-----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, JMZbX5S7KpxVwtQyVh6HNkmwEgQMFumAd8Hcx3Vyb6u2H/7z/8NqbCgLtzRNsm76 UANyXOHhPS9A9jp+oJ8POA== 0000950152-98-002244.txt : 19980324 0000950152-98-002244.hdr.sgml : 19980324 ACCESSION NUMBER: 0000950152-98-002244 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980323 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OM GROUP INC CENTRAL INDEX KEY: 0000899723 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 521736882 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-12515 FILM NUMBER: 98570781 BUSINESS ADDRESS: STREET 1: 50 PUBLIC SQ STREET 2: 3800 TERMINAL TOWER CITY: CLEVELAND STATE: OH ZIP: 44113-2204 BUSINESS PHONE: 2167810083 MAIL ADDRESS: STREET 1: 3900 TERMINAL TOWER CITY: CLEVELAND STATE: OH ZIP: 44113 10-K405 1 OM GROUP, INC. 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________ to ____________ Commission file number 0-22572 OM GROUP, INC. (Exact name of Registrant as specified in charter) Delaware 52-1736882 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 50 Public Square, 3800 Terminal Tower, Cleveland, Ohio 44113-2204 (Address of principal executive offices) (Zip Code) 216-781-0083 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, par value $0.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of the Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of Common Stock, par value $.01 per share, held by non-affiliates (based upon the closing sale price on the NYSE) on March 11, 1998 was approximately $983,655,959. As of March 11, 1998, there were 22,073,626 shares of Common Stock, par value $.01 per share, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the annual meeting of stockholders to be held on May 5, 1998 are incorporated by reference. 2 Page 2 Part I Item 1 BUSINESS OM Group, Inc. (the Company) is a leading international producer and marketer of value-added metal-based specialty chemicals and powders. The Company supplies more than 400 different product offerings - principally categorized as metal carboxylates, inorganic metal salts, and metal powders for diverse applications to more than 25 industries. Metal carboxylates are essential components in numerous complex chemical and industrial processes, and are used in many end markets, such as coatings, custom catalysts, liquid detergents, lubricants and fuel additives, plastic stabilizers, polyester promoters and adhesion promoters for rubber tires. Metal salts are used in a wide variety of end products including catalysts, colorants, rechargeable batteries, petroleum additives, magnetic media and metal finishing agents. High specification metal powders have several important characteristics that make them essential components in cemented carbides for mining and machine tools, diamond tools used in construction, rechargeable batteries, and alloyed materials for automotive, electronics, transportation and catalyst applications. Typically, the Company's products represent a small portion of the customer's total cost of manufacturing or processing, but are critical to the customer's product performance. The Company operates in a single business segment with product lines comprised of metal-based specialty chemicals. COMPETITION The Company's businesses are very competitive. Several of the Company's competitors are divisions or subsidiaries of companies that are substantially larger and have greater financial resources than the Company. However, the Company believes it is the only producer that manufactures and markets three categories of metal-based specialty chemicals -- carboxylates, inorganic salts and powders. The Company believes it is the world's leading producer of cobalt carboxylates, cobalt and nickel specialty inorganic salts and copper powders. The Company also believes that it is the world's second largest producer of cobalt extra-fine powders. The Company believes that its focus on metal-based specialty chemicals as a core business is an important competitive advantage. Competition in the metal-based specialty chemicals market is based primarily on product quality, supply reliability, price, service and technical support capabilities. Generally, the Company is able to pass through to its customers increases and decreases in raw material prices by increasing or decreasing, respectively, the prices of its products. The degree of profitability of the Company depends, in part, on the Company's ability to maintain the differential between its product prices and raw material prices. The timing and amount of such adjustments in its product prices depends upon the type of product sold and the inventories and market share positions of the Company and its competitors. The Company's flexibility with respect to the timing of its price adjustments is greater with respect to carboxylates than with inorganic salts and powders. Inorganic salt and powder prices respond almost immediately to changes in the raw material base metal prices. Competition in the metal-based specialty chemical market is based primarily on product quality, supply reliability, price, service, and technical support capabilities. 3 Page 3 Part I Item 1 CUSTOMERS The Company serves over 1,500 customers with no single customer accounting for 10% or more of the Company's net sales. During 1997, approximately 50% of the Company's net sales were to customers in the Americas, 33% were to customers in Europe, and 17% were to customers in the Asia Pacific. While customer demand for the Company's products is generally non-seasonal, supply/demand and price perception dynamics of key raw materials do periodically cause customers to either accelerate or delay purchases of the Company's products, generating short-term results that may not be indicative of longer-term trends. RAW MATERIALS The primary raw materials used by the Company in manufacturing its products are cobalt, nickel and copper. The cost of raw materials fluctuates due to actual or perceived changes in supply and demand and changes in availability from suppliers. The Company's supply of cobalt has historically been sourced primarily from the Democratic Republic of Congo (DRC), Australia, Finland and Zambia. Although the Company has never experienced a material shortage of cobalt, production problems and political and civil instability in certain supplier countries may in the future affect the supply and market prices of cobalt. The Company attempts to mitigate changes in prices and availability by entering into long-term supply contracts with a variety of producers. The Company does not anticipate any substantial interruption in its raw materials supply that would have a material adverse effect on the Company's operations. Increases in the cost of raw materials can result in higher working capital needs when the price of cobalt, the Company's primary raw material, increases significantly. The Company has had sufficient cash availability and borrowing capacity to finance higher cost inventory as needed. RESEARCH AND DEVELOPMENT The Company's research and new product development program is an integral part of its business. Research and development focuses on adapting proprietary technologies to develop new products and working with customers to meet their specific requirements. New products include new chemical formulations, concentrations of various components, product forms and packaging methods. Research and development expenses were approximately $6.7 million, $3.8 million, and $3.4 million for 1997, 1996, and 1995, respectively. In connection with the acquisition of SCM Metal Products, Inc. (SCM), research and development expenses increased in 1997 and are anticipated to increase at a rate of approximately 5-10% per annum. The Company's research staff of 52 persons conducts carboxylate, metal salts and powders research and development at the Company's laboratories located in Cleveland, Ohio; Research Triangle Park, North Carolina; and Kokkola, Finland. The Company's Finnish facility also maintains a research agreement with a subsidiary of Outokumpu Oy. 4 Page 4 Part I Item 1 PATENTS AND TRADEMARKS The Company holds 151 patents related to the manufacturing, processing and use of metallo-organic and metal-based compounds. In addition, the Company has the right to use, and in certain instances license and sell, technology covered by 16 patents in the areas of hydrometallurgical processes, solvent extraction, agitators and metal powders. The Company does not consider any single patent to be material to its business as a whole. ENVIRONMENTAL MATTERS Since 1970, a wide variety of environmental laws and regulations have been adopted by the United States and by foreign, state and local governments which continue to be amended and supplemented. The Company is subject to these laws and regulations as a result of its operations and use of certain substances that are, or have been, used, produced or discharged by the Company's plants. In addition, soil and/or groundwater contamination presently exists and may in the future be discovered at levels which require remediation under environmental laws at properties now or previously owned, operated or used by the Company. Annual environmental compliance costs have increased to approximately $3.0 million in 1997. Such ongoing expenses include costs relating to waste water analysis and disposal, hazardous and non-hazardous solid waste analysis and disposal, sea water control, air emissions control, soil and groundwater clean-up and monitoring and related staff costs. The Company anticipates that it will continue to incur costs and make expenditures at moderately increasing levels for the foreseeable future in light of the fact that environmental laws and regulations are becoming increasingly stringent, including the likely lowering of permissible discharge limits. The Company has also incurred capital expenditures of approximately $1.0 million in 1997 in connection with environmental compliance. The Company anticipates that capital expenditure levels for such purposes will increase to approximately $3.0 million in 1998, as it continues to modify on an ongoing, regular basis, certain of its processes which may have an environmental impact. Due to the ongoing development and understanding of facts and remedial options and due to the possibility of unanticipated regulatory developments, the amount and timing of future environmental expenditures could vary significantly from those currently anticipated. Although it is difficult to quantify the potential impact of compliance with or liability under environmental protection laws, based on presently available information, the Company believes that the ultimate aggregate cost to the Company of environmental remediation, as well as other legal proceedings arising in the normal course of business, will not result in a material adverse effect upon its financial condition or results of operations. EMPLOYEES At December 31, 1997, the Company had 758 full-time employees of which 488 were located in the United States, 218 in Finland, 38 in Western Europe and 14 in Taiwan. Employees at the Company's facilities in Research Triangle Park, North Carolina; Franklin, Pennsylvania; St. George, Utah; and Ezanville, France are non-unionized. Employees at the Company's facilities in Kokkola, Finland are members of several national workers' unions under various union agreements. 5 Page 5 Part I Item 1 Generally, such union agreements have two-year terms. Employees at the Johnstown, Pennsylvania facility are members of the United Steelworkers Union. The Johnstown union agreement has a term of 5 years expiring in June of 1998. The Company believes relations with its employees are good. INTERNATIONAL OPERATIONS Financial information related to international operations is contained in Note J on page 34 of this report. The Company's products are manufactured at facilities located in Kokkola, Finland; Ezanville, France; Research Triangle Park, North Carolina; Franklin, Pennsylvania; Johnstown, Pennsylvania; and St. George, Utah. The Company conducts its marketing and sales from its offices in Dusseldorf, Germany; Research Triangle Park, North Carolina; Cleveland, Ohio; and Taipei, Taiwan. Although most of the Company's raw material purchases and product sales are transacted in U.S. Dollars, liabilities for non-U.S. operating expenses and income taxes are denominated in local currencies. Accordingly, fluctuations in currency prices may affect the Company's operating results and net income. Specifically, when the Finnish Markka weakens against the U. S. Dollar, there is a net favorable effect on the Company due to lower operating expenses and lower net balance sheet liabilities when translated into U. S. Dollars. The reverse is true when the Finnish Markka strengthens against the U. S. Dollar. In order to partially hedge the balance sheet exposure to fluctuating rates, the Company enters into forward contracts to purchase Finnish Markka. Item 2 PROPERTIES The Company believes that its plants and facilities, which are of varying ages and of different construction types, have been satisfactorily maintained, are in good condition, are suitable for the Company's operations and generally provide sufficient capacity to meet the Company's production requirements. The land on which the Kokkola plant is located is leased with a remaining term of 93 years. The land on which the St. George, Utah plant is located is leased with a remaining term, including options, of 47 years. Otherwise, the real properties comprising the Company's manufacturing facilities are owned by the Company. The Company's Kokkola, Finland production facility (KCO) is situated on property owned by Outokumpu Zinc Oy. KCO and Outokumpu Zinc Oy share certain physical facilities, services and utilities under agreements with varying expiration dates. General property and administrative services are provided under a service agreement, which expires in 1998, but are priced separately and subject to yearly renegotiation in anticipation of phasing out Outokumpu Zinc's role as a service provider. Utilities and raw material purchase assistance contracts provide that KCO jointly purchase with, or pay a fee to, affiliates of Outokumpu Oy for assistance in negotiating contracts and securing bulk quantity discounts. 6 Page 6 Part I Item 2 Certain information regarding the Company's offices and research and product development and manufacturing facilities is set forth below:
Approximate Leased/ Location (a) Facility Function Square Feet Owned ------------------------------------------------------------------------------------------------------ Cleveland, Ohio Corporate headquarters 8,800 leased Research and development facility 27,500 owned Research and development facility 11,400 leased Marketing and administration offices 10,000 owned Dusseldorf, Germany Marketing and administration offices 3,800 leased Taipei, Taiwan Marketing and administration office 1,500 leased Franklin, Pennsylvania Manufactures carboxylates and salts 220,000 owned St. George, Utah Manufactures salts 37,000 owned Kokkola, Finland Manufactures carboxylates, salts and powders 400,000 owned Ezanville, France Manufactures carboxylates 50,000 owned Johnstown, Pennsylvania Manufactures powders 137,700 owned Research Triangle Park, Manufactures powders 83,525 owned North Carolina Marketing and administration offices 20,000 owned Research and development facility 28,475 owned
(a) Does not include facilities owned or leased by the Company's Asia Pacific joint ventures. Item 3 LEGAL PROCEEDINGS Manufacturers of specialty chemical products, including the Company, are subject to various legal and administrative proceedings incidental to such business. In the opinion of the Company, disposition of all suits and claims should not in the aggregate have a material adverse effect on the Company's business or financial position. Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 7 Page 7 Part I EXECUTIVE OFFICERS OF THE REGISTRANT There is set forth below the name, age, positions and offices held by each of the Company's executive officers as of March 23, 1998 as well as their business experiences during the past five years. Years indicate the year the individual was named to the indicated position. James P. Mooney - 50 Chairman and Chief Executive Officer, 1994 Chairman, President and Chief Executive Officer, 1993 Eugene Bak - 64 President and Chief Operating Officer, 1994 Executive Vice President, 1993 James M. Materna - 52 Chief Financial Officer, 1992 Thomas E. Fleming - 52 Vice President and Chief Marketing Officer, 1997 President, OMG Americas, Inc., 1994 (chemical manufacturer, subsidiary of registrant) Vice President, Marketing, Mooney Chemicals, Inc., 1987 (now known as OMG Americas, Inc., chemical manufacturer, subsidiary of registrant) J. R. Hwang - 49 President, OMG Asia Pacific Co., Ltd., 1994 (Asia Pacific marketing office, subsidiary of registrant) Director of Far East Operations, The Hall Chemical Company, 1982 (chemical manufacturer) Kari Muuraiskangas - 53 President, OMG Europe GmbH, 1992 (European marketing office, subsidiary of registrant) H. Burnham Tinker - 58 Vice President, Corporate Development, 1994 Vice President, Research and Development, Mooney Chemicals, Inc., 1990 (now known as OMG Americas, Inc., chemical manufacturer, subsidiary of registrant) Antti Aaltonen - 50 President, OMG Kokkola Chemicals Oy, 1996 (chemical manufacturer, subsidiary of registrant) Vice President, Operations, OMG Kokkola Chemicals Oy, 1992 (chemical manufacturer, subsidiary of registrant) Michael J. Scott - 47 Vice President, Human Resources, General Counsel and Secretary, 1995 General Counsel and Secretary, 1991 John R. Holtzhauser - 41 Corporate Controller, 1993 Terry Guckes - 48 Vice President, Planning and Development, 1996 Vice President, Lubrizol International Management Company, Lubrizol Corporation, 1993 (subsidiary of Lubrizol Corporation, chemical manufacturer) 8 Page 8 Part II Item 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information relating to the recent price and dividend history of the Company's Common Stock is contained on page 35 of this report. The Company's Common Stock is traded on the New York Stock Exchange. As of March 11, 1998 the Company had approximately 11,200 shareholders. Item 6 SELECTED FINANCIAL DATA Selected financial data for each of the last five years is included on page 14 of this report. Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Management's Discussion and Analysis of Financial Condition and Results of Operations is contained on pages 15 through 18, inclusive, of this report. Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Company and its subsidiaries, together with the independent auditors' report relating thereto, are contained on pages 19 through 36, inclusive, of this report. The quarterly data (unaudited) is contained on page 35 of this report. Item 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There are no such changes or disagreements. 9 Page 9 Part III Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information relating to directors of the Company contained under the heading "Election of Directors" on pages 2 and 3 of the Company's Proxy Statement dated April 3, 1998, is incorporated herein by reference. Information relative to executive officers of the Company is contained under Part I of this report. Item 11 EXECUTIVE COMPENSATION The information relating to executive compensation contained under the headings "Committees and Meetings of the Board of Directors" on pages 5 and 6 and "Executive Compensation" on pages 6 through 9, inclusive, of the Company's Proxy Statement dated April 3, 1998, is incorporated herein by reference. Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information relating to security ownership set forth under the heading "Security Ownership of Directors and Officers, and Certain Beneficial Owners" on pages 4 and 5 of the Company's Proxy Statement dated April 3, 1998, is incorporated herein by reference. Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information relating to the related transactions set forth under the heading "Related Party Transactions" on page 10 of the Company's Proxy Statement dated April 3, 1998, is incorporated herein by reference. 10 Page 10 Part IV Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of this Annual Report on Form 10-K (1) The following Consolidated Financial Statements of OM Group, Inc. are filed as a separate section of this report: Consolidated Balance Sheets at December 31, 1997 and 1996 - page 19. Statements of Consolidated Income for the years ended December 31, 1997, 1996 and 1995 page 20. Statements of Consolidated Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995 - page 21. Statements of Consolidated Cash Flows for the years ended December 31, 1997, 1996 and 1995 - page 22. Notes to Consolidated Financial Statements (2) All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (3) Exhibits (3) Articles of Incorporation and by-laws 3.1 Amended and Restated Certificate of Incorporation of the Company ** 3.2 Amended and Restated Bylaws of the Company ** (4) Instruments defining rights of security holders, including indentures 4.1 Form of Common Stock Certificate of the Company ** 4.2 Amended and Restated Credit Agreement dated as of January 30, 1998 among National City Bank as Agent and Letter of Credit Bank and ABN Amro Bank N.V. as Co-Agent and KeyBank National Association, Mellon Bank N.A., Harris Trust and Savings Bank and NBD Bank and OM Group, Inc., as Borrower. 4.3 Note Purchase Agreement among OM Group, Inc. as Seller and The Mutual Life Insurance Company of New York, Nationwide Life Mutual Life Insurance Company of New York, Nationwide Life Insurance Company and Great-West Life & Annuity Insurance Company as Purchaser, dated August 30, 1995 (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and incorporated herein by reference). 4.4 Stockholder Rights Agreement dated as of November 5, 1996 between OM Group, Inc. and National City Bank (filed as Exhibit 1 to the Company's Current Report on Form 8-K filed on December 5, 1996 which exhibit is incorporated herein by reference).
11 Page 11 Part IV Item 14 4.5 Certificate of Designation, Preferences and Rights of Series A Participatory Preferred Stock (filed as Exhibit to Current Report on Form 8-K filed November 27, 1996 and incorporated herein by reference). 4.6 Note Purchase Agreement among OM Group, Inc. as Seller and Nationwide Life Insurance Company and Great-West Life & Annuity Insurance Company as Purchaser, dated October 24, 1997. (10) Material Contracts 10.1 Service Agreement between Kokkola Chemicals ** Oy and Outokumpu Kokkola Zinc Oy dated March 22, 1993. 10.2 Technology Agreement among Outokumpu Oy, ** Outokumpu Engineering Contractors Oy, Outokumpu Research Oy, Outokumpu Harjavalta Metals Oy and Kokkola Chemicals Oy dated March 24, 1993. *10.3 OM Group, Inc. Long-Term Incentive ** Compensation Plan. *10.4 Amendment to OM Group, Inc. Long-Term Incentive *** Compensation Plan *10.5 Amendment to OM Group, Inc. Long-Term Incentive Compensation Plan (filed as Exhibit 99 to the OM Group, Inc. Form S-8 Registration Statement filed on July 3, 1996, and incorporated herein by reference.) *10.6 Mooney Chemicals, Inc. Welfare Benefit Plan. ** *10.7 Mooney Chemicals, Inc. Profit Sharing Plan. ** *10.8 Amendment to Mooney Chemicals, Inc. Profit Sharing Plan. ** *10.9 OMG/Mooney Chemicals, Inc. Employee Profit Sharing Plan (January 1, 1994 restatement) (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and incorporated herein by reference). *10.10 OM Group, Inc. Benefit Restoration Plan, effective January 1, 1995 (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and incorporated herein by reference). *10.11 Trust under OM Group, Inc. Benefit Restoration Plan, effective January 1, 1995 (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and incorporated herein by reference). *10.12 Amendment to OMG Americas, Inc. Profit-Sharing Plan (filed as Exhibit 99 to the OM Group, Inc. Form S-8 Registration Statement filed on July 3, 1996, and incorporated herein by reference). 10.13 OM Group, Inc. Non-employee Directors' Plan dated May 9, 1995, the date of the Annual Shareholder Meeting formally adopting the plan (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and incorporated herein by reference). *10.14 OM Group, Inc. Bonus Program for Key Executives ** and Middle Management. *10.15 Employment Agreement between Mooney Acquisition ** Corporation and James P. Mooney dated September 30, 1991. *10.16 Amendment to Employment Agreement between OM Group, ** Inc. and James P. Mooney dated August 19, 1992. *10.17 Employment Agreement between OM Group, Inc. and Kari ** Muuraiskangas dated January 1, 1993.
12 Page 12 Part IV Item 14 *10.18 Employment Agreement between OM Group, Inc. and ** James M. Materna dated January 1, 1993. *10.19 Employment Agreement between Mooney Chemicals, ** Inc. and Eugene Bak dated August 19, 1991. *10.20 Amendment to Employment Agreement between Mooney ** Chemicals, Inc. and Eugene Bak dated September 1, 1992. *10.21 Retirement Benefit Agreement, Eugene Bak, dated January 1, 1995 (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and incorporated herein by reference). *10.22 Employment Agreement between OM Group, Inc. ** and Thomas E. Fleming dated August 19, 1991. *10.23 Amendment to Employment Agreement between OM ** Group, Inc. and Thomas E. Fleming dated August 19, 1991. *10.24 Employment Agreement between Mooney Chemicals, ** Inc. and H. Burnham Tinker dated August 19, 1991. *10.25 Amendment to Employment Agreement between OM ** Group, Inc. and H. Burnham Tinker dated August 19, 1991. *10.26 Employment Agreement between OM Group, Inc. and Michael J. Scott (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference). *10.27 Employment Agreement between OM Group, Inc. and J.R. Hwang (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference). *10.28 Employment Agreement between OM Group, Inc. and Terry L. Guckes (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference). *10.29 Employment Agreement between OM Group, Inc. ** and Antti Aaltonen. *10.30 Employment Agreement between OM Group, Inc. and John R. Holtzhauser and Amendment thereto (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference). 10.31 Stock Purchase Agreement between SUSI Corporation and OM Group, Inc. dated December 20, 1996 (filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference). 10.32 Agreement and Plan of Merger between Auric Corporation and OM Group, Inc. dated December 19, 1997. 10.33 Joint Venture Agreement among OMG B.V., Groupe George Forrest S.A., La Generale Des Carrieres Et Des Mines and OM Group, Inc. to partially or totally process the slag located in the site of Lumbumbashi, Democratic Republic of Congo. 10.34 Agreement for Sale of concentrate production between Kokkola Chemicals Oy and La Generale Des Carriers Et Des Mines dated April 21, 1997.
13 Page 13 Part IV Item 14 * Indicates a management contract, executive compensation plan or arrangement. ** These documents were filed as exhibits to the Company's Form S-1 Registration Statement (Registration No. 33-60444) which became effective on October 12, 1993, and are incorporated herein by reference. *** Filed as Exhibit 99(b) to the OM Group, Inc. Form S-8 Registration Statement filed on February 1, 1994, and incorporated herein by reference. (21) List of Subsidiaries (filed as a separate section of this report) (23) Consent of Ernst & Young LLP (filed as a separate section of this report) (24) Power of Attorney (filed as a separate section of this report) (27) Financial Data Schedule (filed as a separate section of this report) (b) There were no reports filed on Form 8-K during the last quarter of 1997. 14 Page 14 FINANCIAL REVIEW - ------------------------------------------------------------------------------ SELECTED FINANCIAL DATA (in millions, except per share data)
Year Ended December 31, 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------- Income Statement Data: Net sales $487.3 $388.0 $361.0 $251.3 $179.5 Gross profit 117.4 84.0 74.6 60.6 45.8 Selling, general and administrative expenses 46.8 32.6 30.6 25.4 20.7 Income from operations 70.6 51.4 44.0 35.2 25.1 Other expense-net (12.6) (7.0) (5.5) (4.1) (2.0) Net income $ 38.4 $ 30.0 $ 25.9 $ 20.7 $ 15.4 Net income per common share $ 1.84 $ 1.61 $ 1.39 $ 1.11 $ 0.97 Net income per common share -- assuming dillution $ 1.78 $ 1.56 $ 1.36 $ 1.09 $ 0.95 Dividends declared and paid per common share $ 0.32 $ 0.28 $ 0.24 $ 0.19 Balance Sheet Data: Total assets $601.1 $443.5 $358.0 $278.0 $217.3 Long-term debt (excluding current portion) 170.3 109.3 89.8 46.6 30.6
On January 21, 1997, the Company acquired SCM Metal Products, Inc. (SCM) for $122 million, plus expenses (see Note C to the consolidated financial statements). 15 Page 15 MANAGEMENT'S DISCUSSION AND ANALYSIS of Financial Condition and Results of Operations The following management's discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements of the Company and the notes thereto appearing elsewhere in this Annual Report. Set forth below is summary consolidated financial information of the Company for the years ended December 31, 1997, 1996 and 1995.
