited Newfoundland
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