(Thousands of dollars) Year Ended December 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------- Income Statement Data: Net sales $487,296 $387,999 $360,959 Gross profit 117,363 83,974 74,563 Selling, general and administrative expenses 46,791 32,553 30,594 -------------------------------------------- Income from operations 70,572 51,421 43,969 Other expense (12,595) (7,018) (5,451) Income tax expense (19,534) (14,356) (12,585) -------------------------------------------- Net income $ 38,443 $ 30,047 $ 25,933 ============================================ Products Sold: (millions of pounds) Carboxylates 50.3 43.1 39.7 Salts 61.0 50.7 46.4 Powders 38.6 2.9 2.4 -------------------------------------------- Total 149.9 96.7 88.5 ============================================
RESULTS OF OPERATIONS Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 Net sales for 1997 were $487.3 million, an increase of 25.6% compared to 1996. The increase in sales resulted principally from the January, 1997 acquisition of SCM Metal Products, Inc. (SCM) and an increase in physical volume of products sold, which offset a decline in the Company's product prices resulting from decreasing cobalt market prices. Cobalt market prices ranged from $18 to $26 per pound during 1997 compared to $20 to $32 per pound during 1996. The market price of nickel ranged from $2.66 to $3.66 per pound during 1997 compared to $2.92 to $3.78 per pound during 1996. Pounds of product sold by the Company were approximately 149.9 million pounds during 1997 compared to 96.7 million pounds in 1996. The increase in carboxylate products sold resulted from higher sales in all market regions. The increase in physical volume of salt and powder products sold primarily reflects the addition of copper salt and powder products sold, as a result of the SCM acquisition. Gross profit increased to $117.4 million in 1997, a 39.8% increase from 1996. The improvement in gross profit was primarily the result of the acquisition of SCM, higher physical volume of products sold, and changes in product mix. Cost of products sold decreased to 75.9% of net sales for the year ended 1997 from 78.4% of net sales in 1996 primarily because of lower cobalt market prices and the acquisition of SCM. 16 Page 16 MANAGEMENT'S DISCUSSION AND ANALYSIS of Financial Condition and Results of Operations Selling, general and administrative expenses increased to 9.6% of net sales in 1997 from 8.4% of net sales in 1996, primarily as a result of the acquisition of SCM. Other expense was $12.6 million in 1997 compared to $7.0 million in 1996 due primarily to increased interest expense on higher outstanding borrowings associated with the acquisition of SCM, offset by gains on foreign exchange. Income taxes as a percentage of income before tax increased to 33.7% in 1997 from 32.3% in 1996 due primarily to the non-tax deductible goodwill related to the acquisition of SCM. Net income for 1997 was $38.4 million, an increase of $8.4 million from 1996, primarily due to the aforementioned factors. Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Net sales for 1996 were $388.0 million, an increase of 7.5% compared to 1995. The increase in sales resulted principally from increases in physical volume of products sold and from changes in product mix, more than offsetting a decline in the Company's product prices resulting from decreasing cobalt market prices. Cobalt market prices ranged from $20 to $32 per pound during 1996 compared to $27 to $32 per pound during 1995. The market price of nickel ranged from $2.92 to $3.78 per pound during 1996 compared to $3.17 to $4.57 per pound during 1995. Pounds of product sold by the Company were approximately 96.7 million pounds during 1996 compared to 88.5 million pounds in 1995. The increase in carboxylate products sold resulted principally from higher sales in Europe. The increase in salt products sold resulted principally from higher sales of cobalt based products. The increase in powders sold resulted principally from higher sales of coarse grade powders. Gross profit increased to $84.0 million in 1996, a 12.6% increase from 1995. The improvement in gross profit was primarily the result of higher physical volume of cobalt based products sold. Cost of products sold decreased to 78.4% of net sales for the year ended 1996 from 79.3% of net sales in 1995 primarily because of lower cobalt market prices. Selling, general and administrative expenses remained approximately the same at 8.4% of net sales in 1996 and 1995. Other expenses were $7.0 million in 1996 compared to $5.5 million in 1995 due primarily to increased interest expense on higher outstanding borrowings, offset by gains on foreign exchange. Income taxes as a percentage of income before tax decreased to 32.3% in 1996 from 32.7% in 1995 as a greater percentage of total income was earned in Finland, which has a lower statutory tax rate (28%) than in the United States. Net income for 1996 was $30.0 million, an increase of $4.1 million from 1995, primarily due to the aforementioned factors. 17 Page 17 MANAGEMENT'S DISCUSSION AND ANALYSIS of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES During 1997, the Company's net working capital increased by approximately $50 million. This increase was primarily the result of a decrease in accounts payable from payments on certain raw materials and additional working capital acquired in the purchase of SCM. Capital expenditures increased over the prior year primarily due to plant expansion at various locations. These increased cash needs were funded through cash generated by operations as well as additional borrowings under the Company's revolving credit facility and private placements with insurance companies. In April, 1997, the Company sold 3,450,000 shares of common stock at $26.75 per share in a public offering. The net proceeds of the offering, in the amount of $87.0 million, were used to pay down a portion of the debt incurred in acquiring SCM. The Company's revolving credit facility was revised to increase available credit to $250 million in January, 1998 in connection with the acquisition of Auric Corporation, and to expand its sources of capital by adding two new institutions. In order to convert to a fixed rate and extend the term on a portion of its borrowings, during October, 1997, the Company borrowed $30 million in a private placement with a group of insurance companies and used the proceeds to reduce borrowings under its revolving credit facility with its banks. In June, 1997, the Company signed contracts as a partner to build a smelter in Lubumbashi, Democratic Republic of Congo. The Company's approximately $40 million share of the $80 million project will be funded over the two year construction period through cash generated by operations and the Company's credit facilities. The Company believes that it will have sufficient cash generated by operations and through its credit facilities to provide for its future working capital and capital expenditure requirements and to pay quarterly dividends on its common stock, subject to the Board's discretion. In February, 1998, the Board of Directors authorized an increase in quarterly dividends to $0.09 per share. Subject to several limitations in its credit facilities, the Company may incur additional borrowings under this line to finance working capital and certain capital expenditures, including, without limitation, the purchase of additional raw materials. The Company has ongoing capital expenditure programs to improve its processing technology and plant and equipment, and to expand capacity to accommodate its substantial growth. The Company anticipates that capital spending, exclusive of acquisitions or joint ventures, will approximate $50 million per year through 1999. Although most of the Company's raw material purchases and product sales are transacted in U.S. Dollars, liabilities for non-U.S. operating expenses and income taxes are denominated in local currencies. Accordingly, fluctuations in currency prices will affect the Company's operating results and net income. Specifically, when the Finnish Markka weakens against the U.S. Dollar, there is a net favorable effect on the Company due to lower operating expenses and lower net balance sheet liabilities when translated into U.S. Dollars. The reverse is true when the Finnish Markka strengthens against the U.S. Dollar. In order to partially hedge the balance sheet exposure to fluctuating rates, the Company enters into forward contracts to purchase Finnish Markka. 18 Page 18 MANAGEMENT'S DISCUSSION AND ANALYSIS of Financial Condition and Results of Operations YEAR 2000 The Company presently believes that with modifications to existing computer software and conversions to new software, the Year 2000 Issue will not pose significant operational problems to its normal business activities. The Company anticipates completing its Year 2000 project by December 31, 1998, which is prior to any anticipated impact on its operating systems. This project will be completed using a combination of existing internal and external resources. The total cost of the Year 2000 project is estimated at $2.5 million and is being funded through operating cash flows. Of the total project cost, approximately $800 thousand is attributable to the purchase of new software which will be capitalized. The remaining $1.7 million, which will be expensed as incurred, is not expected to have a material effect on the results of operations. CAUTIONARY STATEMENT FOR "SAFE HARBOR" PURPOSES UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The Company is making this statement in order to satisfy the "safe harbor" provisions contained in the Private Securities Litigation Reform Act of 1995. The foregoing discussion includes forward-looking statements relating to the business of the Company. Such forward- looking statements are subject to uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those matters expressed in or implied by such forward-looking statements. The Company believes that the following factors, among others, could affect its future performance and cause actual results of the Company to differ materially from those expressed in or implied by forward-looking statements made by or on behalf of the Company: (a) the price and supply of raw materials, particularly cobalt, copper and nickel; (b) demand for metal-based specialty chemicals in the mature markets in the United States and Europe; (c) demand for metal-based specialty chemicals in Asia-Pacific and other less mature markets, which geographic areas are an announced focus of the Company's activities; (d) the effect of non-currency risks of investing in and conducting operations in foreign countries, together with fluctuations in currency exchange rates upon the Company's international operations, including those relating to political, social, economic and regulatory factors; and (e) the availability and cost of personnel trained in Year 2000 modifications and the ability to locate and correct all relevant computer codes. 19 Page 19 CONSOLIDATED BALANCE SHEETS
(Thousands of dollars) December 31, 1997 1996 - ---------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 13,193 $ 7,818 Accounts receivable, less allowance of $680 in 1997 and $210 in 1996 80,602 60,054 Inventories 219,201 195,050 Other current assets 11,753 12,448 ------------------------- Total current assets 324,749 275,370 Property, plant and equipment: Land 2,867 467 Buildings and improvements 49,939 40,569 Machinery and equipment 162,938 122,695 Furniture and fixtures 8,615 4,074 ------------------------- 224,359 167,805 Less accumulated depreciation 74,112 57,184 ------------------------- 150,247 110,621 Other assets: Unprocessed inventory 27,499 Goodwill and other intangible assets, less accumulated amortization of $8,296 in 1997 and $4,967 in 1996 116,751 23,036 Other assets 9,316 6,930 ------------------------- TOTAL ASSETS $601,063 $ 443,456 ========================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 219 $ 3,586 Accounts payable 67,521 77,330 Accrued income taxes 9,532 2,753 Deferred income taxes 8,628 7,038 Other accrued expenses 14,782 10,802 ------------------------- Total current liabilities 100,682 101,509 Long-term debt 170,334 109,295 Contract payable 27,499 Deferred income taxes 20,555 18,393 Other long-term liabilities 8,251 1,438 Stockholders' equity: Preferred stock, $.01 par value: Authorized 2,000,000 shares; no shares issued or outstanding Common stock, $.01 par value: Authorized 30,000,000 shares; issued 22,209,346 shares in 1997 and 18,759,346 shares in 1996 222 188 Capital in excess of par value 189,281 102,125 Retained earnings 117,465 85,871 Treasury stock (142,720 shares in 1997 and 141,432 shares in 1996, at cost) (4,829) (2,621) Foreign currency translation adjustments (898) (241) ------------------------- TOTAL STOCKHOLDERS' EQUITY 301,241 185,322 ------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $601,063 $ 443,456 =========================
See accompanying notes to consolidated financial statements. 20 Page 20 STATEMENTS OF CONSOLIDATED INCOME
(Thousands of dollars, except per share data) Year Ended December 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------- Net sales $487,296 $ 387,999 $ 360,959 Cost of products sold 369,933 304,025 286,396 -------------------------------------------- 117,363 83,974 74,563 Selling, general and administrative expenses 46,791 32,553 30,594 -------------------------------------------- Income from operations 70,572 51,421 43,969 OTHER INCOME (EXPENSE) Interest expense (13,410) (7,485) (5,516) Interest income 100 244 398 Foreign exchange gain (loss) 715 223 (333) -------------------------------------------- (12,595) (7,018) (5,451) -------------------------------------------- Income before income taxes 57,977 44,403 38,518 Income taxes 19,534 14,356 12,585 -------------------------------------------- NET INCOME $ 38,443 $ 30,047 $ 25,933 ============================================ NET INCOME PER COMMON SHARE $ 1.84 $ 1.61 $ 1.39 ============================================ NET INCOME PER COMMON SHARE -- ASSUMING DILUTION $ 1.78 $ 1.56 $ 1.36 ============================================
See accompanying notes to consolidated financial statements. 21 Page 21 STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
Capital Foreign in Excess Currency Common of Par Retained Treasury Translation (Thousands of dollars) Stock Value Earnings Stock Adjustments Total - ----------------------------------------------------------------------------------------------------------- Balance at January 1, 1995 $125 $102,088 $ 40,304 $(1,158) $(184) $141,175 Net income 25,933 25,933 Translation adjustment 148 148 Dividends paid (4,474) (4,474) Treasury stock purchased (1,589) (1,589) Issuance of shares under benefit plans, including tax benefit (393) 628 235 ------------------------------------------------------------------------ Balance at December 31, 1995 125 102,088 61,370 (2,119) (36) 161,428 Net income 30,047 30,047 Non-employee directors' compensation 100 100 Translation adjustment (205) (205) Dividends paid (5,465) (5,465) Treasury stock purchased (742) (742) Issuance of shares under benefit plans, including tax benefit (81) 240 159 Three-for-two stock split 63 (63) ------------------------------------------------------------------------ Balance at December 31, 1996 188 102,125 85,871 (2,621) (241) 185,322 Net income 38,443 38,443 Non-employee directors' compensation 198 198 Translation adjustment (657) (657) Dividends paid (6,792) (6,792) Treasury stock purchased (4,173) (4,173) Issuance of shares under benefit plans, including tax benefit (57) 1,965 1,908 Sale of common stock 34 86,958 86,992 ------------------------------------------------------------------------ Balance at December 31, 1997 $222 $189,281 $117,465 $(4,829) $(898) $301,241 ------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 22 Page 22 STATEMENTS OF CONSOLIDATED CASH FLOWS
(Thousands of dollars) Year Ended December 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 38,443 $30,047 $ 25,933 Items not affecting cash: Depreciation and amortization 21,225 15,814 13,734 Foreign exchange (gain) loss (715) (223) 333 Deferred income taxes 5,108 7,841 1,552 Changes in operating assets and liabilities: Accounts receivable (9,435) 11,905 (25,336) Inventories 15,520 (83,482) (14,081) Accounts payable and other accruals (40,837) 34,765 7,342 Other 251 (851) (5,833) ------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 29,560 15,816 3,644 INVESTING ACTIVITIES Expenditures for property, plant and equipment--net (34,399) (28,129) (31,215) Acquisitions of businesses (123,718) (395) (14,511) ------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (158,117) (28,524) (45,726) FINANCING ACTIVITIES Dividend payments (6,792) (5,465) (4,474) Long-term borrowings 172,315 33,364 94,418 Payments of long-term debt (114,643) (15,591) (46,021) Purchase of treasury stock (4,173) (742) (1,589) Proceeds from exercise of stock options 708 159 235 Sale of common stock 86,992 ------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 134,407 11,725 42,569 Effect of exchange rate changes on cash (475) (297) 19 ------------------------------------------- Increase (decrease) in cash 5,375 (1,280) 506 Cash and cash equivalents at beginning of year 7,818 9,098 8,592 ------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 13,193 $ 7,818 $ 9,098 ===========================================
See accompanying notes to consolidated financial statements. 23 Page 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of OM Group, Inc. (the Company) and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in joint ventures are accounted for under the equity method. Inventories Inventories are principally stated at the lower of cost or market and valued using the last-in, first-out (LIFO) method. Property, Plant and Equipment Property, plant and equipment is recorded at historical cost less accumulated depreciation. Depreciation of plant and equipment is provided by the straight-line method over the useful lives, ranging from three to forty years, based on the various classes of assets. Long-lived assets are assessed for impairment when operating profits for the related business indicate that the carrying value may not be recoverable. Research and Development Selling, general and administrative expenses include research and development costs of $6,687, $3,756 and $3,413 in 1997, 1996 and 1995, respectively, which are expensed as incurred. Income Taxes Deferred income taxes are provided to recognize the effect of temporary differences between financial and tax reporting arising principally from different depreciation methods and inventory reserves. Deferred income taxes are not provided for undistributed earnings of foreign consolidated subsidiaries, to the extent such earnings are reinvested for an indefinite period of time. Foreign Currency Translation The functional currency for the Company's Finnish subsidiary is the U.S. dollar since a majority of its purchases and sales are denominated in U.S. dollars and it holds a significant intercompany note payable, denominated in U.S. dollars. Accordingly, foreign exchange gains and losses related to assets, liabilities and transactions which are denominated in other currencies (principally the Finnish Markka) are included in results of operations. The Company enters into forward contracts to partially hedge its balance sheet exposure to the Finnish Markka, and accordingly, gains or losses related to the forward contracts are included in results of operations. The functional currency for the Company's other subsidiaries outside of the United States is the applicable local currency. For those operations, financial statements are translated into U.S. dollars at year-end exchange rates as to assets and liabilities and weighted average exchange rates as to revenues and expenses. The resulting translation adjustments are recorded as a component of stockholders' equity. 24 Page 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) Goodwill and Other Intangibles Goodwill represents principally the excess of the purchase price of businesses acquired over the fair market value of the net tangible assets acquired. Other intangibles represent principally patents, trademarks and technology acquired. Goodwill and other intangible assets are being amortized on a straight-line basis over their respective useful lives (fifteen to forty years). Goodwill is assessed for impairment when operating profits for the related business indicate that the carrying value may not be recoverable. Cash Equivalents For purposes of the statements of consolidated cash flows, all highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. Earnings Per Share The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128 in December 1997. Basic earnings per share are computed based on the weighted average number of shares outstanding. Diluted earnings per share are computed based on the weighted average number of shares outstanding and the dilutive effect of stock options outstanding as discussed in Note H. All prior period earnings per share amounts have been restated to reflect the adoption of this statement. Stock Options and Compensation Plans The Company grants stock options for a fixed number of shares to certain employees with an exercise price equal to the fair value of the shares at the date of grant and accounts for stock options using the intrinsic value method. Accordingly, compensation expense is not recognized for the stock option grants. Non-employee members of the Board of Directors are eligible to receive their annual retainer in the form of cash, stock options, or restricted stock. If stock options are elected, the exercise price is 75% of the fair market value and directors' cash compensation is utilized to acquire the options. Also, directors electing to receive restricted stock receive additional restricted stock equal to 5% of their applied cash compensation. Accordingly, compensation expense is recognized for stock option and restricted share grants elected by eligible directors. Revenue Recognition Revenues are recognized when products are shipped to unaffiliated customers. 25 Page 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from these estimates. Financial Presentation Changes Certain amounts for prior years have been reclassified to conform to the current year presentation. Recently Issued Accounting Pronouncements In June, 1997, SFAS No. 130, "Reporting Comprehensive Income", was issued. SFAS No. 130 establishes new standards for reporting comprehensive income and its components; however the adoption of SFAS No. 130 will have no impact on net income or stockholders' equity. The Company must adopt SFAS No. 130 in the first quarter of fiscal year 1998. The Company expects that comprehensive income will not differ materially from net income. In June, 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", was issued. SFAS No. 131 changes the standards for reporting financial results by operating segments and related products and services, geographic areas, and major customers. The Company must adopt SFAS No. 131 no later than year-end 1998; adoption of this statement is not expected to have a material impact on the Company. B. INVENTORIES Current inventories consist of the following:
December 31, 1997 1996 - ----------------------------------------------------------------------------------------------- Raw materials and supplies $110,477 $ 116,389 Finished goods 107,989 87,980 ---------------------------- 218,466 204,369 LIFO reserve 735 (9,319) ---------------------------- Total inventories $219,201 $ 195,050 ============================
Unprocessed inventory at December 31, 1996 represented cobalt slag feedstock quantities in excess of a twelve-month supply. The cost of the cobalt obtained is based upon prevailing market prices. 26 Page 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) C. ACQUISITION, SALE OF COMMON STOCK, AND SUPPLEMENTAL EARNINGS PER SHARE On January 21, 1997, the Company acquired SCM Metal Products, Inc. (SCM), a subsidiary of U.S. Industries, Inc. SCM, which had fiscal 1996 sales of approximately $94 million, is one of the world's leading producers of metal-based specialty powders and chemicals, principally specialty powders primarily from copper, iron and stainless steel. The total consideration paid by the Company for SCM was $122 million, plus expenses, and was recorded using the purchase method of accounting. Accordingly, the Company's results of operations include the impact of SCM from the date of acquisition. The acquisition was financed through bank borrowings. In April, 1997, the Company sold 3,450,000 shares of common stock in a public offering. The net proceeds of $87.0 million were used to pay down a portion of the debt incurred in acquiring SCM. Had these shares been issued at the date of acquisition, net income per common share for the year ended December 31, 1997 would have been $1.81 per share. Pro forma net sales, net income and net income per share as if the acquisition had occurred as of January 1, 1997, would not be materially different from that reported in the Statements of Consolidated Income for the twelve months ended December 31, 1997. Had the acquisition occurred as of January 1, 1996, pro forma net sales, net income and net income per share for the year ended December 31, 1996 would have been as follows: Net sales $482,278 Net income $ 29,187 Net income per common share $ 1.57 Net income per common share-- assuming dilution $ 1.51
The aforementioned pro forma information includes the amortization of goodwill associated with the acquisition over 40 years by the straight-line method and an interest cost on the funds borrowed to finance the acquisition. D. FINANCIAL INSTRUMENTS Long-term debt consists of the following:
December 31, 1997 1996 - ------------------------------------------------------------------------------- Notes payable to banks $ 110,000 $ 79,000 Notes payable to insurance companies 60,000 30,000 Business acquisition debt 3,447 Other 553 434 ----------------------------- 170,553 112,881 Less: Current portion 219 3,586 ----------------------------- Total long-term debt $ 170,334 $ 109,295 =============================
27 Page 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) At December 31, 1997, the Company had a $180 million revolving credit facility with a group of banks, with variable interest rates based upon either the agent bank's rate or LIBOR plus a .35% to .75% margin, at the Company's option. In connection with the acquisitions of Auric Corporation and Dussek Campbell Limited (see Note K), the Company's revolving credit facility was further expanded to $250 million in January, 1998, including $10 million for the issuance of letters of credit. The five year agreement, expiring in January, 2003, has variable interest rates based upon either the agent bank's rate or LIBOR plus a .40% to .80% margin. Under this credit agreement, the Company must meet certain funded debt ratios, and there are also covenants which restrict the dividend paying and borrowing capability of the Company. Annual dividends are limited to $12 million or 25% of consolidated net income, whichever is greater. During the three year period ended December 20, 1997, the Company had an interest rate swap agreement to convert the variable interest rates on an aggregate contract amount of $30 million to a fixed rate of 7.28% plus .35% to .75%. Subsequent to December 31, 1997, the Company entered into several interest rate swap agreements to convert the variable interest rates on an aggregate contract amount of $60 million to an average fixed rate of 5.65% plus .40% to .80% for a three year period ending February 9, 2001. The combined effective rate of the Company's bank borrowings and the related swap agreement is 6.57%. The net interest paid or received on interest rate swaps is included in interest expense. The counterparties to the interest rate swaps are international commercial banks. During 1995 the Company borrowed $30 million from a group of insurance companies through a private placement. The borrowings bear interest at 7.38% and are due August 30, 2005. During 1997, in order to convert to a fixed rate and extend the term on a portion of its borrowings, the Company borrowed an additional $30 million in a private placement with a group of insurance companies and used the proceeds to reduce borrowings under its revolving credit facility with its banks. Borrowings amounting to $15 million bear interest at 6.82% and are due October 24, 2007. The balance of the borrowings bear interest at 6.99% and are due October 24, 2009. Under the terms of these note purchase agreements, the Company must meet certain interest coverage and funded debt ratios. There are also covenants which restrict the dividend paying and borrowing capability of the Company. Aggregate annual maturities of long-term debt for the five years following December 31, 1997 are as follows: 1998 - $219; 1999 - $139; 2000 - $20; 2001 - $20 and 2002 - $20. Interest paid was $14,771, $7,056 and $4,454 for the years ended December 31, 1997, 1996 and 1995, respectively. At December 31, 1997 the carrying value of the Company's debt approximated its fair value. The Company enters into forward contracts to purchase Finnish Markka to partially hedge its balance sheet exposure to rate fluctuations between the Finnish Markka and the U.S. dollar. At December 31, 1997, the notional value of these forward contracts approximated $7,600. The fair value of the forward contracts, based on the current settlement price at December 31, 1997, approximated $300 payable, which was recorded in results of operations. 28 Page 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) E. INCOME TAXES Income before income taxes consists of the following:
Year Ended December 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------- United States $ 7,794 $ 1,384 $ 4,654 Outside the United States 50,183 43,019 33,864 -------------------------------------------- $ 57,977 $ 44,403 $38,518 ============================================
Income taxes are summarized as follows:
Year Ended December 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------- Current: United States: Federal $ 1,267 $ 923 $ 2,158 State and local 1,166 258 85 Outside the United States 11,993 5,334 8,790 -------------------------------------------- 14,426 6,515 11,033 Deferred: United States 1,209 644 949 Outside the United States 3,899 7,197 603 -------------------------------------------- 5,108 7,841 1,552 -------------------------------------------- $ 19,534 $ 14,356 $12,585 ============================================
Significant components of the Company's deferred income taxes are as follows:
Year Ended December 31, 1997 1996 - ----------------------------------------------------------------------------------------------- Current asset - operating accruals $ 3,372 $ 4,203 Current liability - inventories (8,628) (7,038) Long-term asset - employee benefits 2,580 620 Long-term liability - accelerated depreciation (20,555) (18,393) ------------------------------ $(23,231) $(20,608) ==============================
A reconciliation of income taxes computed at the United States statutory rate to the effective income tax rate follows:
Year Ended December 31, 1997 1996 1995 - ---------------------------------------------------------------------------------------------- Income taxes at the United States statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 1.3 .4 .1 Effective tax rate differential of earnings outside of the United States (2.7) (5.7) (7.2) Change in statutory tax rate outside of the United States 1.8 Adjustment of worldwide tax liabilities (2.0) 2.2 2.9 Non-deductible goodwill 1.6 .4 .5 Other--net .5 (.4) ---------------------------------------- 33.7% 32.3% 32.7% ========================================
29 Page 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) The Company has not provided additional United States income taxes on approximately $114 million of undistributed earnings of consolidated foreign subsidiaries included in stockholders' equity. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation. The Company's intent is for such earnings to be reinvested by the subsidiaries or to be repatriated only when it would be tax effective through the utilization of foreign tax credits. It is not practicable to estimate the amount of unrecognized withholding taxes and deferred tax liability on such earnings. Income tax payments were $12,551, $14,129 and $5,060 during the years ended December 31, 1997, 1996 and 1995, respectively. F. RETIREMENT PLANS The Company sponsors several defined contribution plans covering certain employees. Company contributions are determined by the Board of Directors based upon participant compensation. The Company also sponsors a non-contributory, non-qualified supplemental executive retirement plan for certain employees, providing benefits beyond those covered in the defined contribution plans. Beginning in 1997, in connection with the acquisition of SCM, the Company maintains a 401(k) plan for certain non-union employees in the United States. Aggregate defined contribution plan expenses were $2,295, $1,727 and $1,388 in 1997, 1996 and 1995, respectively. In connection with the acquisition of SCM, the Company also has several non-contributory defined benefit retirement plans covering certain United States hourly and salaried employees, in order to provide uniform retirement income. The benefits for these plans are based primarily on years of credited service and average compensation as defined under the respective plan provisions. The Company's funding policy is to contribute annually an amount sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974. The net periodic pension cost for the year ended December 31, 1997, includes the following components: Service cost - benefits earned during the period $ 513 Interest cost on projected benefit obligations 1,056 Actual return on plan assets (1,071) -------- Net pension cost $ 498 ========
30 Page 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) - ------------------------------------------------------------------------------ The following table sets forth the funded status of the Company's pension plans and the amounts reflected in the accompanying balance sheets at December 31, 1997:
Actuarial present value of benefit obligation: Vested employees $(10,942) Non-vested employees (1,018) ----------- Accumulated benefit obligation (11,960) Additional amount related to projected salary increases (2,408) ----------- Total projected benefit obligation (14,368) Funded assets at fair value 11,737 ----------- Accrued pension liability $ (2,631) ===========
Plan assets consist primarily of equity securities and domestic governmental and corporate obligations. The following assumptions were used to determine the projected benefit obligation and plan assets: Assumed discount rate 7.50% Assumed rate of compensation increase 4.50% Expected rate of return on plan assets 9.00% G. RETIREMENT BENEFITS OTHER THAN PENSIONS The Company provides health care benefits upon retirement for certain United States employees with a specified number of years of service. The estimated cost of their benefits is actuarially determined and accrued over the employees' service periods as a level percentage of compensation for employees expected to qualify for benefits. The components of expense for postretirement benefits are as follows:
Year Ended December 31, 1997 1996 1995 - ----------------------------------------------------------------------------- Service cost - benefits earned during this period $202 $ 27 $16 Interest cost on the accumulated obligation 332 84 75 -------------------------- Postretirement benefit cost $534 $111 $91 ==========================
The liability for postretirement benefit plans other than pensions at December 31 follows:
1997 1996 - ----------------------------------------------------------------------------- Accumulated postretirement benefit obligation Retirees $(1,312) $(506) Employees eligible to retire (1,199) (253) Other active employees (3,530) (268) Unrecognized Prior service cost 1,468 Net (gain)/loss (44) 200 ------------------- Postretirement benefit obligation $(4,617) $(827) ===================
31 Page 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) The increase in annual expense during 1997 and the related accrual at December 31, 1997 reflects the impact of the acquisition of SCM. Actuarial assumptions used in the calculation of the liability for postretirement benefits other than pensions are as follows:
1997 1996 1995 - ------------------------------------------------------------------------------------------------ Discount rate 7.50% 7.75% 7.75% Projected health care cost trend rate 9.50% 9.55% 10.20% Ultimate trend rate 5.50% 5.90% 5.90% Year ultimate trend rate is achieved 2006 2006 2006
An increase of 1% in assumed health care cost trend rates would increase the accumulated benefit obligation as of December 31, 1997 by $1,447 and the aggregate annual service and interest cost by $109. H. STOCKHOLDERS' EQUITY In November, 1996, the Board of Directors declared a dividend distribution of one Right for each outstanding share of common stock. Each Right entitles the shareholder to purchase one one-hundredth share of Series A Participating Preferred Stock at a purchase price of $160 per share, subject to adjustment. The Rights become exercisable if certain events occurred relating to a person or group (Acquiring Person) acquiring or attempting to acquire 15% or more of the outstanding shares of common stock. In the event that the Rights become exercisable, each Right (except for Rights beneficially owned by the Acquiring Person, which become null and void) would entitle the holder to purchase for the exercise price then in effect, shares of the Company's common stock having a value of twice the exercise price. The Rights may be redeemed by the Board of Directors in whole, but not in part, at a price of $0.01 per Right. The Rights have no voting or dividend privileges and are attached to, and do not trade separately from the common stock. The Rights expire on November 14, 2006. The following table sets forth the computation of net income per common share and net income per common share -- assuming dilution:
Year Ended December 31, 1997 1996 1995 - ---------------------------------------------------------------------------------------------- Net income $ 38,443 $30,047 $25,933 Weighted average number of shares outstanding 20,929 18,624 18,637 Dilutive effect of stock options 725 642 500 ------------------------------------------- Weighted average number of shares outstanding -- assuming dilution 21,654 19,266 19,137 Net income per common share $ 1.84 $ 1.61 $ 1.39 ------------------------------------------- Net income per common share -- assuming dilution $ 1.78 $ 1.56 $ 1.36 -------------------------------------------
32 Page 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) The Company's Long-Term Incentive Compensation Plan has authorized the grant of options to management personnel for up to 1,523,438 shares of the Company's common stock. All options granted have 10 year terms and vest and become fully exercisable at the end of the next fiscal year following the year of grant. Pro forma information regarding net income and earnings per share is required by FASB Statement No. 123, "Accounting for Stock Based Compensation", and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value of these options was estimated at the date of grant using the Black-Scholes options pricing model with the following weighted-average assumptions:
Year Ended December 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------- Risk-free interest rate 6.0% 6.5% 6.5% Dividend yield 1.2% 1.2% 1.2% Volatility factor of Company common stock .19 .20 .20 Weighted-average expected option life (years) 5 5 5
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
1997 1996 1995 - ----------------------------------------------------------------------------------------------- Net income $ 36,764 $28,874 $25,782 Net income per common share $ 1.76 $ 1.55 $ 1.38 Net income per common share -- assuming dilution $ 1.70 $ 1.50 $ 1.35
A summary of the Company's stock option activity and related information follows:
1997 1996 1995 - ----------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Options Exercise Options Exercise Options Exercise Price Price Price --------------------------------------------------------------------- Outstanding at January 1 1,243,079 $ 12.55 1,061,656 $ 9.94 900,101 $ 7.65 Granted 239,603 39.94 202,860 25.96 208,055 18.72 Exercised (114,909) 6.15 (17,355) 9.19 (46,500) 5.04 Forfeited (4,082) 12.25 --------------------------------------------------------------------- Outstanding at December 31 1,367,773 $ 17.89 1,243,079 $12.55 1,061,656 $ 9.94 Exercisable at end of year 1,138,773 1,055,579 878,168 Weighted-average fair value of options granted during the year $ 10.28 $ 7.37 $ 5.46
The weighted-average remaining contractual life of these options outstanding is 7.0 years. 33 Page 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) The following table summarizes information about stock options outstanding and exercisable at December 31, 1997:
Outstanding Exercisable ------------------------------------- ------------------------- Weighted Average Weighted Weighted Remaining Average Average Number Contractual Exercise Number Exercise of Shares Life Price of Shares Price ------------------------------------- ------------------------- Range of exercise prices: $ 5.04-$13.00 748,824 5.4 $ 8.20 748,824 $ 8.20 $17.31-$39.94 618,949 9.1 $29.61 389,949 $23.54
I. COMMITMENTS AND CONTINGENCIES In June, 1997, the Company signed contracts as a partner to build a smelter in Lubumbashi, Democratic Republic of Congo. The Company's approximately $40 million share of the $80 million project will be funded over the two year construction period through cash generated by operations and the Company's credit facilities. The Company has also entered into a supply agreement with La Generale des Carriers et des Mines (Gecamines) to purchase all of the concentrate produced by the Luiswishi mine in Shaba, Democratic Republic of Congo through 1999. Annual production from this facility is estimated to contain approximately 4,000 metric tons of cobalt and 8,000 metric tons of copper. The cost of the cobalt and copper obtained will be based upon the prevailing market price as material is processed. The Company is a party to various legal proceedings incidental to its business and is subject to a variety of environmental and pollution control laws and regulations in the jurisdictions in which it operates. As is the case with other companies in similar industries, the Company faces exposure from actual or potential claims and legal proceedings involving environmental matters. Although it is difficult to quantify the potential impact of compliance with or liability under environmental protection laws, management believes that the ultimate aggregate cost to the Company of environmental remediation, as well as other legal proceedings arising out of operations in the normal course of business, will not result in a material adverse effect upon its financial condition or results of operations. 34 Page 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) J. BUSINESS AND GEOGRAPHIC INFORMATION The Company and its operating subsidiaries manufacture and sell metal carboxylates, salts, and powders that are primarily derived from cobalt, copper and nickel. Metal carboxylates are essential components in numerous complex chemical and industrial processes, and are used in many end markets, such as coatings, custom catalysts, liquid detergents, lubricants and fuel additives, plastic stabilizers, polyester promoters and adhesion promoters for rubber tires. Metal salts are used in a wide variety of end products, including catalysts, colorants, rechargeable batteries, petroleum additives, magnetic media and metal finishing agents. High specification metal powders have several important characteristics that make them essential components in cemented carbides for mining and machine tools, diamond tools used in construction, rechargeable batteries, and alloyed materials for automotive, electronics, transportation and catalyst applications. The Company operates in a single business segment serving numerous customers and industries. The Company's operations are located principally in the United States and Finland. Financial information by geographic area is summarized as follows:
Year Ended December 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------------ Net sales: United States $ 274,200 $160,507 $149,114 Finland 207,122 219,754 202,114 Other 5,974 7,738 9,731 ---------------------------------------------- $ 487,296 $387,999 $360,959 ============================================== Operating profit: United States $ 29,162 $ 13,781 $ 12,108 Finland 48,623 44,063 37,227 Other 901 304 504 Corporate administrative expense (8,114) (6,727) (5,870) ---------------------------------------------- 70,572 51,421 43,969 Other expense (12,595) (7,018) (5,451) ---------------------------------------------- Income before income taxes $ 57,977 $ 44,403 $ 38,518 ============================================== December 31, 1997 1996 - ------------------------------------------------------------------------------------------------ Identifiable assets: United States $355,478 $163,252 Finland 240,551 273,590 Other 5,034 6,614 ------------------------------ $601,063 $443,456 ==============================
35 Page 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except per share amounts) K. SUBSEQUENT EVENTS On January 30, 1998, the Company acquired Auric Corporation (Auric). Auric, with annual sales in fiscal 1997 of approximately $48 million, is a leading producer of electroless nickel, electroplating chemicals and metal concentrates. The total consideration paid by the Company for Auric was $80 million, plus expenses. On February 3, 1998, the Company acquired Dussek Campbell Limited (Dussek). Dussek, with annual sales in fiscal 1997 of approximately $12 million, excluding product lines not acquired, is a manufacturer of metal carboxylates. The total consideration paid by the Company for Dussek was approximately $13 million, plus expenses. These acquisitions, which were financed entirely through bank borrowings, are not reflected in the accompanying financial statements as of December 31, 1997 and will be accounted for by the purchase method of accounting. L. QUARTERLY DATA (UNAUDITED)
Quarter Ended March 31 June 30 September 30 December 31 - ---------------------------------------------------------------------------------------------------- 1997 Net sales $110,055 $124,334 $126,317 $126,590 Gross profit 26,578 29,483 29,949 31,353 Income from operations 15,696 17,869 18,320 18,687 Net income 8,216 9,579 10,215 10,433 Net income per common share $ .44 $ .46 $ .46 $ .48 Net income per common share -- assuming dilution $ .43 $ .44 $ .45 $ .46 Market price: high-low 31 3/8 - 26 1/2 33 1/4 -25 3/4 39 15/16 - 33 3/16 41 1/4 - 35 1/16 Dividends paid per share $ .08 $ .08 $ .08 $ .08 1996 Net sales $102,853 $101,485 $ 89,071 $ 94,590 Gross profit 20,211 21,030 20,905 21,828 Income from operations 12,258 13,084 13,036 13,043 Net income 7,151 7,583 7,670 7,643 Net income per common share $ .38 $ .41 $ .41 $ .41 Net income per common share -- assuming dilution $ .37 $ .39 $ .40 $ .40 Market price: high-low 25 1/8 - 21 5/8 28 - 24 1/2 27 3/8 - 22 3/4 28 3/4 - 25 3/8 Dividends paid per share $ .07 $ .07 $ .07 $ .07
36 Page 36 REPORT OF INDEPENDENT AUDITORS Board of Directors and Stockholders OM Group, Inc. We have audited the accompanying consolidated balance sheets of OM Group, Inc. as of December 31, 1997 and 1996, and the related statements of consolidated income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of OM Group, Inc. at December 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Cleveland, Ohio February 3, 1998 37 Page 37 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. OM GROUP, INC. By: /s/ James P. Mooney ----------------------------------- James P. Mooney Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/ James P. Mooney Chairman and Chief Executive Officer March 23, 1998 - -------------------------- --------------- James P. Mooney /s/ Eugene Bak * President and Chief Operating Officer March 23, 1998 - -------------------------- --------------- Eugene Bak /s/ Markku Toivanen * Director March 23, 1998 - -------------------------- --------------- Markku Toivanen /s/ Lee R. Brodeur * Director March 23, 1998 - -------------------------- --------------- Lee R. Brodeur /s/ Thomas R. Miklich * Director March 23, 1998 - -------------------------- --------------- Thomas R. Miklich /s/ John E. Mooney * Director March 23, 1998 - -------------------------- --------------- John E. Mooney /s/ Frank Butler * Director March 23, 1998 - -------------------------- --------------- Frank Butler /s/ James M. Materna Chief Financial Officer (Principal March 23, 1998 - -------------------------- Financial and Accounting Officer) --------------- James M. Materna /s/ James P. Mooney March 23, 1998 - -------------------------- --------------- James P. Mooney Attorney-in-Fact
*James P. Mooney, by signing his name hereto signs this document on behalf of each of the persons so indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission. 38 Page 38 EXHIBIT INDEX
Exhibit No. Exhibit - ----------- ------- 4.2 Amended and Restated Credit Agreement dated as of January 30, 1998 among National City Bank as Agent and Letter of Credit Bank and ABN Amro Bank N.V. as Co-Agent and Keybank National Association, Mellon Bank N.A., Harris Trust and Savings Bank and NBD Bank and OM Group, Inc., as Borrower. 4.6 Note Purchase Agreement among OM Group, Inc. as Seller and Nationwide Life Insurance Company and Great-West Life & Annuity Insurance Company as Purchaser, dated October 24, 1997. 10.32 Agreement and Plan of Merger between Auric Corporation and OM Group, Inc. dated December 19, 1997. 10.33 Joint Venture Agreement among OMG B.V., Groupe George Forrest S.A., La Generale Des Carrieres Et des Mines and OM Group, Inc. to partially or totally process the slag located in the site of Lumbumbashi, Democratic Republic of Congo. 10.34 Agreement for sale of concentrate production between Kokkola Chemicals Oy and La Generale Des Carriers Et des Mines dated April 21, 1997. 21 List of Subsidiaries 23 Consent of Ernst & Young LLP 24 Power of Attorney 27 Financial Data Schedule 27.1 Restated 1st Quarter 1996 Financial Data Schedule 27.2 Restated 2nd Quarter 1996 Financial Data Schedule 27.3 Restated 3rd Quarter 1996 Financial Data Schedule 27.4 Restated 1st Quarter 1997 Financial Data Schedule 27.5 Restated 2nd Quarter 1997 Financial Data Schedule 27.6 Restated 3rd Quarter 1997 Financial Data Schedule
EX-4.2 2 EXHIBIT 4.2 1 EXHIBIT 4.2 AMENDED AND RESTATED CREDIT AGREEMENT (U.S. $250,000,000) Dated as of January 30, 1998 among OM GROUP, INC. as Borrower and THE BANKS WHICH ARE SIGNATORIES HERETO, NATIONAL CITY BANK as Agent and Letter of Credit Bank and ABN AMRO BANK N.V. as Co-Agent 2 TABLE OF CONTENTS
Section Page - ------- ---- 1 DEFINITIONS AND ACCOUNTING TERMS 1.1 Certain Defined Terms......................................................................... 1 1.2 Computation of Time Periods................................................................... 16 1.3 Accounting Terms.............................................................................. 16 1.4 Dollar Equivalents............................................................................ 17 2 STATEMENT OF TERMS 2.1 Revolving Credit Facility..................................................................... 17 (a) Revolving Credit Loans............................................................... 17 (b) Revolving Credit Borrowings.......................................................... 17 (c) Revolving Credit Notes; Loan Account................................................. 17 (d) Control Account Maintained by Agent.................................................. 18 2.2 Credit Requests............................................................................... 18 (a) Credit Requests Executed by the Borrower............................................. 18 (b) Requests for Revolving Credit Borrowing Deemed Given................................. 19 2.3 Funding of Revolving Credit Loans............................................................. 20 (a) Disbursement of Funds Received....................................................... 20 2.4 Availability of Funds......................................................................... 20 2.5 Failure of Bank to Fund....................................................................... 20 (a) Payment Constituting Ratable Portion................................................. 20 (b) Treatment of Defaulting Bank......................................................... 21 (c) Continuing Borrower Obligation....................................................... 21 (d) Continuing Bank Obligation to Fund................................................... 21 2.6 Repayments and Prepayments.................................................................... 21 (a) Repayment............................................................................ 21 (b) Mandatory Prepayment of Revolving Credit Loans....................................... 21 (c) Mandatory Reduction of Revolving Credit Commitment................................... 22 (d) Voluntary Reduction of Revolving Credit Commitment................................... 22 (e) Permitted Prepayments................................................................ 23 (f) Extension of Commitment Period....................................................... 23 2.7 Rate Conversion and Rate Continuation......................................................... 24 2.8 Letters of Credit............................................................................. 25 (a) Term; Form and Conditions of Letters of Credit....................................... 25 (b) Requests for Letters of Credit....................................................... 26 (c) Participation by Banks in Letters of Credit.......................................... 26 (d) Reimbursement........................................................................ 27 (e) Failure to Reimburse................................................................. 27 (f) Obligations Absolute................................................................. 27 (g) Liability of Letter of Credit Bank................................................... 28 (h) Letter of Credit Bank Indemnity...................................................... 29 (i) Effect of Applicable Law or Custom................................................... 29
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Section Page - ------- ---- (j) Termination of Letter of Credit Commitment........................................... 29 2.9 Fees.......................................................................................... 30 (a) Revolving Credit Commitment Fee...................................................... 30 (b) Arrangement and Structuring.......................................................... 30 (c) Annual Agent's Fee................................................................... 30 (d) Letter of Credit Fees................................................................ 30 (e) Late Charges......................................................................... 31 (f) Applicable Risk Participation Percentage and Applicable Facility Fee Percentage...... 31 (g) Payment of Fees; NonRefundable....................................................... 31 2.10 Interest on Revolving Credit Loans............................................................ 31 (a) Interest Rate........................................................................ 32 (b) Applicable LIBOR Margin; Terms of Adjustment......................................... 32 (c) Default Interest..................................................................... 33 (d) Interest Rate Determination.......................................................... 33 2.11 Payments and Computations..................................................................... 34 (a) Payments............................................................................. 34 (b) Payment Procedures................................................................... 34 (c) Authorization to Charge Account...................................................... 34 (d) Computations of Interest and Fees.................................................... 34 (e) Payment not on Business Day.......................................................... 35 (f) Presumption of Payment in Full by Borrower........................................... 35 2.12 Change in Law; LIBOR Rate Loans Unlawful...................................................... 35 2.13 Unavailability................................................................................ 36 (a) Inadequate Rate...................................................................... 36 (b) Unavailable Quotations............................................................... 36 (c) Unavailable Deposits................................................................. 36 2.14 Pro Rata Treatment............................................................................ 36 3 CONDITIONS OF LENDING. 3.1 Conditions Precedent to Initial Loans......................................................... 36 (a) This Agreement....................................................................... 36 (b) Subsidiary Guaranties................................................................ 37 (c) Corporate Action; Incumbency......................................................... 37 (d) Domestic Subsidiary - Corporate Action; Incumbency................................... 37 (e) Good Standing - Borrower............................................................. 37 (f) Good Standing - Domestic Subsidiaries................................................ 37 (g) Revolving Credit Notes............................................................... 37 (h) Legal Opinions....................................................................... 38 (i) Minimum Availability................................................................. 38 (j) Assignment Agreement................................................................. 38 (k) Consents............................................................................. 38 (l) Delivery of Financial Statements; Officer's Certificate.............................. 38
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Section Page - ------- ---- (m) Credit Request and Disbursement Direction Letter..................................... 38 (n) Payment of Fees...................................................................... 38 (o) Projections.......................................................................... 39 (p) Insurance............................................................................ 39 (q) Other Information.................................................................... 39 3.2 Conditions Precedent to all Loans............................................................. 39 (a) Representation Bringdown............................................................. 39 (b) No Default; Compliance with Terms.................................................... 39 (c) No Material Adverse Effect........................................................... 39 4 GENERAL REPRESENTATIONS AND WARRANTIES. 4.1 Existence..................................................................................... 39 4.2 Authorization................................................................................. 40 4.3 Enforceability................................................................................ 40 4.4 Litigation; Proceedings....................................................................... 40 4.5 Taxes......................................................................................... 41 4.6 Title......................................................................................... 41 4.7 No Breach or Default.......................................................................... 41 4.8 Consents; Approvals........................................................................... 41 4.9 Lawful Operations............................................................................. 41 4.10 Environmental Compliance...................................................................... 41 4.11 ERISA......................................................................................... 42 4.12 Adverse Obligations; Labor Disputes........................................................... 43 4.13 Financial Statements.......................................................................... 43 4.14 Value; Solvency............................................................................... 43 4.15 Investment Company Act Status................................................................. 43 4.16 Use of Proceeds; Regulation U/Regulation X Compliance......................................... 43 4.17 Full Disclosure............................................................................... 44 5 COVENANTS OF THE BORROWER. 5.1 Reporting and Notice Covenants................................................................ 44 (a) Quarterly Financial Statements....................................................... 44 (b) Annual Financial Statements.......................................................... 44 (c) Officer's Certificates............................................................... 45 (d) Annual Business Plan................................................................. 45 (e) Other Information.................................................................... 45 (f) Projections.......................................................................... 45 (g) Notices.............................................................................. 46 (h) Notice of Default under ERISA........................................................ 46 (i) Environmental Reporting.............................................................. 46 (j) Multiemployer Plan Withdrawal Liability.............................................. 47 5.2 Affirmative Covenants......................................................................... 47 (a) Corporate Existence.................................................................. 47
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Section Page - ------- ---- (b) Compliance with Law.................................................................. 47 (c) Insurance............................................................................ 47 (d) Taxes................................................................................ 48 (e) Properties; Financial Records........................................................ 48 (f) Visitation........................................................................... 48 (g) Domestic Subsidiaries as Subsidiary Guarantors....................................... 48 (h) Interest Rate Protection Agreements.................................................. 48 5.3 Negative Covenants............................................................................ 49 (a) Mergers; Sales of Assets; Fundamental Transactions................................... 49 (b) Credit Extensions; Investments....................................................... 49 (c) Indebtedness......................................................................... 50 (d) Liens; Leases........................................................................ 50 (e) Dividends............................................................................ 51 (f) Accounting Changes................................................................... 52 (g) Use of Proceeds...................................................................... 52 (h) Compliance with ERISA................................................................ 52 (i) Change in Nature of Business......................................................... 53 5.4 Financial Covenants........................................................................... 53 (a) Consolidated Total Funded Debt to EBITDA Ratio....................................... 53 (b) Consolidated Total Funded Debt....................................................... 53 6 EVENTS OF DEFAULT 6.1 Payment Failure............................................................................... 53 6.2 Representations and Warranties................................................................ 54 6.3 Reporting and Notice Provisions; Violations of Certain Affirmative Covenants.................. 54 6.4 Violation of Negative Covenants; Violation of Certain Other Covenants......................... 54 6.5 Loan Documents................................................................................ 54 6.6 Cross-Default................................................................................. 54 6.7 Termination of Existence...................................................................... 55 6.8 Control....................................................................................... 55 6.9 Failure of Enforceability of this Agreement or any Loan Document.............................. 55 6.10 Judgments..................................................................................... 55 6.11 Forfeiture Proceedings........................................................................ 55 6.12 Payments of Debts............................................................................. 55 6.13 Voluntary Proceedings......................................................................... 55 6.14 Involuntary Proceedings....................................................................... 56 7 REMEDIES 7.1 Optional Defaults............................................................................. 56 7.2 Automatic Defaults............................................................................ 56 7.3 General Rights and Remedies of Agent and the Banks............................................ 56 7.4 Set-off....................................................................................... 56
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Section Page - ------- ---- 7.5 Acions in Respect of the Letters of Credit upon Default........................................ 57 7.6 Letter of Credit Collateral Account............................................................ 57 (a) Application......................................................................... 57 (b) No Borrower or Third Party Claims..................................................... 57 (c) No Liens or Transfers of Account...................................................... 57 (d) Reasonable Care....................................................................... 58 7.7 Termination; Effect on Borrower Obligations.................................................... 58 7.8 Equalization................................................................................... 58 7.9 Remedies Cumulative............................................................................ 58 8 THE AGENT. 8.1 The Agent...................................................................................... 58 8.2 Nature of Appointment.......................................................................... 58 8.3 Agent as a Bank; Other Transactions............................................................ 59 8.4 Instructions from Banks........................................................................ 59 8.5 Bank's Diligence............................................................................... 59 8.6 No Implied Representations..................................................................... 59 8.7 Sub-Agents..................................................................................... 59 8.8 Agent's Diligence.............................................................................. 59 8.9 Notice of Default.............................................................................. 60 8.10 Agent's Liability.............................................................................. 60 8.11 Agent's Indemnity.............................................................................. 61 8.12 Resignation of Agent........................................................................... 61 9 TRANSFERS AND ASSIGNMENTS. 9.1 Transfer of Commitments........................................................................ 61 (a) Prior Consent......................................................................... 62 (b) Agreement; Transfer Fee............................................................... 62 (c) Revolving Credit Notes................................................................ 62 (d) Parties............................................................................... 62 9.2 Sale of Participations......................................................................... 63 (a) Benefits of Participant............................................................... 63 (b) Rights Reserved....................................................................... 63 (c) No Delegation......................................................................... 63 9.3 Confidentiality................................................................................ 63 10 INDEMNITIES. 10.1 Increased Costs................................................................................ 64 10.2 Risk-Based Capital............................................................................. 64 10.3 Taxes.......................................................................................... 64 (a) Taxes; Withholding.................................................................... 64 (b) Stamp Taxes........................................................................... 65 (c) Indemnification for Other Taxes....................................................... 65
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Section Page - ------- ---- (d) Request for Refund.................................................................... 65 (e) Furnishing of Certificate............................................................. 66 (f) Exemption Certificate................................................................. 66 (g) Survival of Provision................................................................. 67 10.4 Losses......................................................................................... 67 10.5 Indemnification for Requests................................................................... 67 10.6 General Indemnity.............................................................................. 67 10.7 Environmental Indemnity........................................................................ 68 10.8 Certificate for Indemnification................................................................ 68 10.9 Duty To Mitigate; Standard Treatment........................................................... 68 11 GENERAL 11.1 Amendments and Waivers......................................................................... 68 11.2 Cumulative Provisions; Integration............................................................. 69 11.3 Binding Effect................................................................................. 69 11.4 Costs and Expenses............................................................................. 70 11.5 Survival of Provisions......................................................................... 70 11.6 Immediate U.S. Funds........................................................................... 70 11.7 Captions....................................................................................... 70 11.8 Interest Rate Limitation....................................................................... 70 11.9 Illegality..................................................................................... 70 11.10 Notices........................................................................................ 71 11.11 Governing Law.................................................................................. 71 11.12 Entire Agreement............................................................................... 71 11.13 JURY TRIAL WAIVER.............................................................................. 71 11.14 Jurisdiction; Venue; Inconvenient Forum........................................................ 71 (a) Jurisdiction.......................................................................... 71 (b) Venue; Inconvenient Forum............................................................. 72 11.15 Execution in Counterparts...................................................................... 72
vi 8 EXHIBITS AND SCHEDULES Exhibit A (Form of Revolving Credit Note) Exhibit B (Form of Credit Request) Exhibit C (Form of Rate Conversion/Continuation Request) Exhibit D (Form of Subsidiary Guaranty) Exhibit E (Form of Acquisition Certificate) Exhibit F (Form of Bank Assignment) Annex I Commitments Annex II Supplemental Schedule vii 9 AMENDED AND RESTATED CREDIT AGREEMENT (U.S. $250,000,000) DATED AS OF JANUARY 30, 1998 OM GROUP, INC., a Delaware corporation, the BANKS listed on the signature pages of this Agreement, NATIONAL CITY BANK, a national banking association, as Agent for the Banks under this Agreement and as Letter of Credit Bank and ABN AMRO BANK N.V., as Co-Agent, hereby agree as follows: 1 DEFINITIONS AND ACCOUNTING TERMS. 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed thereto in section 302(a)(2) of ERISA. "ACQUISITIONS" means the acquisition by the Borrower of (i) Auric Corporation (d/b/a Fidelity Chemical Products Corporation), for a purchase price not to exceed Eighty-Five Million Dollars ($85,000,000) and (ii) Dussek Campbell Limited, for a purchase price not to exceed Fifteen Million Dollars ($15,000,000). "ACQUISITION CERTIFICATE" means the certificate attached hereto as Exhibit E with respect to the Acquisitions. "ACQUISITION DOCUMENTS" means, with respect to each of the Acquisitions, the purchase agreement and all documents or agreements or instruments delivered by the Borrower or Domestic Subsidiary in connection therewith. "ADVANTAGE" means any payment (whether made voluntarily or involuntarily, by offset of any deposit or other Indebtedness or otherwise) received by a Bank in respect of the Obligations if the payment results in any other Bank's having more than its Ratable Portion of the Obligations in question. "AFFILIATE" means, with respect to a specified Person, any other Person: (a) which Controls, or is Controlled by, or is under common Control with such specified Person. "AGENT" means National City Bank, its successors and assigns, in its capacity as administrative agent for the Banks. "AGENT FEE LETTER" means that certain letter, dated January 30, 1998, from the 10 Agent addressed to the Borrower and accepted by the Borrower. "AGREEMENT" means this Amended and Restated Credit Agreement, which amends and restates in its entirety the Existing Credit Agreement, and each amendment, supplement or modification, if any, to this Amended and Restated Credit Agreement. "ALTERNATE BASE RATE" means, for any day, a rate per annum equal to the higher of: (a) the rate of interest which is established from time to time by NCB at its principal office in Cleveland, Ohio as its "prime rate" or "base rate" in effect, such rate to be adjusted automatically, without notice, as of the opening of business on the effective date of any change in such rate (it being agreed that: (i) such rate is not necessarily the lowest rate of interest then available from NCB on fluctuating rate loans and (ii) such rate may be established by NCB by public announcement or otherwise) and (b) the Federal Funds Rate in effect on such day plus one half of one percent (1/2 of 1%). "ALTERNATE BASE RATE LOAN" means an Loan which bears interest as provided in Section 0(a)(i) of this Agreement. "ALTERNATE BASE RATE BORROWING" means a Borrowing consisting of Alternate Base Rate Loans. "APPLICABLE LIBOR MARGIN" means, with respect to any Margin Adjustment Date, the percentage applicable to a LIBOR Rate Loan corresponding to the Consolidated Total Funded Debt to EBITDA Ratio set forth below (determined on the basis of the Consolidated Total Funded Debt to EBITDA Ratio for the Cumulative Four Quarter Period ending on the Determination Date applicable to such Margin Adjustment Date and calculated in accordance with Section 0 of this Agreement): ============================================================= Consolidated Total LIBOR Rate Funded Debt to Margin EBITDA Ratio ============================================================= > 2.5 to 1.0 but < 3.0 to 1.0 .80% - - - ------------------------------------------------------------- > 2.0 to 1.0 but < 2.5 to 1.0 .65% - - - ------------------------------------------------------------- > 1.5 to 1.0 but < 2.0 to 1.0 .55% - - - ------------------------------------------------------------- < 1.5 to 1.0 .40% ============================================================= "APPLICABLE RISK PARTICIPATION PERCENTAGE"; "APPLICABLE COMMITMENT FEE 2 11 PERCENTAGE" means, with respect to the risk participation fee applicable to Standby Letters of Credit required by Section 0 of this Agreement and the commitment fee required by Section 0(a) of this Agreement, as the case may be, the percentage set forth in the column below which is applicable to such risk participation fee or commitment fee, as the case may be, and which corresponds to the Consolidated Total Funded Debt to EBITDA Ratio set forth below (in each case determined on the basis of the Consolidated EBITDA for the Cumulative Four Quarter Period ending on the Determination Date applicable to such risk participation fee or commitment fee, as the case may be, and calculated in accordance with Section 0 of this Agreement): ================================================================================ Consolidated Total Risk Commitment Funded Debt to Participation Fee Percentage EBITDA Ratio Margin =============================================================================== > 2.5 to 1.0 but < 3.0 to 1.0 .80% 0.30% - - - -------------------------------------------------------------------------------- > 2.0 to 1.0 but < 2.5 to 1.0 .65% 0.25% - - - -------------------------------------------------------------------------------- > 1.5 to 1.0 but < 2.0 to 1.0 .55% 0.20% - - - -------------------------------------------------------------------------------- < 1.5 to 1.0 .40% 0.15% ================================================================================ "BANK ASSIGNMENT AGREEMENT" has the meaning specified in Section 0 of this Agreement. "BANKS" means the banks listed on the signature pages hereof and the successors thereto and assignees thereof. "BORROW" means to obtain a Revolving Credit Borrowing. "BORROWER" means OM Group, Inc., a Delaware corporation. "BORROWING" means a group of Revolving Credit Loans of a single Type made by the Banks on a single date and as to which a single Interest Period is in effect (i.e., any group of Loans made by the Banks of a different Type, or having a different Interest Period (regardless of whether such Interest Period commences on the same date as another Interest Period), or made on a different date shall be considered to comprise a different Borrowing). "BUSINESS DAY" means: (i) a day of the year on which banks are not required or authorized to close in Cleveland, Ohio and (ii) if the applicable Business Day relates to 3 12 LIBOR Rate Loans, a day of the year which is a Business Day described in clause (i) above and which is also a day on which dealings in Dollar deposits are carried on in the London interbank market and banks are open for business in London. "CAPITALIZED LEASES" means, in respect of any Person, any lease of property imposing obligations on such Person, as lessee of such property, which are required in accordance with GAAP to be capitalized on a balance sheet of such Person. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Sections 9601 et seq. "CHANGE IN CONTROL" means, if (x) any "person" or "group" shall become the "beneficial owner" (as those terms are respectively used in the Securities and Exchange Act of 1934, as amended, and the rules and regulations thereunder) of more than fifty percent (50%) of the outstanding voting stock of the Borrower or shall otherwise acquire the power (whether by contract, by proxy or otherwise) to elect a majority of the Borrower's board of directors or (y) during any twelve (12) month period, individuals who were directors of the Borrower at the beginning of such period or were elected to the Board of Directors of the Borrower with the approval of a majority of such directors shall cease to constitute a majority of the Board of Directors. "CLOSING DATE" means the date and the time the initial Revolving Credit Borrowing is advanced under this Agreement. "CO-AGENT" means ABN Amro Bank N.V., its successors and assigns, in its capacity as Co-Agent. "CODE" means the Internal Revenue Code of 1986, as amended. "CONSOLIDATED EBITDA" means, at the time and for any Cumulative Four Quarter Period, the Consolidated Net Income for such period plus the consolidated interest expense for such period for the Borrower and its Subsidiaries plus the consolidated federal, state and local income taxes for such period for the Borrower and its Subsidiaries plus the consolidated depreciation and amortization expense for such period for the Borrower and its Subsidiaries, each as determined in accordance with GAAP. "CONSOLIDATED LEASE EXPENSE" means, for any period, the amount of lease expense of the Borrower and its Subsidiaries for such period incurred or accrued by the Borrower and its Subsidiaries in connection with operating leases, as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NET INCOME" means, for any period, the net income (or loss) of the Borrower and its Subsidiaries as determined on a consolidated basis in accordance 4 13 with GAAP, after taxes and after extraordinary items, but without giving effect to any gain resulting from any reappraisal or write-up of any asset. "CONSOLIDATED NET WORTH" means, as of the date of determination, all amounts that would be included under the caption "shareholders' equity" (or any like caption) on a balance sheet of the Borrower determined on a consolidated basis in accordance with GAAP as at such date. "CONSOLIDATED TOTAL FUNDED DEBT" means, Indebtedness of the Person in question, including, without limitation, (a) any Capitalized Lease, (b) any Guaranty of Indebtedness owing by another Person and (c) any long-term Indebtedness secured by a Lien encumbering any property owned or being acquired by the Person in question even if the full faith and credit of that person or entity is not pledged to the payment thereof. "CONSOLIDATED TOTAL FUNDED DEBT TO EBITDA RATIO" means, as at the end of any Fiscal Quarter, the ratio of: (a) the aggregate principal amount of the Consolidated Funded Debt outstanding as of the end of such Fiscal Quarter to (b) the Consolidated EBITDA for the Cumulative Four Quarter Period then ended. "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "CONTROL ACCOUNT" has the meaning set forth in Section 0 of this Agreement and maintained by the Agent in respect of Revolving Credit Borrowings. "CREDIT EVENT" means: (a) the incurrence of the obligation of each Bank to make a Revolving Credit Loan on the occasion of each Revolving Credit Borrowing or Rate Conversion or Rate Continuation; (b) the making by any Bank of a Revolving Credit Loan or the issuance by the Letter of Credit Bank of any Letter of Credit; (c) the delivery by the Borrower of (i) a Credit Request requesting a Revolving Credit Borrowing or the issuance of a Letter of Credit or (ii) a Rate Conversion/Continuation Request requesting the conversion or continuation of Revolving Credit Borrowings; (d) a Rate Conversion or Rate Continuation, and (e) the acceptance by the Borrower of proceeds of any Revolving Credit Borrowing. "CREDIT REQUEST" has the meaning specified in Section 0(a) of this Agreement with respect to a request by the Borrower for a Revolving Credit Borrowing. "CUMULATIVE FOUR QUARTER PERIOD" means, with respect to any date of determination, the period consisting of the four consecutive Fiscal Quarters immediately preceding any such date of determination, whether such quarters are in the same Fiscal Year of the Borrower or different Fiscal Years of the Borrower. 5 14 "DEEMED CREDIT REQUEST" has the meaning specified in Section 0(b) of this Agreement. "DEFAULT UNDER ERISA" means (a) the occurrence or existence of a material Accumulated Funding Deficiency in respect of any of the Borrower's or its Subsidiaries' Pension Plans, (b) any material failure by the Borrower or any of its Subsidiaries to make a full and timely payment of premiums required by ERISA for insurance against any employer's liability in respect of any such plan, (c) any material breach of a fiduciary duty by the Borrower or any of its Subsidiaries or any trustee in respect of any such plan or (d) the existence of any action for the forcible termination of any such plan. "DETERMINATION DATE" has: (i) in respect of a Margin Adjustment Date in respect of an Applicable LIBOR Margin, the meaning specified in Section 0, (ii) in respect to any Fee Adjustment Date in respect of an Applicable Risk Participation Percentage or an Applicable Facility Fee Percentage, the meaning specified in Section 0(f) of this Agreement. "DOLLAR EQUIVALENT" means, on any date of determination, with respect to any amount in any covenant and relating to a Subsidiary which is not a Domestic Subsidiary, the equivalent in Dollars of such amount, determined by the Agent using the Exchange Rate with respect to such currency then in effect. "DOLLARS", "U.S. DOLLARS" and the sign "$" each means lawful money of the United States. "DOMESTIC SUBSIDIARY" means each Subsidiary of the Borrower which is (i) wholly-owned by the Borrower, directly or through one or more other wholly-owned Subsidiaries and (ii) organized under the laws of any state of the United States. "DOMESTIC SUBSIDIARY CERTIFICATE" means a certificate, together with all of the attachments thereto, substantially in the form of the certificates delivered by the Borrower pursuant to Section 0 "ENVIRONMENTAL LAWS" means CERCLA, the Hazardous Material Transportation Act (49 USC 1801 et seq.), RCRA, the Federal Water Pollution Control Act (33 USC 1251 et seq.), the Toxic Substances Control Act (15 USC 2601 et seq.) and the Occupational Safety and Health Act (29 USC 651 et seq.), as such laws have been or hereafter may be amended, and any and all analogous present or future environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974 (Public Law 93-406), as amended, and in the event of any amendment affecting any section 6 15 thereof referred to in this Agreement, that reference shall be reference to that section as amended, supplemented, replaced or otherwise modified. "ERISA AFFILIATE" of any Person means any other Person that for purposes of Title IV of ERISA is a member of such Person's controlled group, or under common control with such Person, within the meaning of Section 414 of the Code. "ERISA REGULATOR" means any governmental agency (such as the Department of Labor, the Internal Revenue Service and the Pension Benefit Guaranty Corporation) having any regulatory authority over any Employee Benefit Plan. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest Period in respect of any LIBOR Rate Loan, as of any date of determination, the aggregate of the then stated maximum reserve percentages (including any marginal, special, emergency or supplemental reserves), expressed as a decimal, applicable to such Interest Period (if more than one such percentage is applicable, the daily average of such percentages for those days in such Interest Period during which any such percentages shall be so applicable) by the Board of Governors of the Federal Reserve System, any successor thereto, or any other banking authority, domestic or foreign, to which the Agent or any Bank may be subject in respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) or in respect of any other category of liabilities including deposits by reference to which the interest rate on LIBOR Rate Loans is determined or any category of extension of credit or other assets that include the LIBOR Rate Loans. For purposes hereof, such reserve requirements shall include, without limitation, those imposed under Regulation D of the Federal Reserve Board and the LIBOR Rate Loans shall be deemed to constitute Eurocurrency Liabilities subject to such reserve requirements without benefit of credits for proration, exceptions or offsets which may be available from time to time to any Bank under said Regulation D. "EVENT OF DEFAULT" has the meaning specified in Section 0 of this Agreement. "EXCHANGE RATE" means, with respect to any currency other than Dollars on a particular date, the rate at which such currency may be exchanged into Dollars, as set forth on such date on the relevant Reuters currency page at or about 11:00 a.m. London time, on such date. In the event that such rate does not appear on any Reuters currency page, the "Exchange Rate" with respect to such currency shall be determined by reference to such other publicly available service for exchange rates as may be agreed upon by the Agent and the Borrower or, in the absence of such agreement, such "Exchange Rate" 7 16 shall instead be the Agent's spot rate of exchange in the market which its foreign currency exchange operations are then being conducted, at or about 10:00 A.M., local time, on such date for the purchase of Dollars with such Alternate Currency, for delivery two (2) Business Days later; provided, that if at the time of any such determination, no such spot rate can be reasonably 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. "EXISTING CREDIT AGREEMENT" means that certain Second Amended and Restated Credit Agreement, dated as of January 21, 1997, among the Borrower, NCB as Agent, and the banks which are signatories thereto. "FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest one hundredth of one percent (1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that: (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such a rate on such transactions on the immediately preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Rate for such Business Day shall be the average of quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. "FEE ADJUSTMENT DATE" has the meaning specified in Section 0 of this Agreement. "FEE DETERMINATION DATE" has the meaning specified in Section 0 of this Agreement. "FISCAL QUARTER" means any of the four consecutive three-month fiscal accounting periods of the Borrower ending on March 31, June 30, September 30 and December 31 of each calendar year. "FISCAL YEAR" means the Borrower's regular annual accounting period for federal income tax purposes ending on December 31 of each calendar year. "GAAP" means generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 0 of this Agreement and otherwise consistently applied. "GUARANTOR" means a Person who pledges his credit or property in any manner 8 17 for the payment or other performance of Indebtedness, agreements or other obligation of another Person including, without limitation, any guarantor (whether of collection or payment), any obligor in respect of a standby letter of credit or surety bond issued for the account of another Person, any surety, any co-maker, any endorser, and any Person who agrees conditionally or otherwise to make any loan, purchase or investment in order to enable another Person to prevent or correct a default of any kind or otherwise to assure a creditor against loss in respect of such Indebtedness, agreements or obligations. "GUARANTY" means the obligations undertaken by a Guarantor. "INDEBTEDNESS" means, with respect to any Person, without duplication, (a) indebtedness for borrowed money, (b) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) obligations of such Person for the deferred purchase price of property or services with a stated maturity of greater than twelve (12) months, (d) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (e) all obligations of such Person as an account party in respect of letters of credit or banker's acceptances, (f) obligations of a third party secured by any Lien on the properties or assets of such Person and (g) obligations under any direct or indirect Guaranty in respect of indebtedness or obligations of a third party of the kinds referred to in clauses (a) through (g) above. "INTELLECTUAL PROPERTY" means all inventions, designs, patents, and applications therefor, trademarks, service marks, trade names, and registrations and applications therefor, copyrights, any registrations therefor, and any licenses thereof, whether now owned or existing or hereafter arising or acquired other than those which are owned, existing or acquired outside of the United States. "INTEREST PERIOD" means, for each LIBOR Rate Loan comprising a Borrowing, the period commencing on the date of such LIBOR Rate Loan or the date of the Rate Conversion or Rate Continuation of any Loans into such LIBOR Rate Loan and ending on the numerically corresponding day of the period selected by the Borrower pursuant to the provisions hereof and each subsequent period commencing on the last day of the immediately preceding Interest Period in respect of such LIBOR Rate Loan and ending on the last day of the period selected by the Borrower pursuant to the provisions hereof; provided, however, that the duration of each such Interest Period shall be one, two, three or six months, in each case as the Borrower may select by delivery to the Agent of a Credit Request therefor in accordance with Section 0 of this Agreement and; provided, further, that: (i) Interest Period for each LIBOR Rate Loan comprising part of the same Borrowing shall be of the same duration; 9 18 (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; (iii) if the Interest Period commences on a Business Day for which there is no numerical equivalent in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of that calendar month; and (iv) with respect to LIBOR Rate Loans comprising any Revolving Credit Borrowing, no Interest Period may end on a date later than the Revolving Credit Termination Date. "LAW" means any law, treaty, regulation, statute or ordinance, common law, civil law, or any case precedent, ruling, requirement, directive or request having the force of law of any foreign or domestic governmental authority, agency or tribunal. "LC COMMITMENT" means the obligation of the Letter of Credit Bank under this Agreement to issue Letters of Credit for the account of the Borrower in an aggregate amount of up to Ten Million Dollars ($10,000,000). "LC EXPOSURE" means, with respect to any Bank, at any time of determination, such Bank's Ratable Portion of the sum of: (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time and (b) the aggregate amount that has been drawn under such Letters of Credit which the Letter of Credit Bank or the Banks, as the case may be, have not at such time been reimbursed by the Borrower. "LENDING OFFICE" means, with respect to any Bank, the office of such Bank specified as its "Lending Office" under its name on the signature pages hereto, or such other office of such Bank as such Bank may from time to time specify in writing to the Borrower and the Agent as the office at which Loans are to be made and maintained. "LETTER OF CREDIT" means any Trade Letter of Credit or Standby Letter of Credit. "LETTER OF CREDIT BANK" means National City Bank, its successors and assigns, in its capacity as issuer of Letters of Credit. "LETTER OF CREDIT COLLATERAL ACCOUNT" has the meaning specified in Section 0 of this Agreement. 10 19 "LIBOR RATE LOAN" means a Loan which bears interest as provided in Section 0(a)(ii) of this Agreement. "LIBOR RATE BORROWING" means a Borrowing consisting of LIBOR Rate Loans. "LIEN" means any lien, security interest or other charge or encumbrance of any kind, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "LOAN" means a Revolving Credit Loan. "LOAN ACCOUNT" has the meaning specified in Section 0 of this Agreement. "LOAN DOCUMENTS" means any note, security agreement, or other lien instrument, reimbursement agreement, financial statement, audit report, environmental audit, notice, request of advance, interest rate swap or hedge agreement, officer's certificate or other writing of any kind which is now or hereafter required to be delivered by or on behalf of the Borrower to the Agent or the Banks under this Agreement and includes, without limitation, the Revolving Credit Notes and the other writings referred to in Sections 0 and 0 of this Agreement. "LONDON INTERBANK OFFERED RATE" means, for any Interest Period with respect to a LIBOR Rate Borrowing, the quotient (rounded upwards, if necessary, to the nearest one sixteenth of one percent (1/16th of 1%)) of: (x) the per annum rate of interest, determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 11:00 a.m. (London time) two Business Days prior to the beginning of such Interest Period pertaining to such LIBOR Rate Loan, appearing on Page 3750 of the Telerate Service (or any successor or substitute page of such Service, or any successor to or substitute for such Service providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) as the rate in the London interbank market for Dollar deposits in immediately available funds with a maturity comparable to such Interest Period divided by (y) a number equal to 1.00 minus the Eurocurrency Reserve Percentage. In the event that such rate quotation is not available for any reason, then the rate (for purposes of clause (x) hereof) shall be the rate, determined by the Agent as of approximately 11:00 a.m. (London time) two Business Days prior to the beginning of such Interest Period pertaining to such LIBOR Rate Loan, to be the average (rounded upwards, if necessary, to the nearest one sixteenth of one percent (1/16th of 1%) of the per annum rates at which Dollar deposits in immediately available funds in an amount comparable to NCB's Ratable Portion of such LIBOR Borrowing and with a maturity comparable to such Interest Period are offered to 11 20 the prime banks by leading banks in the London interbank market. The London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Percentage. "MARGIN ADJUSTMENT DATE" has the meaning specified in Section 0 of this Agreement. "MATERIAL ADVERSE EFFECT" means, as to any event, occurrence or condition, if the result thereof would, either singly or in the aggregate, have a material adverse effect on: (i) the business, operations, profitability or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole, (ii) the Borrower's ability to repay the Obligations or (iii) the legality, validity or enforceability of this Agreement or the Loan Documents or the rights and remedies of the Agent and the Banks. "MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a "multiemployer plan" as such term is defined in section 4001(a)(3) of ERISA. "NET PROCEEDS" means (i) the cash proceeds (including cash proceeds subsequently received in respect of non-cash consideration initially received) from any sale, transfer or other disposition (other than (a) any sale of Inventory in the ordinary course, (b) disposition in the ordinary course of Borrower's business of assets that are obsolete, worn out or no longer used or useful in the Borrower's or its Subsidiaries' business and (c) disposition of capital assets the proceeds of which are reinvested within a reasonable period of time in capital assets of the Borrower or its Subsidiaries) of any asset of the Borrower or any of its Subsidiaries to any Person (other than the Borrower or any other Subsidiary of the Borrower) the value of which asset or assets exceeds Five Million Dollars ($5,000,000) in any calendar year net of (x) selling expenses, including without limitation any reasonable broker's fees or commissions, costs of discontinuing operations associated with such assets and sales, transfer and similar taxes, and (y) the repayment of any Indebtedness secured by a purchase money Lien on such assets that is permitted under this Agreement; and (ii) the cash proceeds from the issuance and/or sale of pari passu debt securities of the Borrower pursuant to any public offering, private placement, net of transaction costs and net of expenses including, without limitation, underwriters' or placement agents' discounts and commissions and transfer and similar taxes. "NCB" means National City Bank, its successors and assigns, in its capacity as a Bank. "NOTE PURCHASE AGREEMENT" means that certain Note Purchase Agreement dated as of August 30, 1995, as amended by that certain Amendment to Note Purchase Agreement, dated as of January 21, 1997, entered into between and among the Borrower and the Noteholders. 12 21 "NOTEHOLDERS" means the Great-West Life and Annuity Insurance Company, The Mutual Life Insurance Company of New York, and Nationwide Life Insurance Company. "OBLIGATIONS" means the present and future obligations of the Borrower and its Subsidiaries under this Agreement including, without limitation, (a) the outstanding principal and accrued interest (including interest accruing after a petition for relief under the federal bankruptcy laws has been filed) in respect of any Revolving Credit Loans; (b) fees owing to the Banks or the Agent under this Agreement or any Loan Document; (c) any costs and expenses reimbursable to the Banks, the Letter of Credit Bank and the Agent pursuant to Section 0 of this Agreement; (d) Taxes, Other Taxes, compensation, indemnification obligations or other amounts owing by the Borrower to the Agent, the Letter of Credit Bank or the Banks under this Agreement or any Loan Document; and (e) the amounts owing to any of the Banks by the Borrower and its Subsidiaries under any interest rate swap agreement or similar interest rate hedge in connection with Loans under this Agreement. "OPERATING ACCOUNT" means an account maintained by and in the name of the Borrower at the Payment Office of the Agent, as Agent for the benefit of the Banks, for the purposes of disbursing the proceeds of Revolving Credit Loans, which account shall in no case be a payroll account. "OTHER TAXES" has the meaning specified in Section 0 of this Agreement. "PAYMENT OFFICE" means such office of the Agent as set forth on the signature page of the Agent or such offices as may be from time to time selected by the Agent and notified in writing by the Agent to the Borrower and the Banks as the office to which payments are to be made to the Agent by the Borrower or the Banks, as the case may be. "PBGC" means the Pension Benefit Guaranty Corporation or any other governmental authority succeeding to any of its functions. "PENSION PLAN" means a defined benefit plan (as defined in section 3(35) of ERISA) of a Company and includes, without limitation, any such plan that is a multi-employer plan (as defined in section 3(37) of ERISA) applicable to any of the Borrower or its Subsidiaries' employees. "PERMITTED FOREIGN INVESTMENTS" means certificates of deposit issued by any Bank or by any other financial institution not organized under the laws of the United States or any state thereof having a combined capital and surplus aggregating at least Three Hundred Fifty Million Dollars ($350,000,000), or any other money-market investment if it carries the highest quality of rating of any nationally recognized rating agency or any repurchase agreements issued by banks continuously secured by 13 22 obligations issued or guaranteed and backed by the full faith and credit of the central bank or national treasury of a country other than the United States of America; provided, however, that no such security shall mature more than ninety (90) days after the date when made. "PERMITTED US INVESTMENTS" means securities that are direct obligations of the United States of America or any agency thereof, or certificates of deposit issued by any Bank or by any other financial institution organized under the laws of the United States or any state thereof having a combined capital and surplus aggregating at least Three Hundred Fifty Million Dollars ($350,000,000), or any other money-market investment if it carries the highest quality of rating of any nationally recognized rating agency or any repurchase agreements issued by banks continuously secured by obligations issued or guaranteed and backed by the full faith and credit of the United States of America; provided, however, that no such security shall mature more than ninety (90) days after the date when made. "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "POTENTIAL DEFAULT" means an event, condition or thing which with the lapse of any applicable grace period or with the giving of notice or both would constitute, an Event of Default referred to in Section 0 of this Agreement and which has not been appropriately waived in writing in accordance with this Agreement or fully corrected, prior to becoming an actual Event of Default. "PROFORMA COVENANT COMPLIANCE" means compliance by Borrower and its Subsidiaries with the general financial standards contained in Section 0 of this Agreement as of the time of the event in question and for the following twelve (12) month period based upon the Projections delivered by Borrower in contemplation of such event pursuant to Section 0 if the same are requested by a Bank and otherwise consistent with Borrower's internally generated and used projections. "PROJECTIONS" has the meaning ascribed to that term in Section 0. "PROPERTIES" has the meaning specified in Section 0 of this Agreement. "RATABLE PORTION" means, in respect of any Bank, the quotient (expressed as a percentage) obtained at any time by dividing: (i) such Bank's Revolving Credit Commitment at such time by (ii) the sum of the aggregate amount of the Revolving Credit Commitments of all of the Banks at such time; provided; however, if all of the Revolving Credit Commitments are terminated pursuant to the terms hereof, then, Ratable Portion means the quotient (expressed as a percentage) obtained by dividing (x) 14 23 the aggregate amount of such Bank's Revolving Credit Loans by (y) the aggregate amount of Revolving Credit Loans of all of the Banks outstanding at such time. "RATE CONTINUATION" means, in respect of LIBOR Rate Loans having a particular Interest Period, a continuation of such LIBOR Rate Loans pursuant to Section 0 of this Agreement as LIBOR Rate Loans with an Interest Period of the same duration. "RATE CONVERSION" means a conversion pursuant to Section 0 of this Agreement of Loans of one Type into Loans of another Type and, with respect to LIBOR Rate Loans, from one permissible Interest Period to another permissible Interest Period. "RATE CONVERSION/CONTINUATION REQUEST" has the meaning specified in Section 0 of this Agreement. "RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq. "REGULATORY CHANGE" means, as to any Bank, any change in United States federal, state or foreign Laws or regulations or the adoption or making of any interpretations, directives or requests of or under any United States federal, state or foreign Laws or regulations (whether or not having the force of Law) by any court or governmental authority charged with the interpretation or administration thereof. "REIMBURSEMENT AGREEMENT" has the meaning set forth in Section 0 of this Agreement. "REPORTABLE EVENT" means any of the events set forth in Section 4043 of ERISA excluding those events for which the requirement of notice has been waived by the PBGC. "REQUIRED BANKS" means, at any time, (a) Banks (excluding, for the purposes of this definition, Banks then constituting "defaulting Banks" under Section 0) holding at least sixty six and two thirds percent (66-2/3rds%) of the aggregate outstanding principal amount of Loans of all of the Banks at such time or (b) if no principal amount is then outstanding, Banks having at least sixty six and two thirds percent (66-2/3rds%) of the Revolving Credit Commitments at such time, of all of the Banks at such time. "REVOLVING CREDIT BORROWING" means an Alternate Base Rate Borrowing or a LIBOR Rate Borrowing, as the case may be. "REVOLVING CREDIT COMMITMENT" means, in respect of a Bank, the obligation of such Bank hereunder to make Revolving Credit Loans as hereinafter provided, and to participate in the risks of all Letters of Credit issued by the Letter of Credit Bank up to an 15 24 amount equal to the Revolving Credit Commitment of such Bank as set forth in Annex I and as further specified in Section 0 of this Agreement and as such Revolving Credit Commitment may be reduced from time to time in accordance with Section 0 hereof. "REVOLVING CREDIT LOAN" means an Loan made by a Bank to the Borrower pursuant to Section 0 of this Agreement. "REVOLVING CREDIT NOTE" means a promissory note of the Borrower payable to the order of a Bank, in substantially the form of Exhibit A-1 hereto and in the original principal amount of such Bank's Revolving Credit Commitment, evidencing the aggregate indebtedness of the Borrower to such Bank resulting from the Revolving Credit Loans made by such Bank. "REVOLVING CREDIT TERMINATION DATE" means the earlier of: (i) __________ __, 2003, as extended pursuant to Section 0 of this Agreement or (ii) the earlier date of the termination of the Revolving Credit Commitments pursuant to Section 0 or Section 0 of this Agreement. "SOLVENT" means, with respect to any Person, on any date of determination, that on such date: (a) fair value of the property of the Person is greater than the total amount of liabilities (including contingent liabilities) of the Person, (b) the present fair salable value of the assets of the Person is not less than the amount that will be required to pay the probable liability of the Person on its debts as they become absolute and matured, (c) the Person is able to pay all liabilities of the Person as those liabilities mature, and (d) the Person does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage. "STANDBY LETTER OF CREDIT" means any letter of credit issued by the Letter of Credit Bank from time to time at the request of the Borrower pursuant to the terms of this Agreement which letter of credit is not a Trade Letter of Credit. "SUBSIDIARY" means, in respect of a corporate Person, a corporation or other business entity the shares constituting a majority of the outstanding capital stock (or other form of ownership) or constituting a majority of the voting power in any election of directors (or shares constituting both majorities) of which are (or upon the exercise of any outstanding warrants, options or other rights would be) owned directly or indirectly at the time in question by such Person or another subsidiary of such Person or any combination of the foregoing. "SUBSIDIARY GUARANTOR" means each of OMG Americas, Inc., an Ohio corporation, OMG Apex, Inc., a Delaware corporation, SCM Metal Products Inc., a Delaware corporation, and any other Domestic Subsidiary of the Borrower existing on the Closing Date or thereafter created. 16 25 "SUBSIDIARY GUARANTY" means, the form of guaranty agreement attached hereto as Exhibit D. "SUPPLEMENTAL SCHEDULE" means the schedule which is attached hereto as Annex II and is incorporated into this Agreement. "TAXES" has the meaning specified in Section 0(a) of this Agreement. "TRADE LETTER OF CREDIT" means any trade letter of credit issued by the Letter of Credit Bank from time to time at the request of the Borrower pursuant to the terms of this Agreement for the purpose of purchasing goods or services in the ordinary course of business. "TYPE" means, when used in respect of any Loan, the London Interbank Offered Rate or the Alternate Base Rate in effect in respect of such Loan. "UCC" means the Uniform Commercial Code in effect in the State of Ohio from time to time. "UNITED STATES" and "U.S." each means United States of America. 1.2 COMPUTATION OF TIME PERIODS. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". 1.3 ACCOUNTING TERMS. All accounting and financial terms not specifically defined herein shall be construed in accordance with GAAP as in effect from time to time. In all cases, such accounting and financial terms shall be applied on a basis consistent with those applied in the preparation of the Borrower's audited financial statements for the Fiscal Year ending December 31, 1996; provided, however, (a) that all financial statements shall reflect the Borrower's adoption of FAS 106 and (b) if any change in GAAP in itself materially affects the calculation of any financial covenant in Section 0 of this Agreement, the Borrower may by written notice to the Agent, or the Agent (upon request by the Required Banks), may by written notice to the Borrower, require that such covenant thereafter be calculated in accordance with GAAP as in effect. If any such notice is given, the compliance certificates delivered pursuant to Section 0 of this Agreement after such change occurs shall be accompanied by reconciliations of the difference between the calculation set forth therein and a calculation made in accordance with GAAP as in effect from time to time after such change occurs. 1.4 DOLLAR EQUIVALENTS. Each reference herein to an amount stated Dollars shall be a reference to Dollars or the Dollar Equivalent of such amount unless the context dictates otherwise. 17 26 2 STATEMENT OF TERMS. 2.1 REVOLVING CREDIT FACILITY. (a) REVOLVING CREDIT LOANS. Subject to the terms and conditions set forth in this Agreement, each Bank severally agrees to make, from time to time on and after the Closing Date and up to but excluding the Business Day immediately preceding the Revolving Credit Termination Date, advances to or for the account of the Borrower on a revolving credit basis (each a "Revolving Credit Loan"); that the outstanding principal amount of Revolving Credit Loans made by or on behalf of such Bank, when taken together with the outstanding principal amount of all Revolving Credit Loans made by or on behalf of such Bank, shall not exceed the amount of such Bank's Revolving Credit Commitment in effect at such time minus the LC Exposure of such Bank at such time. Within the limits set forth herein, the Borrower may borrow, prepay and reborrow Revolving Credit Loans. (b) REVOLVING CREDIT BORROWINGS. Each Revolving Credit Borrowing shall be: (i) if comprised of Alternate Base Rate Loans, in an aggregate amount of not less than One Hundred Thousand Dollars ($100,000) or an integral multiple thereof and (ii) if comprised of LIBOR Rate Loans, in an aggregate amount of not less than One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof. The Borrower shall be entitled to have more than one Revolving Credit Borrowing outstanding at one time; provided, however, that the Borrower shall not be entitled to request any Revolving Credit Borrowing which, together with all outstanding Revolving Credit Borrowings, would result in any Bank's having an aggregate of more than six (6) LIBOR Rate Loans outstanding at any one time. (c) REVOLVING CREDIT NOTES; LOAN ACCOUNT. Each Bank's Revolving Credit Loans shall be evidenced at all times by a Revolving Credit Note. Each Revolving Credit Note shall: (i) be executed and delivered by the Borrower and payable to the order of such Bank, (ii) be in a stated principal amount equal to the amount of such Bank's Revolving Credit Commitment in effect at the execution and delivery of such Bank's Revolving Credit Note, (iii) mature on the Revolving Credit Termination Date, (v) bear interest as provided in Section 0, (vi) be subject to mandatory repayment as provided in Sections 0 and 0 of this Agreement and (vii) be entitled to the benefits of this Agreement and the Loan Documents. Whenever the Borrower obtains a Revolving Credit Borrowing, each Bank shall endorse an appropriate entry on such Bank's Revolving Credit Note or make an appropriate entry in a loan account (the "Loan Account") maintained in such Bank's books and records, or both, to evidence such Bank's Revolving Credit Loans comprising part of a Revolving Credit Borrowing. The Loan Account shall also evidence: (i) accrued interest on the Revolving Credit Loans of such Bank, (ii) all other amounts due to such Bank in respect of such Revolving Credit Loans and (iii) all 18 27 payments made by the Borrower received by such Bank from the Agent for application to such Revolving Credit Borrowings. Each entry on such Bank's Revolving Credit Note or in such Bank's books and records or Loan Account shall be prima facie evidence of the data entered. Such entries shall not be a condition to the Borrower's obligation to repay the Obligations. (d) CONTROL ACCOUNT MAINTAINED BY AGENT. The Agent shall maintain on its books and records a control account (the "Control Account") in respect of the Borrower and the Revolving Credit Borrowings hereunder in which the Agent shall record: (i) advances of Revolving Credit Borrowings to the Borrower, (ii) the Ratable Portion of each Bank in the outstanding Revolving Credit Borrowings, (iii) the amounts of any Collections and Remittances received and credited to reduce the Revolving Credit Loans and (iv) the Ratable Portion of each Bank in such credited Collections and Remittances. Each entry by the Agent in the Control Account shall be prima facie evidence of the data entered, absent manifest error. 2.2 CREDIT REQUESTS. Each Revolving Credit Loan shall be made upon request of a Borrower in accordance with clause (a) below or upon a request deemed to be made pursuant to clause (b) below: (a) CREDIT REQUESTS EXECUTED BY THE BORROWER. Requests for Revolving Credit Loans comprising a Revolving Credit Borrowing shall be given by the Borrower to the Agent not later than 12:00 noon (Cleveland, Ohio time): (i) on the Business Day which is the requested date of a proposed Alternate Base Rate Borrowing comprised of Alternate Base Rate Loans (the Revolving Credit Borrowing made on the Closing Date must consist entirely of Alternate Base Rate Loans) and (ii) on the Business Day which is three (3) Business Days before the requested date of a proposed LIBOR Rate Borrowing. Except as herein after permitted, each such request (a "Credit Request") for a Revolving Credit Borrowing shall be in writing signed by the Borrower and transmitted by the Borrower to the Agent by telecopier, telex or cable (in the case of telex or cable, confirmed in writing prior to the date of the requested Revolving Credit Borrowing), in substantially the form of Exhibit B hereto. Each Credit Request shall specify: (A) the requested date of the Revolving Credit Borrowing, (B) the aggregate amount of such Revolving Credit Borrowing, (C) whether such Revolving Credit Borrowing is to be comprised of Alternate Base Rate Loans or LIBOR Rate Loans, and (D) in the case of a proposed LIBOR Rate Borrowing, the initial Interest Period for such LIBOR Rate Borrowing. Each Credit Request shall be irrevocable and binding on the Borrower and be subject to the indemnification provisions of Section 0 of this Agreement. The Borrower may give a Credit Request telephonically so long as: (I) a written Credit Request confirmation is received by the Agent by 1:00 p.m. (Cleveland, Ohio time) on the same day such telephonic Credit Request was given and (II) that the other requirements of this Section are satisfied. The Agent may rely on such telephonic Credit Request to the same extent that the Agent may rely on a written Credit Request. The 19 28 Borrower shall bear all risks related to the giving of a Credit Request by the Borrower whether given telephonically or by such other method of transmission as the Borrower shall elect. (b) REQUESTS FOR REVOLVING CREDIT BORROWING DEEMED GIVEN. The Borrower shall be deemed to have made a request for a Borrowing (a "Deemed Credit Request"), which Deemed Credit Request shall be deemed to be irrevocable, upon the occurrence of any of the following and the Banks agree that on the specified date of such occurrence, the Banks will make the requested Loans pursuant to the Deemed Credit Request and that the Banks' obligation to make such Loans is absolute and unconditional and shall not be affected by any event or circumstance whatsoever, including the occurrence of any Potential Default or Event of Default hereunder or the failure of any condition precedent set forth in Section 0 of this Agreement to be satisfied and each such payment shall be made without any offset, abatement, withholding or reduction whatsoever: (i) LETTER OF CREDIT DRAWING. As specified in Section 0 of this Agreement, upon a drawing under a Letters of Credit, the Borrower shall be deemed to have made a request for an Alternate Base Rate Borrowing in an amount equal to the amount necessary either to reimburse the Letter of Credit Bank for such drawing upon the Letter of Credit together with accrued interest thereon or, if reimbursement of the Letter of Credit Bank is made by the Banks for any reason, reimburse the Banks for such payment. (ii) PAYMENT OF INTEREST AND OBLIGATIONS. Unless payment is otherwise made by the Borrower, upon any such interest or fee hereunder becoming due without payment by the Borrower, the Borrower shall be deemed to have made a request for an Alternate Base Rate Borrowing in an amount equal to the amount necessary to pay such interest or fee. Each Bank acknowledges and agrees that its obligation to participate in and make Loans comprising a Borrowing pursuant to a Deemed Credit Request is absolute and unconditional and shall not be affected by any event or circumstance whatsoever, including the occurrence of any Potential Default or Event of Default hereunder or the failure of any condition precedent set forth in Section 0 of this Agreement to be satisfied at the time of the making of such Deemed Credit Request, and each Loan made by a Bank in satisfaction of its obligation shall be made without any offset, abatement, withholding or reduction whatsoever. 2.3 FUNDING OF REVOLVING CREDIT LOANS. The Agent shall notify each Bank of such Credit Request promptly on the date received by telecopy, telephone or similar form of transmission. Each Bank shall, before 3:00 p.m. (Cleveland, Ohio time) on the date of each Revolving Credit Borrowing requested, make available to the Agent, in immediately available funds at the account of the Agent maintained at the Payment Office of the Agent, such Bank's 20 29 Ratable Portion of the Revolving Credit Borrowing. On the date requested by the Borrower for a Revolving Credit Borrowing, after the Agent's receipt of the funds representing a Bank's Ratable Portion of such Revolving Credit Borrowing and subject to the terms of this Agreement and the Borrower's fulfillment of the conditions set forth in Section 0 of this Agreement, the Agent will make such Revolving Credit Loan of such Bank available to the Borrower in immediately available funds, by wire transfer or intrabank transfer: (A) to the Operating Account or (B such other account of the Borrower as the Agent and the Borrower shall have agreed upon from time to time in writing. (a) DISBURSEMENT OF FUNDS RECEIVED. On the date requested by the Borrower for a Revolving Credit Borrowing, after the Agent's receipt of the funds representing a Bank's Ratable Portion of such Revolving Credit Borrowing and subject to the terms and conditions set forth in this Agreement, the Agent shall make such Revolving Credit Advance of such Bank available to the Borrower, in immediately available funds, by wire transfer or intrabank transfer to the Operating Account. 2.4 AVAILABILITY OF FUNDS. Unless the Agent shall have received notice from a Bank on a Business Day prior to the date (or, in the case of Alternate Base Rate Loans, prior to the time) of any Revolving Credit Borrowing that such Bank will not make available to the Agent such Bank's Ratable Portion of the Revolving Credit Borrowing, the Agent may assume that such Bank has made its Ratable Portion of the Revolving Credit Borrowing available to the Agent on the date of the Revolving Credit Borrowing in accordance with Section 0 of this Agreement. In reliance upon such assumption, the Agent may, but shall not be obligated to, make available to the Borrower on such date, a portion of the Revolving Credit Borrowing corresponding to such Bank's Ratable Portion. Any disbursement by the Agent in reliance on such assumption shall be deemed to be an advance of a Revolving Credit Loan by such Bank. 2.5 FAILURE OF BANK TO FUND. If and to the extent that any Bank shall not have made available to the Agent such Bank's Ratable Portion of any Revolving Credit Borrowing, such Bank and the Borrower severally agree to repay to the Agent, immediately upon demand by the Agent, an amount equal to such Bank's Ratable Portion of such Revolving Credit Borrowing, as the case may be, together with interest thereon for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at: (a) in the case of the Bank, (i) Federal Funds Rate for the first three (3) days from and after the date of the Revolving Credit Borrowing and (ii) thereafter, at the Interest Rate then applicable to Alternate Base Rate Loans and (b) in the case of the Borrower, the interest rate applicable at the time to Alternate Base Rate Loans. (a) PAYMENT CONSTITUTING RATABLE PORTION. If such Bank pays to the Agent the Bank's Ratable Portion of such Revolving Credit Borrowing prior to repayment of such amount by the Borrower, the amount so repaid shall constitute such Bank's Ratable Portion of such Revolving Credit Borrowing and the Borrower shall have no further obligation to make the payment required by this Section. 21 30 (b) TREATMENT OF DEFAULTING BANK. The Agent shall not be obligated to transfer to a defaulting Bank any payments made by the Borrower to the Agent for the benefit of such defaulting Bank if such Bank has not made available to the Agent such Bank's Ratable Portion of any Revolving Credit Borrowing advanced pursuant to this Agreement. Until the earlier of such defaulting Bank's cure of such failure or the termination of the Commitments, all amounts repaid to the Agent by the Borrower which would otherwise be required to be applied to such Bank's Ratable Portion of the Obligations shall be advanced to the Borrower by the Agent on behalf such defaulting Bank to cure, in full or in part, the failure by such Bank, but shall nevertheless be deemed to have been paid to such defaulting Bank in satisfaction of the Obligations to which such payment would otherwise have been applied. Notwithstanding anything contained herein to the contrary, no such defaulting Bank shall have any voting or consent rights under or with respect to the Loan Documents or constitute a "Bank" (or be included in the calculation of "Required Banks" hereunder) for any voting or consent rights under or with respect to any Loan Document. The terms of this Section 0 shall: (i) remain effective with respect to such defaulting Bank until such time as the defaulting Bank shall no longer be in default of any of its obligations under this Agreement and (ii) shall not relieve or excuse the performance by the Borrower of any of its duties or obligations hereunder. (c) CONTINUING BORROWER OBLIGATION. Failure of any Bank to fund its Ratable portion of any Borrowing shall not relieve or excuse the performance by the Borrower of any of its duties or obligations hereunder. (d) CONTINUING BANK OBLIGATION TO FUND. It is understood that: (i) a Bank shall not be responsible for any failure by any other Bank to perform its obligation to make any Loans hereunder, (ii) the Revolving Credit Commitment of a Bank shall not be increased or decreased as a result of any failure by any other Bank to perform its obligation to make any Loans hereunder, (iii) failure by any Bank to perform its obligation to make any Loans hereunder shall not excuse any other Bank from its obligation to make any Revolving Credit Loans hereunder, and (iv) the obligations of each Bank hereunder shall be several, not joint and several. 2.6 REPAYMENTS AND PREPAYMENTS; REDUCTION OF COMMITMENTS, EXTENSION OF COMMITMENTS. (a) REPAYMENT. The Borrower shall repay to the Agent, for the account of the Banks, the outstanding principal amount of the Revolving Credit Loans on the Revolving Credit Termination Date in accordance with Section 0(a). (b) MANDATORY PREPAYMENT OF REVOLVING CREDIT LOANS. If, on any Business Day, (x) the sum of: (A) the aggregate Revolving Credit Loans outstanding at 22 31 such time plus (B) the aggregate LC Exposure of the Banks outstanding at such time exceeds (y) the aggregate Revolving Credit Commitments of all of the Banks then in effect, then the Borrower shall on such day prepay to the Agent for the account of the Banks an aggregate principal amount of such Revolving Credit Loans in an amount at least equal to such excess plus any amounts required pursuant to the provisions of Section 0 of this Agreement. (c) MANDATORY REDUCTION OF REVOLVING CREDIT COMMITMENT. The Borrower shall apply all Net Proceeds acquired in connection with transactions permitted by this Agreement promptly upon receipt thereof to prepay the Revolving Credit Loans outstanding at the time of such receipt and to permanently reduce the Revolving Credit Commitments (rounded down to the nearest One Hundred Thousand Dollars ($100,000) amounts in excess of such rounded amount shall be applied to the outstanding Revolving Credit Loans only): provided, however, that the Borrower shall not be permitted at any time to reduce the Revolving Credit Commitments to an amount less than the aggregate LC Exposure of the Banks outstanding at such time. In the event that the reduction in the Revolving Credit Commitments required by this Section 0 would cause the remaining Revolving Credit Commitments to be less than the LC Exposure of the Banks after giving effect to such reduction, the Agent shall hold such excess fund in a non-interest bearing account until such time that the requirements of the immediately preceding sentence shall not be violated. Each reduction in the aggregate Revolving Credit Commitments hereunder shall be made among the Banks ratably in accordance with their Revolving Credit Commitments. On the date of each reduction, the Borrower shall pay to the Agent for the account of the Banks (x) the commitment fees and interest accrued through the date of such reduction in respect of the aggregate Revolving Credit Commitments and (y) any amounts required pursuant to the provisions of Section 0 of this Agreement. Any reduction in the Revolving Credit Commitments shall be a permanent reduction and no amount in excess of such reduced commitment may be borrowed or reborrowed. (d) VOLUNTARY REDUCTION OF REVOLVING CREDIT COMMITMENT. Upon three (3) Business Days prior written notice to the Agent, the Borrower may in accordance with the terms of this Agreement request that the Banks permanently reduce, in whole or in part, the aggregate Revolving Credit Commitment. Each reduction shall be subject to the following: (i) each such reduction shall be in an aggregate principal amount of not less than Five Million Dollars ($5,000,000) or any integral multiple of One Million Dollars ($1,000,000) in excess thereof, (ii) the Borrower shall not be permitted to reduce the aggregate Revolving Credit Commitments unless, concurrently with any reduction, the Borrower shall make a principal payment on each Bank's then outstanding Revolving Credit Loans in an amount equal to the excess, if any, of (A) the sum of such Revolving Credit Loans and aggregate LC Exposure over (B) the Revolving Credit Commitment of such Bank as so reduced and (iii) the Borrower shall not be permitted at any time to reduce the Revolving Credit Commitments to an amount less than the aggregate LC Exposure of the Banks outstanding at such time. Each reduction in the aggregate 23 32 Revolving Credit Commitments hereunder shall be made among the Banks ratably in accordance with their Revolving Credit Commitments. On the date of each reduction, the Borrower shall pay to the Agent for the account of the Banks (x) the commitment fees and interest accrued through the date of such reduction in respect of the aggregate Revolving Credit Commitments and (y) any amounts required pursuant to the provisions of Section 0 of this Agreement. Any reduction in the Revolving Credit Commitments shall be a permanent reduction and no amount in excess of such reduced commitment may be borrowed or reborrowed. (e) PERMITTED PREPAYMENTS. The Borrower may prepay all or any part of Revolving Credit Loans by giving notice to the Agent for the account of the Banks stating the proposed date of prepayment, the Type of Borrowing being prepaid and the aggregate principal amount of the prepayment not later than 12:00 noon (Cleveland, Ohio time) on the Business Day immediately preceding the Business Day on which such prepayment is to be made. Upon such notice, the Borrower shall: (A) in respect of Alternate Base Rate Loans comprising part of the same Revolving Credit Borrowing, prepay the outstanding aggregate principal amount thereof in whole or ratably in part and (B) in respect of LIBOR Rate Loans comprising part of the same Revolving Credit Borrowing, prepay the outstanding aggregate principal amount thereof in whole and the interest accrued to the date of such prepayment on the principal amount of such Borrowing so prepaid; provided, however, that: (I) each partial prepayment of Alternate Base Rate Loans shall be (x) in an aggregate principal amount of One Hundred Thousand Dollars ($100,000) or any multiple thereof or (y) in an amount equal to the aggregate principal amount of Alternate Base Rate Loans then outstanding, (II) each partial prepayment of LIBOR Rate Loans shall be (a) in an aggregate principal amount not less than One Million Dollars ($1,000,000), or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof or (b) in an amount equal to the aggregate principal amount of LIBOR Rate Loans then outstanding, and (III) any prepayment of any LIBOR Rate Loans made on other than the last day of an Interest Period shall obligate the Borrower to reimburse the Bank in respect thereof pursuant to Section 0 of this Agreement. (f) EXTENSION OF COMMITMENT PERIOD. During the thirty (30) day period following delivery by the Borrower pursuant to Section 0 of this Agreement of its consolidated financial statements for its Fiscal Year ending December 31, 1998, and annually thereafter during the thirty (30) day period following delivery by the Borrower of its consolidated financial statements pursuant to Section 0, the Borrower may request the Agent to determine if all of the Banks are then willing to extend the Revolving Credit Termination Date for a single additional year. If the Borrower so requests the Agent will advise the Banks. If all of the Banks in their sole discretion are willing to extend the Revolving Credit Termination Date, the Borrower, the Agent and the Banks shall execute a definitive written amendment extending the Revolving Credit Termination Date. No extension shall be effective for any purpose unless such definitive written instrument is signed by all of the Banks and delivered within sixty (60) days following the notice from 24 33 the Agent to the Banks that the Borrower has requested such an extension. No Bank shall be obligated to grant the Borrower any such extension, and unanimous written consent of all the Banks shall be required to extend the Revolving Credit Termination Date. In the event of the failure of any of the Banks to so respond affirmatively or negatively in writing within such sixty (60) day period, such request for extension shall be deemed to have been denied. 2.7 RATE CONVERSION AND RATE CONTINUATION. The Borrower shall have the right to convert or continue any Revolving Credit Borrowing as a LIBOR Rate Borrowing or an Alternate Base Rate Borrowing, upon request delivered by the Borrower to the Agent not later than 12:00 noon (Cleveland time): (a) on the Business Day that Borrower desires to convert any LIBOR Rate Borrowing into an Alternate Base Rate Borrowing, (b) three Business Days prior to the Business Day on which the Borrower desires to convert any Alternate Base Rate Borrowing into a LIBOR Rate Borrowing for a given Interest Period, (c) three Business Days prior to the Business Day on which Borrower desires to continue any LIBOR Rate Borrowing as a LIBOR Rate Borrowing for an additional Interest Period of the same duration, and (d) three Business Days prior to the Business Day on which Borrower desires to convert any LIBOR Rate Borrowing having a particular Interest Period into a LIBOR Rate Borrowing having a different permissible Interest Period; provided, however, that each such Rate Conversion or Rate Continuation shall be subject to the following: (i) each Rate Conversion or Rate Continuation shall be made among the Banks based upon such Bank's Ratable Portion of such converted or continued Revolving Credit Borrowing; (ii) if less than all the outstanding principal amount of a Revolving Credit Borrowing is converted or continued, the aggregate principal amount of such Revolving Credit Borrowing converted or continued shall be: (A) in the case of a LIBOR Rate Borrowing, not less than One Million Dollars ($1,000,000), or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof and (B) in the case of an Alternate Base Rate Borrowing, One Hundred Thousand Dollars ($100,000); (iii) each Rate Conversion or Rate Continuation shall be effected as if each Bank were applying the proceeds of Loans resulting from such Rate Conversion or Rate Continuation to Loans being converted or continued, as the case may be, and the accrued interest on any such Loans (or portion thereof) being converted or continued shall be paid to the Agent on behalf of each Bank by the Borrower at the time of such Rate Conversion or Rate Continuation; (iv) LIBOR Rate Loans shall not be converted or continued at a time other than the end of an Interest Period applicable thereto unless the Borrower shall pay to the Agent for the benefit of the Banks, upon demand, any amounts due to any of the Banks pursuant to Section 0.4 of this Agreement; 25 34 (v) a Revolving Credit Borrowing may not be converted into or continued as a LIBOR Rate Borrowing if the Interest Period applicable thereto will expire less than one month prior to the Revolving Credit Termination Date; (vi) after and during the continuance of a Potential Default, and after the occurrence of an Event of Default which has not been waived or otherwise consented to by the Required Banks, a Revolving Credit Borrowing may not be converted or continued as a LIBOR Rate Borrowing; and (vii) any LIBOR Rate Borrowing that cannot be continued as a LIBOR Rate Borrowing by reason of clause (iv), (v), (vi) or (vi) of this definition shall be automatically converted at the end of the Interest Period in effect for each LIBOR Rate Borrowing into an Alternate Base Rate Borrowing. Each such request for a conversion or continuation (a "Rate Conversion/Continuation Request") in respect of a Revolving Credit Borrowing shall be transmitted by the Borrower to the Agent by telecopier, telex or cable (in the case of telex or cable, confirmed in writing prior to the effective date of the Rate Conversion or Rate Continuation requested), in substantially the form of Exhibit C hereto. The Rate Conversion/Continuation Request shall specify: (A) the identity and amount of the Loans comprising a Revolving Credit Borrowing that the Borrower requests be converted or continued, (B) the Type of Loans into which such Loans are to be converted or continued, (C) if such notice requests a Rate Conversion, the date of the Rate Conversion (which shall be a Business Day) and (D) in the case of a Revolving Credit Borrowing converted into or continued as a LIBOR Rate Borrowing, the Interest Period for such LIBOR Rate Loans. The Borrower may make Rate Conversion/Continuation Requests telephonically so long as written confirmation of such Revolving Credit Borrowing is received by the Agent by 1:00 p.m. (Cleveland, Ohio time) on the same day of such telephonic Rate Conversion/Continuation Request. The Agent may rely on such telephonic Rate Conversion/Continuation Request to the same extent that the Agent may rely on a written Rate Conversion/Continuation Request. Each Rate Conversion/Continuation Request, whether telephonic or written, shall be irrevocable and binding on the Borrower and subject the Borrower to the indemnification provisions of Section 0 of this Agreement. The Borrower shall bear all risks related to giving any Rate Conversion/Continuation Request telephonically or by such other method of transmission as Borrower shall elect. 2.8 LETTERS OF CREDIT. Subject to the terms and conditions set forth in this Agreement, the Letter of Credit Bank agrees, at any time and from time to time, from and including the Closing Date but in no event after the thirtieth calendar day immediately preceding the Revolving Credit Termination Date, to issue and deliver, or to extend the expiration of, Letters of Credit for the account of the Borrower; provided, however, that, the aggregate LC Exposure of the Banks shall not at any time exceed the lesser of: (x) Ten Million Dollars ($10,000,000) outstanding at any time and (y) the difference between (I) the aggregate Revolving 26 35 Credit Commitments of the Banks as then in effect and (II) the sum of (a) the aggregate outstanding Revolving Credit Loans of the Banks at such time plus (b) the aggregate LC Exposure of the Banks at such time. (a) TERM; FORM AND CONDITIONS OF LETTERS OF CREDIT. Each Letter of Credit shall be issued in such form as the Letter of Credit Bank may reasonably require subject to the Uniform Customs and Practices for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and any subsequent revisions thereof. Each Letter of Credit shall: (A) permit drawings upon presentation of one or more sight drafts and such other documents as specified by the Borrower in the Credit Request delivered pursuant to Section 0 of this Agreement and agreed to by the Letter of Credit Bank, which drawings shall occur on or prior to the applicable expiration date of such Letter of Credit, (B) by its terms expire not later than the earlier of one (1) year after the date of the Letter of Credit or the third (3rd) Business Day prior to the Revolving Credit Termination Date and (C) by its terms provided for payment of drawings in Dollars. (b) REQUESTS FOR LETTERS OF CREDIT. Letters of Credit shall be issued upon request given by the Borrower to the Agent not later than 12:00 noon (Cleveland, Ohio time) three (3) Business Days prior to the specified date for the issuance of the requested Letter of Credit. Each such request for a Letter of Credit shall be made in the form of a Credit Request transmitted by the Borrower to the Agent by telecopier, telex or cable (in the case of telex or cable, confirmed in writing prior to the date of the requested issuance of the Letter of Credit), specifying with respect to each Letter of Credit requested: (i) the face amount thereof, (ii) the beneficiary, (iii) the intended date of issuance, (iv) the terms of the Letter of Credit, and shall be promptly forwarded by the Agent to the Letter of Credit Bank. Concurrently with each Credit Request requesting a Letter of Credit, the Borrower shall execute and deliver to the Letter of Credit Bank a Reimbursement Agreement, in the Letter of Credit Bank's then standard form of application for and reimbursement agreement with respect to letters of credit (such documents being hereinafter collectively referred to as a "Reimbursement Agreement"); provided, however, that in the event of any conflict between the provisions of any such Reimbursement Agreement and this Agreement, the provisions of this Agreement shall govern. 27 36 (c) PARTICIPATION BY BANKS IN LETTERS OF CREDIT. By the issuance of a Letter of Credit by the Letter of Credit Bank and without further action on the part of the Letter of Credit Bank or any Bank, the Letter of Credit Bank hereby grants to each Bank, and each Bank hereby acquires from the Letter of Credit Bank, a participation in each Letter of Credit equal to such Bank's Ratable Portion, effective on the date of the issuance of each Letter of Credit. In consideration, each Bank hereby absolutely and unconditionally agrees to pay to the Agent for the account of such Letter of Credit Bank such Bank's Ratable Portion of each disbursement made by such Letter of Credit Bank in respect of such Letter of Credit and not reimbursed by the Borrower as hereinafter provided or not reimbursed by reason of the illegality of such reimbursement, or any reimbursement payment required to be refunded to the Borrower for any reason. Each Bank acknowledges and agrees that its obligation to acquire risk participations pursuant to this Section 0 is absolute and unconditional and shall not be affected by any event or circumstance whatsoever, including the occurrence of any Potential Default or Event of Default hereunder or the failure of any condition precedent set forth in Section 0 of this Agreement to be satisfied and each payment in satisfaction thereof shall be made without any offset, abatement, withholding or reduction whatsoever; provided, however, that the foregoing shall not be construed to excuse the Letter of Credit Bank from liability to any Bank to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by each of the Banks to the fullest extent permitted by applicable Law) suffered by such Bank that are caused by such Letter of Credit Bank's gross negligence or wilful misconduct. (d) REIMBURSEMENT; INTEREST. The Borrower agrees that whenever there is a drawing on a Letter of Credit issued by the Letter of Credit Bank, the Borrower shall pay to the Agent on the date of such drawing, an amount equal to such drawing. The Agent shall promptly remit any such payment to the Letter of Credit Bank. If there is a drawing on a Letter of Credit, then, unless the Borrower shall reimburse such amount in full on such date, the unpaid amount thereof shall bear interest for the account of the Letter of Credit Bank for each day from and including the date of such drawing, to but excluding the earlier of the date of reimbursement or the date on which such drawing is reimbursed by a Revolving Credit Borrowing, at the rate per annum that would apply to such amount if such amount were an Alternate Base Rate Loan by a Bank. (e) FAILURE TO REIMBURSE. In the event that the Borrower fails to make a timely reimbursement, together with any interest thereon, to the Agent on the date of any drawing on a Letter of Credit pursuant to this Section, such failure shall constitute a Deemed Credit Request requesting an Alternate Base Rate Loan in an aggregate amount equal to the amount reimbursable to the Letter of Credit Bank plus any interest thereon. The Agent shall disburse all such loan proceeds directly to the Letter of Credit Bank to satisfy the Borrower's aforesaid reimbursement liability. The obligations of the Banks to the Agent under this Section are in addition to and not in limitation of the obligations of the Banks under Section 0 of this Agreement. In the event that an Loan cannot be legally 28 37 made pursuant to this Section 0 for any reason, each of the Banks shall reimburse the Letter of Credit Bank in an amount equal to such Bank's Ratable Portion of the drawing on the Letter of Credit. (f) OBLIGATIONS ABSOLUTE. The obligation of the Borrower to reimburse the Letter of Credit Bank shall, in each case, be absolute and unconditional and shall be performed under all circumstances including, without limitation: (i) any lack of validity or enforceability of any Letter of Credit, (ii) the existence of any claim, offset, defense or other right that the Borrower may have against the beneficiary of any Letter of Credit or any successor in interest thereto, (iii) the existence of any claim, offset, defense or other right that any Bank or the Agent may have against the Borrower or against the beneficiary of any Letter of Credit or against any successor in interest thereto, (iv) the existence of any fraud or misrepresentation in the presentment of any draft or other item drawn and paid under any Letter of Credit by any person other than the Letter of Credit Bank, (v) any payment of any draft or other item by the Letter of Credit Bank which does not strictly comply with the terms of any Letter of Credit issued by the Letter of Credit Bank, so long as, in each case, such payment shall not have constituted gross negligence or willful misconduct on the part of the Letter of Credit Bank, (vi) any improper use which may be made of the Letter of Credit or any improper acts or omissions of any beneficiary or transferee of the Letter of Credit in connection therewith, (vii) any statement or any other documents presented under any Letter of Credit proving to be insufficient, forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever, (viii) the insolvency of any Person issuing any documents in connection with the Letter of Credit, (ix) any irregularity in the transaction with respect to which a Letter of Credit is issued, including any fraud by the beneficiary or any transferee of such Letter of Credit, (x) any errors, omissions, interruptions or delays in transmission or delivery of any messages, (xi) any act, error, neglect or default, omission, insolvency or failure of business of any of the correspondents of the Letter of Credit Bank, or (xii) any other circumstances arising from causes beyond the control of the Letter of Credit Bank. (g) LIABILITY OF LETTER OF CREDIT BANK. It is expressly understood and agreed that the absolute and unconditional obligation of the Borrower hereunder to reimburse disbursements in respect of Letters of Credit issued by a Letter of Credit Bank shall not be construed to excuse a Letter of Credit Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable Law) suffered by the Borrower or any Subsidiary of the foregoing that are caused by the gross negligence or willful misconduct of the Letter of Credit Bank in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties agree that the Letter of Credit 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, and may make payment upon 29 38 presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit; provided, however, that the Letter of Credit Bank shall have the right in its sole discretion to decline to accept such documents and to decline to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit. In making any payment under any Letter of Credit, the Letter of Credit Bank's (i) exclusive reliance on the documents, appearing on their face to be in order, as well as signatures and endorsements presented to it under such Letter of Credit, in each case as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether the amount due to the beneficiary thereunder equals the amount of such draft, any document presented pursuant to such Letter of Credit proves to be in order, or any other statement or any other document or any signature or endorsement with respect thereto presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, and (ii) making payment upon presentation of documents not complying in any immaterial respect with the terms of the Letter of Credit shall, in each case, not be deemed to constitute willful misconduct or gross negligence of the Letter of Credit Bank. Any action, inaction or omission on the part of the Letter of Credit Bank or any of its correspondents, under or in connection with any Letter of Credit issued by the Letter of Credit Bank or any renewal or extension thereof or the related instruments or documents, if taken in good faith and in conformity with applicable Laws and regulations governing Letters of Credit generally and the terms of this Section 0, shall be binding upon the Borrower and shall not place the Letter of Credit Bank or any of its correspondents under any liability to the Borrower. The Letter of Credit Bank's rights, powers, privileges and immunities specified in or arising under this Agreement are in addition to any heretofore or at any time hereafter otherwise created or arising rights, powers, privileges and immunities, whether by statute or rule of Law or contract. (h) LETTER OF CREDIT BANK INDEMNITY. The Borrower shall indemnify the Letter of Credit Bank from and against: (i) any loss or liability (other than any caused by such Letter of Credit Bank's gross negligence or willful misconduct as determined by the final judgment of a court of competent jurisdiction) incurred by the Letter of Credit Bank in respect of this Agreement and the Letters of Credit and (ii) any out-of-pocket expenses incurred by the Letter of Credit Bank in defending itself or otherwise related to this Agreement or any Letter of Credit (other than any caused by the Letter of Credit Bank's gross negligence or willful misconduct as determined by the final judgment of a court of competent jurisdiction) including, without limitation, reasonable fees and expenses of legal counsel incurred by such Letter of Credit Bank (including, without limitation, the reasonable interdepartmental charges of its salaried attorneys) in the defense of any claim against it or in the prosecution of its rights and remedies. (i) EFFECT OF APPLICABLE LAW OR CUSTOM. All Letters of Credit issued hereunder, all reimbursement obligations hereunder and all reimbursement obligations under any Reimbursement Agreement will, except to the extent otherwise expressly 30 39 provided in this Agreement, the Reimbursement Agreements or the Letters of Credit, be governed by the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and any subsequent revisions thereof. (j) TERMINATION OF LETTER OF CREDIT COMMITMENT. In the event that: (i) any restriction is imposed on the Letter of Credit Bank (including, without limitation, any legal lending or acceptance limits imposed by the United States of America or any political subdivision thereof or of any foreign government or central bank) which in the judgment of the Letter of Credit Bank would prevent the Letter of Credit Bank from issuing Letters of Credit or maintaining its commitment to issue Letters of Credit or (ii) there shall have occurred, at any time during the term of this Agreement: (A) any outbreak of hostilities or other national or international crisis or change in economic conditions if the effect of such outbreak, crisis or change would make the creation of Letters of Credit impracticable, (B) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which would materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement, or (C) the taking of any action by any government or agency in respect of its monetary or fiscal affairs which would have a material adverse effect on the issuance of Letters of Credit, then the Letter of Credit Bank, in the case of the occurrence of any event described hereinabove, shall give written notice of the occurrence of such event to the Borrower and the Agent whereupon the commitment of the Letter of Credit Bank to issue Letters of Credit shall be suspended on the effective date of such notice and shall continue suspended until the effect of such event shall cease to exist. 2.9 FEES. The Borrower shall pay to the Agent for its own account, or for the account of the Letter of Credit Bank or the Banks, as the case may be, the fees set forth in this Section 0. All fees set forth in this Section 0 shall be paid on the date due, in immediately available funds, to the Agent for distribution as appropriate to itself, the Letter of Credit Bank, and the Banks and once paid, none of such fees shall be refundable under any circumstances. (a) REVOLVING CREDIT COMMITMENT FEE. The Borrower agrees to pay to the Agent for the benefit of the Banks, allocable to the Banks in accordance with the Ratable Portion of the Banks, a commitment fee equal to: (x) the Applicable Commitment Fee Percentage then in effect multiplied by (y) the average daily unused portion of the total of the Revolving Credit Commitments of the Banks outstanding on the Fee Percentage Determination Date immediately preceding the applicable Fee Percentage Adjustment Date. The annual fee shall be payable quarterly in arrears on the first day of each Fiscal Quarter commencing April 1, 1998, until the Revolving Credit Termination Date. (b) ARRANGEMENT AND STRUCTURING. The Borrower agrees to pay to the Agent on the Closing Date for its sole account a one time fee for arranging and structuring the 31 40 financing transaction contemplated by this Agreement in the amount specified in the commitment letter executed by the Borrower and the Agent, dated December 9, 1997. (c) ANNUAL AGENT'S FEE. The Borrower agrees to pay to the Agent for its sole account an annual agent fee as set forth in the Agent's Fee Letter. (d) LETTER OF CREDIT FEES. The Borrower agrees to pay fees in respect of Letters of Credit issued for the account of the Borrower as follows: (i) ANNUAL LETTER OF CREDIT RISK PARTICIPATION FEE. The Borrower agrees to pay to the Agent for the benefit of the Banks, allocable to the Banks in accordance with the Ratable Portion of the Banks, in advance on the date of issuance of each Standby Letter of Credit issued for its account and on any renewal or extension date thereafter, an annual risk participation fee (adjusted for Standby Letters of Credit having terms less than one year) equal to: (x) the Applicable Risk Participation Fee then in effect multiplied by (y) the face amount of the Standby Letter of Credit issued by the Letter of Credit Bank. (ii) ANNUAL LETTER OF CREDIT BANK FEE. Commencing on April 1, 1998, the Borrower agrees to pay to the Agent for the sole benefit of the Letter of Credit Bank, payable quarterly in arrears, an issuance fee equal to: (x) one-eighth of one percent (1/8%) multiplied by (y) the average daily face amount of each Standby Letter of Credit outstanding during the immediately preceding quarter. (iii) OTHER FEES RELATING TO LETTERS OF CREDIT. The Borrower agrees to pay to the Agent for the sole benefit of the Letter of Credit Bank upon issuance of any Letters of Credit issued for its account any standard fees, amendment and modification fees and any other standard fees and charges customarily charged by the Letter of Credit Bank in connection with Standby Letters of Credit. (e) LATE CHARGES. If the Borrower fails to pay any amount due under this Agreement, or any fee in connection herewith, in full within ten (10) days after its due date, the Agent shall be entitled to, in addition to its remedies under Section 0 hereof, and the Borrower will incur and shall pay to the Agent for the benefit of the Banks, in each such case, a late charge equal to one percent (1%) of the amount failed to be paid. The payment of a late charge will not cure or constitute a waiver of any Potential Default or Event of Default under this Agreement. (f) APPLICABLE RISK PARTICIPATION PERCENTAGE AND APPLICABLE FACILITY FEE PERCENTAGE. The Applicable Risk Participation Percentage or Applicable Commitment Fee Percentage, as the case may be, shall be calculated as herein specified as of the Closing Date and as of the first day of the calendar quarter (each an "Fee Adjustment Date") commencing after the date the Agent shall have received (A) financial statements 32 41 required by Sections 0, 0 or 0, as the case may be, for the period ending as of the last day of the Fiscal Quarter or Fiscal Year immediately preceding such Fee Adjustment Date (each a "Fee Determination Date") and (B) a certificate complying with Section 0 certifying the Borrower's Consolidated Total Funded Debt to EBITDA Ratio as of any such Fee Determination Date. On each Fee Adjustment Date, the Applicable Risk Participation Percentage or Applicable Commitment Fee Percentage, as the case may be, shall be the percentage set forth in the definition of "Applicable Risk Participation Percentage" and "Applicable Facility Fee Percentage" which corresponds to the Borrower's Consolidated Total Funded Debt to EBITDA Ratio as of the Fee Determination Date applicable to such Fee Adjustment Date. The Applicable Risk Participation Percentage and Applicable Commitment Fee Percentage effective as of a particular Fee Adjustment Date shall remain effective only until the next succeeding Fee Adjustment Date at which time the Applicable Risk Participation Percentage and Applicable Commitment Fee Margin shall be recalculated pursuant to this Section 0; except, however, that, if an Event of Default shall have occurred which has not been waived in writing by all of the Banks, or if the Borrower shall not have delivered as of such Margin Adjustment Date the financial statements in accordance with Sections 0, 0 and 0 of this Agreement, the Applicable Risk Participation Fee Percentage shall be eight-tenths of one percent (.80%) per annum and the Applicable Commitment Fee Percentage shall be three-tenths of one percent (.30%) per annum. (g) PAYMENT OF FEES; NONREFUNDABLE. All fees set forth in this Section 0 shall be paid on the date due, in immediately available funds, to the Agent for distribution, if and as appropriate, to the Banks or the Letter of Credit Bank. Once paid, to the extent permitted by applicable Law, none of such fees shall be refundable under any circumstances. 2.10 INTEREST ON REVOLVING CREDIT LOANS. (a) INTEREST RATE. The Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Loan made by each Bank from the date of such Revolving Credit Loan until such principal amount shall be paid in full as follows: (i) ALTERNATE BASE RATE LOANS. During such periods as any Alternate Base Rate Loan comprising a Revolving Credit Borrowing is outstanding, the Borrower shall pay interest on such Alternate Base Rate Loan at a rate per annum equal at all times to the sum of the Alternate Base Rate, payable quarterly, in arrears, on the first day of each calendar quarter and on the date such Alternate Base Rate Loan comprising a Revolving Credit Borrowing shall be converted or paid in full (whether at maturity, by reason of acceleration or otherwise) and, after maturity, on demand. 33 42 (ii) LIBOR RATE LOANS. During such periods as any LIBOR Rate Loan comprising a Revolving Credit Borrowing is outstanding, the Borrower shall pay interest on such LIBOR Rate Loan at a rate per annum equal to the sum of the London Interbank Offered Rate plus the Applicable LIBOR Margin in effect as of the most recently preceding Margin Adjustment Date occurring prior to the date of the making of such LIBOR Rate Loan, or the conversion or continuation of such LIBOR Rate Loan in accordance with Section 0, payable: (A) on the last day of each Interest Period and (B) if such Interest Period has a duration of more than three months, three months after the first day of such Interest Period and (C) on the date such LIBOR Rate Loan comprising a Revolving Credit Borrowing shall be converted to an Alternate Base Rate Loan or paid in full (whether at maturity, by reason of acceleration or otherwise) and (D) after maturity, on demand. (b) APPLICABLE LIBOR MARGIN; TERMS OF ADJUSTMENT. (i) COMMENCEMENT; CONDITIONS. So long as no Event of Default shall have occurred which has not been waived in writing by all of the Banks, the Applicable LIBOR Margin shall be calculated as herein specified as of the Closing Date and effective as of the first day of the Fiscal Quarter (each an "Margin Adjustment Date") during which the Agent shall have received (A) financial statements required by Sections 0, 0 or 0, as the case may be, for the period ending as of the last day of the Fiscal Quarter or Fiscal Year immediately preceding such Margin Adjustment Date (each a "Determination Date") and (B) a certificate complying with Section 0 certifying the Borrower's Consolidated Funded Debt to EBITDA Ratio as of any such Determination Date. (ii) CALCULATION AND DURATION OF ADJUSTMENT. On each Margin Adjustment Date, the Applicable LIBOR Margin shall be the Applicable LIBOR Margin set forth in the definition of "Applicable LIBOR Margin" which corresponds to the Borrower's Consolidated Total Funded Debt to EBITDA Ratio as of the Determination Date applicable to such Margin Adjustment Date. The Applicable LIBOR Margin effective as of a particular Margin Adjustment Date shall remain effective only until the next succeeding Margin Adjustment Date at which time the Applicable LIBOR Margin shall be recalculated pursuant to this Subsection (b); provided, however, that: (I) if at any time an Event of Default shall have occurred that has not been waived in writing by all of the Banks, or if the Borrower shall not have delivered as of any Margin Adjustment Date the financial statements required to have been delivered under Sections 0 and 0 of this Agreement, then, at the election of the Required Banks, the Applicable LIBOR shall immediately adjust to be eight-tenths of one percent (0.80%) per annum and (II) if an Event of Default shall have occurred which has not been waived in writing by the Required Banks, the interest rate shall, upon the request 34 43 of the Required Banks, be the interest rate applicable pursuant to Section 0 of this Agreement. (c) DEFAULT INTEREST. Following the occurrence of an Event of Default which has not been waived in writing by all of the Banks, (i) the principal thereof and the unpaid interest and fees thereon shall, upon the request of the Required Banks, bear interest, payable on demand, for Alternate Base Rate Loans and LIBOR Rate Loans, at a rate per annum which shall be equal at all times to two percent (2.0%) in excess of the Alternate Base Rate and (ii) the Applicable Risk Participation Fee shall be two percent (2%) per annum. (d) INTEREST RATE DETERMINATION. (i) AGENT DETERMINATION; NOTICE. The Agent shall determine the London Interbank Offered Rate in accordance with the definition of London Interbank Offered Rate set forth in Section 0 of this Agreement. The Agent shall give prompt notice to each of the Banks and the Borrower of the applicable interest rate determined by the Agent for purposes of Sections 0 and 0 of this Agreement. (ii) FAILURE OF BORROWER TO ELECT. If no Interest Period is specified in any Credit Request or any Rate Conversion/Continuation Request for any LIBOR Rate Loans, the Borrower shall be deemed to have selected an Interest Period with a duration of one month. If the Borrower shall not have given notice in accordance with Section 0 of this Agreement to continue any LIBOR Rate Loans into a subsequent Interest Period (and shall not have otherwise delivered a Rate Conversion/Continuation Request in accordance with Section 0 of this Agreement to convert such Loans), such LIBOR Rate Loans shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically convert into Alternate Base Rate Loans. 35 44 2.11 PAYMENTS AND COMPUTATIONS. (a) PAYMENTS; APPLICATION OF PAYMENTS. Except to the extent otherwise provided herein, all payments of Obligations shall be made in Dollars, in immediately available funds, without setoff, counterclaim, defense or deduction of any kind, to the Agent not later than 12:00 noon (Cleveland, Ohio time) on the day on which such payment shall become due by deposit of such funds to the Agent's account maintained at the Payment Office of the Agent. Payments received after 12:00 noon (Cleveland, Ohio time) shall be deemed to have been received on the next succeeding Business Day. The Borrower shall at the time of making a payment hereunder specify to the Agent the Obligations to which such payment is to be applied. If the Borrower does not specify an application or if an Event of Default has occurred which has not been waived in writing by the Required Banks, the Agent may, subject to Section 0 of this Agreement, distribute a payment to the Letter of Credit Bank or the Banks for application to such Obligations as the Agent, in its sole discretion, elects or as the Required Banks shall have directed; provided, however, the Agent will use reasonable efforts to avoid an application of a payment which causes early prepayment of a LIBOR Rate Borrowing prior to expiration of its applicable Interest Period. Each payment received by the Agent for the account of the Letter of Credit Bank or a Bank shall be paid on the day of such receipt, in immediately available funds, to the Letter of Credit Bank or Bank for the account of its respective Lending Office. (b) PAYMENT PROCEDURES. The Control Account of the Borrower will be charged with all Advances made by the Banks to the Borrower and all other Obligations of the Borrower under this Agreement or any other Loan Document. The Borrower hereby authorizes each Bank to charge the Loan Account of the Borrower with such Obligations. The Control Account of the Borrower will be credited in accordance with this Section 0 with all payments received by the Agent directly from such Borrower or for the account of the Borrower. The Agent shall send the Borrower statements in accordance with the Bank's standard procedures. Absent manifest error, each such statement shall be final, conclusive and binding on the Borrower. The Loan Accounts of each Bank shall reflect the activity in the Control Account applicable to such Bank's Loan Account. (c) AUTHORIZATION TO CHARGE ACCOUNT. If and to the extent payment owed to the Agent or any Bank is not made when due hereunder or under the Revolving Credit Notes, the Borrower hereby authorizes the Agent and each Bank to charge from time to time against any or all of the Borrower's accounts with the Agent or such Bank, as the case may be, any amount so due. Notice of any such charge shall be given promptly to the Borrower by the Agent or such Bank, as the case may be. (d) COMPUTATIONS OF INTEREST AND FEES. All computations of interest on LIBOR Rate Loans, as well as fees and other compensation hereunder, shall be made by 36 45 the Agent on the basis of a year of 360 days and for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. All computations of interest on Alternate Base Rate Loans shall be made by the Agent on the basis of a year of 365 or 366 days and in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Agent of interest, fees or other amounts of compensation due hereunder shall be, absent manifest error, prima facie evidence thereof. (e) PAYMENT NOT ON BUSINESS DAY. Whenever any payment hereunder or under the Revolving Credit Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. Any such extension of time shall in such case be included in the computation of payment of interest, fees or other compensation, as the case may be. (f) PRESUMPTION OF PAYMENT IN FULL BY BORROWER. Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date. In reliance upon such assumption, the Agent may, but shall not be obligated to, distribute to each Bank on such due date the amount then due such Bank. If and to the extent the Borrower shall not have made such payment in full to the Agent, each Bank shall repay to the Agent promptly upon demand the amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate for the first three (3) days from and after such date and thereafter at the Interest Rate then applicable to Alternate Base Rate Loans. 2.12 CHANGE IN LAW; LIBOR RATE LOANS UNLAWFUL. Notwithstanding any other provision of this Agreement, if any Bank determines that any applicable Law, or any change therein, or any change in the interpretation or administration of any Law by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall make it unlawful or impossible, or any such governmental authority, central bank or agency asserts that it is unlawful, for any Bank or its Lending Office to perform its obligations hereunder to make LIBOR Rate Loans or to fund or maintain LIBOR Rate Loans hereunder, then, upon notice to the Agent and the Borrower by such Bank: (a) the obligation of all of the Banks to make, or to convert Loans into, LIBOR Rate Loans shall be suspended until the Agent shall notify the Borrower and the Banks that the circumstances causing such suspension no longer exist and (b) the Borrower shall immediately, or at such later date, if any, as may thereafter be permitted by relevant Law, prepay in full the then outstanding principal amount of all LIBOR Rate Loans of all Banks, together with interest accrued thereon and any other amounts 37 46 payable to the Banks hereunder unless the Borrower, upon notice from the Agent, converts all LIBOR Rate Loans of all Banks then outstanding into Loans of another Type in accordance with Section 0 of this Agreement as to which such circumstances do not exist. Any such payment or Rate Conversion shall be subject to the provisions of Section 0 of this Agreement. 2.13 UNAVAILABILITY. Notwithstanding any other provision in this Agreement, if at any time with respect to any LIBOR Rate Loans: (a) INADEQUATE RATE. Any Bank notifies the Agent that the London Interbank Offered Rate for any Interest Period for such LIBOR Rate Loans will not adequately reflect the cost to such Bank of making, funding or maintaining its LIBOR Rate Loans for such Interest Period, the Agent shall promptly notify the Borrower and the Banks; (b) UNAVAILABLE QUOTATIONS. The Agent determines (which determination shall be conclusive) that quotations of interest rates for Dollar deposits are not being provided in the relevant amounts or for the relevant maturities to, or the circumstances affecting the London interbank market of deposits in Dollars make it impracticable to, determine the London Interbank Offered Rate, or (c) UNAVAILABLE DEPOSITS. Any Bank determines that Dollar deposits of the relevant amount for the relevant Interest Period are not available in the London interbank market of deposits of Dollars for the purpose of funding the LIBOR Rate Loans, then: (i) each LIBOR Rate Loan will automatically, on the last day of the then existing Interest Period therefor, convert into an Alternate Base Rate Loan and (ii) the obligation of the Banks to make or to convert Loans into LIBOR Rate Loans or continue LIBOR Rate Loans shall be suspended until the Agent shall notify the Borrower and the Banks that the circumstances causing such suspension no longer exist. 2.14 PRO RATA TREATMENT. Except as set forth in Sections 0, 0 and 0 of this Agreement, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the fees provided for hereunder, each Rate Conversion or Rate Continuation of Loans comprising a Borrowing shall be allocated among the Banks in accordance with each Bank's Ratable Portion (or if the Commitments shall have expired or been terminated, in accordance with the respective principal amounts of each Bank's Loans). 3 CONDITIONS OF LENDING. 3.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The effectiveness of this Agreement, the obligation of each Bank to make a Revolving Credit Loan on the occasion of each Revolving Credit Borrowing and each Rate Conversion or Rate Continuation, and the obligation of the Letter of Credit Bank to issue any Letter of Credit are subject to the condition precedent that the Agent shall have received on or before the Closing Date the following: 38 47 (a) THIS AGREEMENT. Counterparts of this Agreement executed and delivered by or on behalf of each of the parties hereto. (b) SUBSIDIARY GUARANTIES. Subsidiary Guaranties appropriately completed and executed by each of the Domestic Subsidiaries. (c) CORPORATE ACTION; INCUMBENCY. A certificate executed by an authorized officer of the Borrower certifying: (i) the resolutions of the Board of Directors of the Borrower authorizing the execution, performance and delivery of (A) this Agreement, (B) the Revolving Credit Notes, (C) all Loan Documents to which the Borrower is a party and (D) each other document executed in connection therewith or in connection with any of the transactions contemplated herein or therein, (ii) as true and correct the Articles of Incorporation and By-Laws of the Borrower, (iii) the names and signatures of the officers of the Borrower executing or attesting to such documents, (iv) compliance by the Borrower with all representations, warranties, covenants and conditions under this Agreement and each of the documents executed in connection herewith, (v) the absence of any Potential Default or Event of Default and (vi) the absence of any material litigation with respect to this Agreement and the transactions contemplated thereby. The Agent and each Bank may conclusively rely on such certificates until receipt of notice in writing from the Borrower to the contrary. (d) DOMESTIC SUBSIDIARY - CORPORATE ACTION; INCUMBENCY. A certificate executed by an authorized officer of each Domestic Subsidiary certifying: (i) the resolutions of the Board of Directors of such Subsidiary authorizing the execution, performance and delivery of (A) its respective Subsidiary Guaranty and (B) each other document executed in connection therewith or in connection with any of the transactions contemplated herein or therein, (ii) as true and correct the Articles or Certificate of Incorporation and By-Laws or Regulations of such Subsidiary, (iii) the names and signatures of the officers of such Subsidiary executing or attesting to such documents, (iv) compliance by such Subsidiary with all representations, warranties, covenants and conditions under its respective the Subsidiary Guaranty and each of the documents executed in connection herewith, (v) the absence of any Potential Default or Event of Default and (vi) the absence of any material litigation with respect to its Subsidiary Guaranty Agreement and the transactions contemplated thereby. The Agent and each Bank may conclusively rely on such certificates until receipt of notice in writing from the Borrower to the contrary. (e) GOOD STANDING - BORROWER. A certificate, as of a recent date, from the Secretary of State of Delaware as to the good standing of the Borrower in such jurisdiction. (f) GOOD STANDING - DOMESTIC SUBSIDIARIES. Certificates, as of a recent date, 39 48 from appropriate governmental authorities for the jurisdiction of incorporation with respect to each Domestic Subsidiary as to the good standing of such Domestic Subsidiary in such jurisdiction. (g) REVOLVING CREDIT NOTES. The Revolving Credit Notes, in favor of each of the Banks, in the principal amount of such Bank's Revolving Credit Commitment, each duly executed by the Borrower. (h) LEGAL OPINIONS. An opinion of Squire, Sanders & Dempsey, counsel to the Borrower, in form and substance satisfactory to the Agent, the Banks and their counsel, (i) with respect to the Borrower, relating to corporate authority under Delaware law, the enforceability of this Agreement and the Loan Documents under Ohio law and other matters customarily addressed in opinions rendered in transactions of this type and (ii) with respect to the Domestic Subsidiaries, relating to corporate authority in the jurisdiction in which each such Domestic Subsidiary is organized, the enforceability of the Subsidiary Guaranty of each Domestic Subsidiary against such Domestic Subsidiary, and such other matters customarily addressed in opinions rendered in transactions of this type. (i) MINIMUM AVAILABILITY. After the disbursement of the Loan proceeds necessary to repay the Existing Lenders and to consummate the Acquisitions, the Borrower shall have the ability to borrow at least Twenty Million Dollars ($20,000,000) in Revolving Credit Loans. (j) ASSIGNMENT AGREEMENT. The parties hereto and the parties to the Existing Credit Agreement shall have executed and delivered an assignment and acceptance agreement in form and substance satisfactory to the Agent. (k) CONSENTS. Evidence satisfactory to the Agent that the Borrower has obtained, as certified by an officer of the Borrower, all documents and instruments, including all consents, authorizations, novations and filings required under law or under any material contractual obligations of the Borrower as may be necessary for consummation of the transactions contemplated by this Agreement and the Loan Documents. (l) DELIVERY OF FINANCIAL STATEMENTS; OFFICER'S CERTIFICATE. (i) Company prepared financial statements of the Borrower as of September 30, 1997, and the audited financial statements of the Borrower as of December 31, 1996, each in form and substance satisfactory to the Agent and the Banks and (ii) a certificate of the chief financial officer of the Borrower, in his or her capacity as chief financial officer, setting forth the calculations necessary to determine which of the financial standards specified in definitions of "Applicable LIBOR Margin" and "Applicable Risk Participation Percentage" and "Applicable Commitment Fee Percentage" have been satisfied by the Borrower. 40 49 (m) CREDIT REQUEST AND DISBURSEMENT DIRECTION LETTER. A Credit Request and a letter from the Borrower directing the Agent to disburse the proceeds of the Loans. (n) PAYMENT OF FEES. Evidence of the payment (or disbursement direction for such payment delivered pursuant to Section 0 of this Agreement): (i) to the Agent for its own account, the structuring and arrangement fee and facility fee payable to the Agent and (ii) the legal fees and out-of-pocket expenses of legal counsel to the Agent through the time of Closing. (o) PROJECTIONS. Acceptance by the Agent and the Banks of projections for Fiscal Year 1998 and each of the next succeeding two Fiscal Years of the Borrower. (p) INSURANCE. Evidence satisfactory to the Agent and the Banks, together with insurance certificates, that the Borrower has adequate personal and real property, liability, business interruption and product liability insurance. (q) OTHER INFORMATION. Such other information, financial or otherwise, as the Agent, any Bank or respective counsel thereto may request, in its reasonable discretion. 3.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of each Bank to make a Revolving Credit Loan on the occasion of each Revolving Credit Borrowing, Rate Conversion and Rate Continuation, and the obligation of the Letter of Credit Bank to issue any Letter of Credit, are subject to the condition precedent that, as of the date of any such Loan or issuance, and before and after giving effect thereto: (a) REPRESENTATION BRINGDOWN. The representations and warranties contained in Sections 0 of this Agreement are true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date; and (b) NO DEFAULT; COMPLIANCE WITH TERMS. The Borrower shall be in compliance with all other terms and provisions set forth herein and in each other Loan Documents on its part to be observed or performed, and at the time of and immediately after such Credit Event, No Potential Default or Event of Default shall have occurred which has not been waived by the Required Lenders; and (c) NO MATERIAL ADVERSE EFFECT. There has been no event and there exists no condition which would or which might reasonably be expected to have a Material Adverse Effect, as determined by the Required Banks. 41 50 Each Credit Event and each receipt by the Borrower of the proceeds of any Loan shall constitute a representation and warranty by the Borrower that on the date of such Credit Event or receipt, as the case may be, the foregoing statements are true and correct as of such date. 4 GENERAL REPRESENTATIONS AND WARRANTIES. So long as the Obligations shall remain outstanding, the Banks shall have any Revolving Credit Commitment and LC Exposure hereunder, and the Letter of Credit Bank shall have any LC Commitment hereunder, the Borrower represents and warrants to the Agent and each of the Banks as follows: 4.1 EXISTENCE. The Borrower and each of its subsidiaries is (a) a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and (b) has all requisite corporate power and authority , and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being conducted. The Borrower has no Subsidiaries other than as listed in the Supplemental Schedule. The Borrower and each of its Domestic Subsidiaries is duly qualified or licensed to transact business in each jurisdiction where such qualification or licensure is necessary and a failure to so qualify or be licensed will have a Material Adverse Effect. 4.2 AUTHORIZATION. The execution, delivery, and performance of this Agreement, the Loan Documents to which the Borrower or any Domestic Subsidiary is a party: (a) are within Borrower's or such Domestic Subsidiary's corporate powers, (b) have been duly authorized by all necessary corporate action, (c) are not in contravention of Law or the terms of Borrower's or such Domestic Subsidiary's Certificate of Incorporation or By-Laws or of any indenture or other document or instrument evidencing Indebtedness for borrowed money or any other material agreement or undertaking to which the Borrower or such Domestic Subsidiary is a party or by which it or its property is bound and (d) do not required any waivers, consents or approvals by any of the creditors (including, without limitation, the Note Holders) or trustees for creditors of the Borrower or such Domestic Subsidiary or any other Person. The execution, delivery, and performance of the Acquisition Documents, upon the consummation of the Acquisitions: (a) are within Borrower's corporate powers, (b) have been duly authorized by all necessary corporate action, (c) are not in contravention of Law or the terms of Borrower's Certificate of Incorporation or By-Laws or of any indenture or other document or instrument evidencing Indebtedness for borrowed money or any other material agreement or undertaking to which the Borrower is a party or by which it or its property is bound and (d) do not required any waivers, consents or approvals by any of the creditors (including, without limitation, the Note Holders) or trustees for creditors of the Borrower or any other Person. 4.3 ENFORCEABILITY. This Agreement and the Loan Documents constitute, the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with the terms thereof subject to any applicable bankruptcy, insolvency, reorganization, 42 51 moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). Upon consummation of the Acquisitions, the Acquisition Documents will constitute, the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with the terms thereof subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 4.4 LITIGATION; PROCEEDINGS. Except as disclosed in the Supplemental Schedule, there is no action, suit, investigation or proceeding, and no order, writ, injunction, judgment or decree, now pending, existing or, to the knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries, affecting any property of the Borrower or any of its Subsidiaries or with respect to this Agreement or any Loan Document or any Acquisition Document, whether at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any federal, state, local or foreign government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators which, if adversely determined, might reasonably be expected to have a Material Adverse Effect. 4.5 TAXES. The Borrower has filed all federal, state and local tax returns which are required to be filed by the Borrower or its Subsidiaries and, except to the extent permitted by Section 0 of this Agreement, has paid all taxes and assessments due as shown on such returns, including interest, penalties and fees. There are no material tax disputes or contests pending as of the Closing Date. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Borrower, adequate. 4.6 TITLE. The Borrower and each of its Subsidiaries has good title to all personal property assets reflected in, and good and marketable title to all real property assets reflected in, the financial statements referred to in Sections 0 and 0 of this Agreement and in the financial statements delivered from time to time pursuant to Section 0 of this Agreement. There are no Liens on any real or personal property of the Borrower, other than as permitted by Section 0. The Borrower and each of its Subsidiaries owns, or is licensed to use, all Intellectual Property material to its business. 4.7 NO BREACH OR DEFAULT. Neither the execution and delivery of this Agreement and the Loan Documents, nor the consummation of the transactions contemplated hereby and thereby, nor the compliance with the terms and provisions hereof and thereof will conflict with or result in a breach of, or constitute a default under: (a) the articles and By-Laws of the Borrower or any of its Subsidiaries, (b) any applicable law or regulation, (c) any order, writ, warrant, injunction or decree of any court or governmental authority or agency, (d) any material agreement or instrument to which the Borrower or any of its Subsidiaries is a party or by which it is bound or its property subject, or (e) result in the creation or imposition of any Lien upon any of the revenues or assets of the Borrower or its Subsidiaries pursuant to the terms of any such agreement or instrument. 43 52 4.8 CONSENTS; APPROVALS. Except as set forth on the Supplemental Schedule, no action, consent or approval of, registration or filing with or any other action by any governmental authority or other Person is or will be required in connection with execution and delivery of this Agreement, the Loan Documents or the Acquisition Documents and the transactions contemplated hereby and thereby, except such as have been made or obtained and are in full force and effect. 4.9 LAWFUL OPERATIONS. The Borrower and each of its Subsidiaries, and each of the operations of the Borrower and such Subsidiaries, are in full compliance with all requirements imposed by Law (whether statutory, administrative, judicial or other and whether federal, state, or local but excluding Environmental Laws to the extent addressed in Section 0 below), except to the extent any such noncompliance, when taken singly or with all other such noncompliance, has not resulted, and could not reasonably be expected to result, in a Material Adverse Effect. 4.10 ENVIRONMENTAL COMPLIANCE. Except for copper emissions from the Subsidiary's plant in Durham, North Carolina (which emissions do no violate applicable Environmental Laws), hazardous materials have not been released or disposed of on any property owned or leased by a the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, any property adjoining any such properties. All environmental permits have been obtained and are in effect for the operations conducted at all property owned or leased by the Borrower or any of its Subsidiaries. The Borrower and each of its Subsidiaries are in material compliance with all applicable Environmental Laws and all environmental permits. The Borrower and each of its Subsidiaries have disposed of all wastes generated, including wastes containing hazardous materials, in material compliance with all applicable Environmental Laws and environmental permits. There are no past, pending or, to the actual knowledge of the Borrower, threatened environmental claims against the Borrower or any of its Subsidiaries that individually or in the aggregate could have a Material Adverse Effect. No property owned or leased by the Borrower or any of its Subsidiaries, or to the best knowledge of the Borrower, any property adjoining any such property, is listed or proposed for listing on the National Priorities List under CERCLA or on any other list maintained by any governmental authority of sites requiring environmental investigation or cleanup. Neither the Borrower nor any if its Subsidiaries has transported or arranged for the transportation of any hazardous materials to any location that is listed or proposed for listing on the National Priorities List under CERCLA or on any other analogous list or, to the best knowledge of the Borrower, to any location that is the subject of any environmental claim. To the best knowledge of the Borrower, there are no circumstances with respect to any property owned or leased by the Borrower or any of its Subsidiaries or the operations of any of the Borrower or its Subsidiaries that could reasonably be anticipated (i) to form the basis of an environmental claim against the Borrower or such Subsidiary or any property owned or leased by the Borrower or any Subsidiary that individually or in the aggregate might result in a Material Adverse Effect or (ii) to cause any property owned or leased by the Borrower or any Subsidiary to be subject to any restrictions on ownership, occupancy, use or 44 53 transferability under any applicable Environmental Law. 4.11 ERISA. The Supplemental Schedule sets forth all of the Employee Benefit Plans of the Borrower and its Subsidiaries as of the Closing Date. The Borrower and each ERISA Affiliate of the Borrower are in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Employee Benefit Plan. No Accumulated Funding Deficiency exists in respect of any Employee Benefit Plan of Borrower or any of its ERISA Affiliates. No Reportable Event has occurred in respect of any Employee Benefit Plan which is continuing and which (i) constitutes grounds either for termination of the plan or for court appointment of a trustee for the administration thereof or (ii) has resulted or could result in a Material Adverse Effect. No "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code), has occurred that: (A) could cause the Borrower or any of its ERISA Affiliates to incur a material liability or (B) has resulted or could reasonably be expected to result in a Material Adverse Effect. None of the Borrower or any of its ERISA Affiliates has (i) had an obligation to contribute to any Multiemployer Plan except as disclosed in the Supplemental Schedule or (ii) incurred or reasonably expects to incur any material liability for the withdrawal from such a Multiemployer Plan. Neither the Borrower nor any ERISA Affiliate of the Borrower has failed to make any contribution or payment to any Employee Benefit Plan or Multiemployer Plan, or made any amendment to any Employee Benefit Plan, which has resulted or could reasonably be expected to result in the imposition of a Lien on the assets of the Borrower or the posting of a bond or other security under ERISA or the Code 4.12 ADVERSE OBLIGATIONS; LABOR DISPUTES. Neither the Borrower nor any of its US Subsidiaries is subject to any contract, agreement, corporate restriction, judgment, decree or order materially and adversely affecting its business, property, assets, operations or condition, financial or otherwise. The Borrower is not in default of any indenture or other agreement evidencing indebtedness or any other material agreement where such default has or could reasonably be expected to result in a Material Adverse Effect. As of the Closing Date, the Borrower is not a party to any labor dispute (other than grievance disputes which do not individually or in the aggregate materially and adversely affect any of its operations, financial condition, or business). There are no material strikes, slow downs, walkouts or other concerted interruptions of operations by employees whether or not relating to any labor contracts. 4.13 FINANCIAL STATEMENTS. The audited balance sheets of the Borrower for the Fiscal Year ending December 31, 1996, and the related statements of income, shareholder's equity, and cash flows, and, as applicable, changes in financial position or cash flows for such Fiscal Years, and the notes to such financial statements, reported upon by _______________, certified public accountants, together with the unaudited internal financial statements consisting of balance sheet and statements of income, shareholder's equity and cash flows as of the Fiscal Quarter ending September 30, 1997, certified by an executive officer of the Borrower: (a) have been prepared in accordance with GAAP, applied on a consistent basis with the Borrower's financial statements from prior Fiscal Years and (b) fairly present in all material respects (subject to routine year-end audit adjustments in the case of the unaudited financial statements) the financial condition of the 45 54 Borrower as of the respective dates thereof (including a full disclosure of liabilities, contingent or otherwise, if any) and the results of its operations for the respective fiscal periods then ending. As of the Closing Date, the Borrower has not experienced a Material Adverse Effect since the December 31, 1996 financial statements nor any change in the Borrower's accounting procedures used therein. The Borrower and its Subsidiaries did not as of December 31, 1996, and will not as of the Closing Date, have any material contingent liabilities, material liabilities for taxes, unusual and material forward or long-term commitments or material unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected in said audited balance sheet or subsequent 10Q. 4.14 VALUE; SOLVENCY. The Borrower has received fair consideration and reasonably equivalent value for the obligations and liabilities incurred to the Banks hereunder. The Borrower is Solvent. 4.15 INVESTMENT COMPANY ACT STATUS. Neither the Borrower nor any of its Subsidiaries is an "investment company," or an "affiliated person" of, or a "promoter" or "principal underwriter" for an "investment company" ( as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. Section 80(a)(1), et seq.)). 4.16 USE OF PROCEEDS; REGULATION U/REGULATION X COMPLIANCE. The proceeds of Loans made to the Borrower pursuant to this Agreement will be used only for general corporate purposes of the Borrower and as more specifically provided for in this Agreement. No part of the proceeds of Loans made to the Borrower pursuant to this Agreement will be used, directly or indirectly, to purchase or carry any "margin stock" or for a purpose which violates any law, rule, or regulation including, without limitation, the provisions of Regulation G, T, U, or X of the Board of Governors of the Federal Reserve System, as amended. Neither the Borrower nor any of its Subsidiaries owns any "margin stock," as that term is defined in Regulation U and Regulation X of the Board of Governors of the Federal Reserve System. 4.17 FULL DISCLOSURE. The Borrower has provided all information requested by the Agent and the Banks. None of the written information, exhibits or reports furnished by the Borrower to the Agent or the Banks contain any untrue material fact or omit to state any material fact necessary to make the statements contained therein not materially misleading in light of the circumstances and purposes for which such information was furnished; provided, however, that, with respect to the projections furnished to the Agent, although the Borrower is not aware of facts that would make the projections incorrect and believes that the assumptions underlying the projections were developed in good faith. 46 55 5 COVENANTS OF THE BORROWER. So long as any of the Obligations shall remain unpaid, the Banks shall have any Revolving Credit Commitments and LC Exposure hereunder, or the Letter of Credit Bank shall have any LC Commitment hereunder, the Borrower will comply with the following provisions unless the Banks shall otherwise consent in writing: 5.1 REPORTING AND NOTICE COVENANTS. (a) QUARTERLY FINANCIAL STATEMENTS. The Borrower shall furnish to the Banks within forty-five (45) days after the end of each of the first three Fiscal Quarters of the Borrower, consolidated balance sheets of the Borrower as at the end of such Fiscal Quarter and the statements of income and cash flows for such Fiscal Quarter, prepared on an unaudited comparative basis with the comparable period during the prior year and in accordance with GAAP. (b) ANNUAL FINANCIAL STATEMENTS. The Borrower shall furnish to the Banks as soon as available (and in any event within ninety (90) days after the end of each Fiscal Year of the Borrower), a complete copy of the audited consolidated, and internally prepared consolidating, balance sheets of the Borrower as at the end of such Fiscal Year and the related consolidated statements of income, retained earnings, statements of shareholder's equity and cash flows for such Fiscal Year, and the notes thereto) for that Fiscal Year: (i) prepared on a comparative basis with the prior year and in accordance with GAAP except as disclosed therein, (ii) audited and certified (without qualification) by any nationally recognized independent public accountants selected by the Borrower and meeting the reasonable satisfaction of the Agent and the Banks to the effect that such consolidated financial statements present fairly in all material respects the financial condition and income of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied and (iii) accompanied by the accountants' management report relating thereto, if any. (c) OFFICER'S CERTIFICATES. The Borrower shall furnish to the Agent and the Banks, concurrently with the financial statements delivered in connection with Section 0 above and within sixty (60) days after the end of the fourth Fiscal Quarter of the Borrower, a certificate of the chief financial officer of the Borrower, in his or her capacity as chief financial officer, certifying that: (A) with respect to the first three Fiscal Quarters of the Borrower, to the best of his knowledge and belief, those financial statements fairly present in all material respects the financial condition and results of operations of the Borrower subject (in the case of interim financial statements) to routine year-end audit adjustments, (B) no Potential Default or Event of Default then exists or, if any Potential Default or Event of Default does exist, a brief description of the Potential Default or Event of Default and the Borrower's intentions in respect thereto and (C) setting forth the calculations necessary to determine which of the financial standards specified in 47 56 definition of Applicable LIBOR Margin, Applicable Commitment Fee Percentage and Applicable Risk Participation Percentage have been satisfied by the Borrower pursuant to Section 0 of this Agreement and whether the Borrower is in compliance with the financial covenants specified in Section 0 of this Agreement. (d) ANNUAL BUSINESS PLAN. Within sixty (60) days after the end of each Fiscal Year of the Borrower, the Borrower shall provide the Agent and the Banks with forecasts prepared by Borrower's management, in form and substance satisfactory to the Agent and the Banks, of consolidated and consolidating income statements and consolidated and consolidating cash flow statements for the Borrower and its Subsidiaries on a quarterly basis for the next succeeding Fiscal Year. (e) OTHER INFORMATION. The Borrower shall furnish to the Agent, promptly upon the Agent's written request, such other information about the financial condition, properties and operations of the Borrower, its Subsidiaries and its Employee Benefit Plans as the Agent may from time to time reasonably request. (f) PROJECTIONS. The Borrower shall furnish to each of the Banks, not less than ten (10) days nor more than forty-five (45) days prior to (1) an acquisition by Borrower of substantially all the assets or equity interests of another corporation or business enterprise, (2) a merger or consolidation by the Borrower or any of its Subsidiaries with any other Person (other than a merger or consolidation referred to in clause (B) of Section 0, (3) a joint venture with another corporation or business enterprise, or (4) an investment in or advance or loan to any person or entity made after the date of this Agreement pursuant to clause (C) of Section 0 or (iv) below, oral notification to each Bank regarding such event of the type referred to in clauses (1) through (4) above and, if any Bank shall request in respect thereto, twelve (12) month financial projections (the "Projections"), including a projected balance sheet and cash flow and income statements, prepared by Borrower's chief financial officer, controller or another officer reasonably satisfactory to the Required Banks. Notwithstanding the foregoing, Banks agree that they shall not request Projections in the event the aggregate dollar amount of such events for a given fiscal year do not exceed ten percent (10%) of the consolidated Stockholders Equity of the Companies as of the end of the prior fiscal year. The Projections shall be prepared on the basis of the historical operations of the Borrower and its Subsidiaries (and any entity to be acquired or merged or consolidated with) after giving effect to the event in question and all reasonable related assumptions. The officer preparing such Projections shall certify to Banks and the Agent that to the best of his knowledge and belief such financial information is not misleading and is accurate in all material respects. The Borrower shall promptly notify the Banks of any change in the assumptions upon which the Projections are based between the date of preparation and the date of the event in question. (g) NOTICES. The Borrower will cause its chief financial officer, or in his 48 57 absence another officer designated by him, to give the Agent and each Bank prompt written notice (and in any event within ten (10) Business Days) whenever: (i) the Borrower or any of its Subsidiaries receives notice from any court, agency or other governmental authority of any alleged non-compliance with any Law or order which could reasonably be expected to have or result in, if such noncompliance is found to exist, a Material Adverse Effect, (ii) the Internal Revenue Service or any other federal, state or local taxing authority shall allege any default by the Borrower or any of its Subsidiaries in the payment of any tax material in amount or shall threaten or make any assessment in respect thereof, (iii) any litigation or proceeding shall be brought against the Borrower or any of its Subsidiaries before any court or administrative agency which could, if successfully brought against the Borrower, reasonably be expected to have or result in a Material Adverse Effect, (iv) any material adverse change or development in connection with any such litigation proceeding, or (v) such officer reasonably believes that any Potential Default or Event of Default has occurred or that any other representation or warranty made herein shall for any reason have ceased to be true and complete in any material respect. (h) NOTICE OF DEFAULT UNDER ERISA. If Borrower shall receive notice from any ERISA Regulator or otherwise have actual knowledge that a Default under ERISA exists with respect to any Employee Benefit Plan, Borrower shall notify the Agent and each Bank of the occurrence of such Default under ERISA, within ten (10) Business Days after receiving such notice or obtaining such knowledge (the disclosures contained in the Supplemental Schedule being such notice of each Default under ERISA disclosed therein to the extent of the disclosure therein) and shall: (i) so long as the Default under ERISA has not been corrected to the satisfaction of, or waived in writing by the party giving notice, the Borrower shall thereafter treat as a current liability (if not otherwise so treated) all liability of Borrower or its Subsidiary that would arise by reason of the termination of or withdrawal from such Employee Benefit Plan if such plan was then terminated, and (ii) within forty-five (45) days of the receipt of such notice or obtaining such knowledge, furnish to the Agent and each Bank a current consolidated balance sheet of Borrower with the amount of the current liability referred to above. (i) ENVIRONMENTAL REPORTING. The Borrower shall promptly deliver to the Agent and each Bank, and in any event within ten (10) Business Days after receipt or transmittal by the Borrower or any of its Subsidiaries, as the case may be, copies of all material communications with any government or governmental agency relating to Environmental Laws and all material communications with any other Person relating to Environmental Claims brought against the Borrower or its Subsidiaries which could, in either case, if successfully brought against the Borrower or such Subsidiaries, reasonably be expected to result in a Material Adverse Effect. (j) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY. The Borrower shall 49 58 (i) once in each calendar year beginning 1996, request a current statement of withdrawal liability from each Multiemployer Plan to which the Borrower or any ERISA Affiliate is or has been obligated to contribute during such year and (ii) within fifteen (15) days after the Borrower receives the such current statement, transmit a copy of such statement to the Agent and each Bank. 5.2 AFFIRMATIVE COVENANTS. (a) CORPORATE EXISTENCE. The Borrower and each Subsidiary shall at all times maintain its corporate existence, rights and franchises. (b) COMPLIANCE WITH LAW. The Borrower shall comply, and shall cause each of its Subsidiaries to comply, with all Laws and with every lawful governmental order (whether administrative or judicial). Without limiting the generality of the foregoing, the Borrower shall, and shall cause each of its Subsidiaries to, (a) use and operate all of its facilities and properties in material compliance with all Environmental Laws and handle all hazardous materials in material compliance therewith; keep in full effect each permit, approval, certification, license or other authorization required by any Environmental Law for the conduct of any material portion of its business; and comply in all other material respects with all Environmental Laws (including the undertaking of any cleanup, remedial or other action necessary in order to comply with any directive of a governmental authority or Environmental Law); (b) make a full and timely payment of premiums required by ERISA and perform and observe all such further and other requirements of ERISA such that no Default Under ERISA shall occur or begin to exist and no Lien shall be created; and (c) comply with all material requirements of all occupational health and safety laws and federal and state securities laws; provided, however, that, this Section shall not apply to any of the foregoing (i) if and to the extent that (x) the same shall be contested in good faith by timely and appropriate proceedings which are effective to stay enforcement thereof and against which a bond has been posted or appropriate reserves shall have been established and as to which no Lien has been created and (y) non-compliance therewith would not have a Material Adverse Effect or (ii) if non-compliance would not have a Material Adverse Effect. (c) INSURANCE. The Borrower will maintain, and will cause each of its Subsidiaries to maintain, insurance with sound and responsible insurance companies in such amounts, on such properties and against such risks as is usually carried by companies of established repute engaged in the same or similar businesses, owning similar properties, and located in the same general areas as the Borrower. The Borrower shall, on the Closing Date and within ten (10) Business Days of the request by the Agent thereafter, provide evidence (including, without limitation, full policies if so requested) satisfactory to the Agent that the Borrower has adequate personal and real property, liability, business interruption and product liability insurance. 50 59 (d) TAXES. The Borrower shall pay in full, and shall cause each of its Subsidiaries to pay in full, prior in each case to the date when penalties for the nonpayment thereof would attach, all taxes, assessments and governmental charges and levies for which it may be or become subject and all lawful claims which, if unpaid, might become a Lien upon its property; provided, however, that no such tax, assessment, charge or levy need be paid so long as and to the extent that it is contested in good faith and by timely and appropriate proceedings effective to stay, during the pendency of such proceedings, the enforcement thereof and the creation of any Lien, and appropriate reserves, as required by GAAP, are made on the books of the Borrower and its Subsidiaries. (e) PROPERTIES; FINANCIAL RECORDS. The Borrower will keep, and will cause each of its Subsidiaries to keep, all of its properties necessary in its business in good working order and condition, ordinary wear and tear excepted. The Borrower shall maintain at all times, true and complete financial records in accordance with GAAP, consistently applied, and, without limiting the generality of the foregoing, make appropriate accruals to reserves for estimated and contingent losses and liabilities as required under GAAP. (f) VISITATION. The Borrower shall promptly upon written or oral request of the Agent or any Bank permit, and shall cause each of its Subsidiaries to permit, the Agent or such Bank, as the case may be, during normal business hours: (i) to examine, with the guidance and supervision of the Borrower, the Borrower's financial records and to make copies of and extracts from such records and (ii) upon prior reasonable notice to the Borrower, to consult with the Borrower's and its Subsidiaries' officers, directors, accountants, actuaries, trustees and plan administrators, as the case may be, in respect of the Borrower's and its Subsidiaries' financial condition, each of which parties is hereby authorized by the Borrower to make such information available to such Bank to the same extent that it would to the Borrower subject only to such professional and legal restrictions to which such parties may be bound and which cannot be waived by the Borrower or its Subsidiaries. (g) DOMESTIC SUBSIDIARIES AS SUBSIDIARY GUARANTORS. Within thirty (30) days after the creation or acquisition of any Domestic Subsidiary, the Borrower shall cause such Domestic Subsidiary to execute and deliver to the Agent and each of the Banks, an appropriately executed Subsidiary Guaranty, together with a Domestic Subsidiary Certificate. (h) INTEREST RATE PROTECTION AGREEMENTS. Prior to the execution of any interest rate protection agreement, the Borrower shall, and shall cause each of its Subsidiaries to, submit such agreement to the Agent for its review for compliance with the current ISDA documentation standards. 51 60 5.3 NEGATIVE COVENANTS. (a) MERGERS; SALES OF ASSETS; FUNDAMENTAL TRANSACTIONS. The Borrower shall not, and shall not permit any of its Subsidiaries to, (i) merge or consolidate with or into, or enter into any agreement to merge or consolidate with or into, any other Person or otherwise be a party to any merger or consolidation, (ii) purchase (whether in one transaction or a series of transactions) all or substantially all of the assets and business or equity of any other Person, (iii) acquire any Subsidiary other than the Subsidiaries set forth on the Supplemental Schedule, or (iv) lease as lessor, sell, sell-leaseback or otherwise transfer (whether in one transaction or a series of transactions) its business or assets (whether now owned or hereafter acquired); except, that, if immediately after giving effect to such transaction no Event of Default or Potential Default shall have occurred, the Borrower and its Subsidiaries may from and after the Closing Date: (A) enter into a merger or consolidation involving only Subsidiaries of the Borrower or any merger involving only the Borrower and one or more of its Subsidiaries in which the Borrower is the surviving corporation, (B) acquire all or substantially all of the assets or equity of other Persons (other than the Acquisitions) other than as set forth in clause (A) above (whether by merger or purchase and whether in one transaction or a series of transactions) so long as (x) the target or resulting entity is in the same, substantially similar or a complementary line of business, (y) the Borrower shall have establish Pro Forma Covenant Compliance and, to the extent Projections are requested, the Required Banks do not reasonably object to the assumptions or other information upon which the relevant Projections were based and (z) prior to the consummation thereof, the Agent shall have received copies of the acquisition documents together with an acquisition certificate, (C) acquire all or substantially all of the equity of other Persons in connection with the Acquisitions other than as set forth in clause (A) above so long as prior to the consummation thereof, the Agent shall have received copies of the Acquisition Documents together with an Acquisition Certificate and (D) lease as lessor, sell, sell-leaseback or otherwise transfer its assets (other than the sale or transfer by the Borrower of any of the capital stock of any of the Borrower's Subsidiaries) so long as (I) such sale, lease or transfer is for not less than the fair market value of such assets, (II) the consideration received therefor is cash or cash equivalents and (III) the aggregate amount of such transactions entered into during the term of this Agreement does not exceed Five Million Dollars ($5,000,000). (b) CREDIT EXTENSIONS; INVESTMENTS. The Borrower shall not, except as disclosed in the Supplemental Schedule, and shall not permit any of its Subsidiaries to, (i) loan any money to or Guaranty or assume any obligation of any other Person or (ii) make prepayments or advances to others (except to the Bank in accordance with this Agreement); except, that this Section shall not apply to: (A) any existing or future advance, commission or relocation payment, or other loan or advance made to an employee or to a director or officer of the Borrower or its Subsidiaries in the ordinary course of business and consistent with past practice, (B) any Permitted US Investments or 52 61 (C) any Permitted Foreign Investments; provided, however, that the aggregate amount of such Permitted Foreign Investments in clause (C) outstanding at any time shall not exceed Thirty-Five Million Dollars ($35,000,000), (D) any existing investment, advance, loan or Guaranty fully disclosed in the Companies' December 31, 1996 consolidated audited financial statements or in the Supplemental Schedule, (E) any other investment, advance or loan provided that (x) the entity invested in or to which an advance or loan is made is in the same, substantially similar or a complementary line of business and (y) the Borrower is able to establish Proforma Covenant Compliance and, to the extent Projections are requested, the Required Banks do not reasonably object to the assumptions or other information upon which the relevant Projections were based, (F) any intercompany loan by the Borrower (not otherwise permitted by clause (D) above) to, any investment by the Borrower in, or any Guaranty by the Borrower of any indebtedness of, any Subsidiary of the Borrower in which the Borrower owns one hundred percent (100%) of the outstanding common stock (except for shares owned by directors as required by law); provided, however, that,(X) at the time of and after giving effect to any such loan or Guaranty (I) no Potential Default or Event of Default shall have occurred and be continuing and (II) if such loan or Guaranty exceeds ten percent (10%) of the Borrower's Consolidated Net Worth, then the Borrower shall establish Proforma Covenant Compliance and, to the extent Projections are requested, the Required Banks do not reasonably object to the assumptions or other information upon which the relevant Projections were based and (Y) this subsection shall not prohibit any intercompany loan by the Borrower to, investment by the Borrower in or Guaranty by the Borrower of the indebtedness of, any joint venture of any Subsidiary of the Borrower or any of its Subsidiaries with respect to a Congo smelter project so long as the aggregate amount of any such loans, investments or guaranties does not exceed Forty Million Dollars ($40,000,000), (G) any endorsement of a check or other medium of payment for deposit or collection, or any similar transaction in the normal course of business, or (H) pre-payment for raw materials in the ordinary course of business and trade accounts arising and outstanding in the ordinary course of business unless represented by a promissory note or other instrument. (c) INDEBTEDNESS. The Borrower shall not, and shall not permit any Subsidiary to, create, assume, incur, suffer to exist or have outstanding at any time any indebtedness for borrowed money or any Funded Indebtedness or other debt of any kind to the extent (i) the same would cause a violation of the financial covenants set forth in Section 0 or otherwise violate any other term or provision of this Agreement or any of the Loan Documents and (ii) the same has covenants or defaults materially more restrictive on the Borrower and its Subsidiaries than those set forth in this Agreement. (d) LIENS; LEASES. The Borrower shall not, and shall not permit any of its Subsidiaries to, (i) acquire or hold any property subject to any Lien, (ii) suffer or permit any property now owned or hereafter acquired by it to be or become encumbered by a Lien, (iii) sell or otherwise transfer receivables with recourse; except, that this Section 53 62 shall not prohibit: (A) any lien for a tax, assessment or government charge or levy for taxes, assessments or charges not yet due and payable or not yet required to be paid pursuant to Section 0, (B) any deposits or cash pledges securing only workers' compensation, unemployment insurance or similar obligations (other than Liens arising under ERISA) in the ordinary course of business, (C) any mechanic's, carrier's, landlord's or similar common law or statutory lien incurred in the normal course of business for amounts that are not yet due and payable or which are being diligently contested in good faith, so long as the Agent has been notified thereof and adequate reserves are maintained for their payment, (D) zoning or deed restrictions, public utility easements, minor title irregularities and similar matters having no adverse affect as a practical matter on the ownership or use of any of the property in question, (E) any Lien (1) which arises in connection with judgments or attachments the occurrence of which does not constitute an Event of Default under Section 0 and (2) the execution or other enforcement of such Lien is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings, (F) deposits or cash pledges securing performance of contracts, bids, tenders, leases (other than Capitalized Leases), statutory obligations, surety and appeal bonds; provided, that, clauses (A) through (G) shall only apply to Liens arising by operation of law and in the ordinary course of business and shall not apply to any Lien that secures indebtedness for borrowed money or any Guaranty thereof or any obligation that is in material default in any manner (other than any default contested in good faith by timely and appropriate proceedings effective to stay the enforcement of such Lien and against which a bond has been posted or appropriate reserves shall have been established), (G) any Lien in favor of the Bank or any existing Lien fully disclosed in the Supplemental Schedule, (H) any Lien (including any Lien in respect of a Capitalized Lease of real property) which is created or assumed in purchasing, constructing or improving any real property or to which any real property is subject when purchased; provided, however, that: (x) the mortgage, security interest or other lien is confined to the property in question and (y) the Indebtedness secured thereby does not exceed the total cost of the purchase, construction or improvement and (z) the aggregate outstanding Indebtedness secured by such Liens (when taken together with any secured Indebtedness permitted to be secured pursuant to clause (L) of this subsection) does not at any time exceed Five Million Dollars ($5,000,000), (I) any transfer of a check or other medium of payment for deposit or collection, or any similar transaction in the normal course of business, (J) any financing statement perfecting a security interest that would be permissible under this subsection or (J) any Lien (including any Lien in respect of a Capitalized Lease of personal property) which is created in purchasing personal property; provided, however, that: (x) the Lien is confined to the property in question, (y) the Indebtedness secured thereby does not exceed the total cost of the purchase, and (z) the aggregate outstanding Indebtedness secured by such Liens (when taken together with any secured Indebtedness permitted to be secured pursuant to clause (H) of this subsection) does not at any time exceed Five Million Dollars ($5,000,000). (e) DIVIDENDS. The Borrower shall not make or commit itself to make any 54 63 Distribution (other than stock dividends) to its shareholders at any time; except that, if immediately after giving effect to such transaction no Event of Default or Potential Default shall have occurred, the Borrower may, during any Fiscal Year: (i) make Distributions consisting of dividends payable solely in cash in an aggregate amount not to exceed the greater of (x) Twelve Million Dollars ($12,000,000) or (y) twenty-five percent (25%) of the Consolidated Net Income for such Fiscal Year. (f) ACCOUNTING CHANGES. The Borrower will not, and will not permit any of its Subsidiaries to, make or permit any change in its accounting policies or financial reporting practices and procedures, except as required or permitted by GAAP or any changes in financial reporting practices and procedures which are required or permitted by GAAP, in each case as to which the Borrower shall have delivered to the Agent prior to the effectiveness of any such change a report prepared by a responsible officer of the Borrower describing such change and explaining in reasonable detail the basis therefor and effect thereof. (g) USE OF PROCEEDS. The Borrower shall not use the proceeds of the Loans for any purpose other than: (i) to refinance Indebtedness owing to the Borrower's existing banking facility, (ii) to finance the consummation of the Acquisitions, (iii) to finance acquisitions (whether of assets or stock, by purchase or merger) as permitted by Section 0 of this Agreement, and (iv) for working capital and other general corporate purposes. (h) COMPLIANCE WITH ERISA. The Borrower shall not and shall not permit any ERISA Affiliate to: (i) engage in any transaction in connection with which the Borrower or any ERISA Affiliate could reasonably be expected to be subject to either a civil penalty assessed pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of the Code, terminate or withdraw from any Employee Benefit Plan (other than a Multiemployer Plan) in a manner, or take any other action with respect to any such Employee Benefit Plan (including, without limitation, a substantial cessation of business operations or an amendment of an Employee Benefit Plan within the meaning of section 4041(e) of ERISA), which could reasonably be expected to result in any liability of the Company or any ERISA Affiliate to the PBGC, to the Department of Labor or to a trustee appointed under section 4042(b) or (c) of ERISA, incur any liability to the PBGC on account of a withdraw from or a termination of an Employee Benefit Plan under section 4063 or 4064 of ERISA, incur any liability for post-retirement benefits under any and all welfare benefit plans (as defined in section 3(1) of ERISA) other than as required by applicable statute, fail to make full payment when due of all amounts which, under the provisions of any Employee Benefit Plan or applicable Law, the Borrower or any ERISA Affiliate is required to pay as contributions thereto, or permit to exist any Accumulated Funding Deficiency, whether or not waived, with respect to any Employee Benefit Plan (other than a Multiemployer Plan); provided, however, that such engagement, termination, withdrawal, action, incurrence, failure or permitting shall not be deemed to have violated this clause (i) unless such engagement, termination, withdrawal, action, 55 64 incurrence, failure or permitting, when taken singly or together with other such engagements, terminations, withdrawals, actions, incurrences, failures or permittings, has resulted or could reasonably be expected to result in a Material Adverse Effect; (ii) at any time permit the termination of any defined benefit pension plan intended to be qualified under section 401(a) and 501(a) of the Code; provided, however, that such termination shall not be deemed to have violated this clause (ii) unless (A) the value of all benefit liabilities (as defined in section 4001(a)(16) of ERISA) upon the termination date of all such terminated defined benefit pension plans of the Borrower, its Subsidiaries and their ERISA Affiliates exceeds the then current value (as defined in section 3 of ERISA) of all assets in such terminated defined benefit pension plans by an amount in excess of One Million Dollars ($1,000,000) in the aggregate or (B) the payment of such amount has resulted or could reasonably be expected to result in a Material Adverse Effect; or (iii) if the Borrower or any ERISA Affiliate becomes obligated under a Multiemployer Plan (except with respect to the potential liabilities now existing as disclosed in the Supplemental Schedule), effect a complete or partial withdrawal such that the Borrower, its Subsidiaries or their ERISA Affiliates incur Withdrawal Liability under Title IV of ERISA with respect to Multiemployer Plans or otherwise have liability under Title IV of ERISA; provided, however, that the incurrence of such Withdrawal Liability or other liability under Title IV of ERISA shall not be deemed to be a violation of this clause (iii) unless, the amount the payment by the Borrower of such Withdrawal Liability or other liability has resulted or could reasonably be expected to result in a Material Adverse Effect or could reasonably be expected to result in the imposition of a Lien. (i) CHANGE IN NATURE OF BUSINESS. The Borrower shall not, and shall not permit any of its Subsidiaries to, make any material change in the nature of its business as carried on at the date hereof. (j) REGULATION U COMPLIANCE. The Borrower shall not use any portion of the proceed of any Loan for the purpose of purchasing or carrying any Margin Stock or for any other purpose in violation of any requirement of Law or of the terms and conditions of this Agreement. 5.4 FINANCIAL COVENANTS. (a) CONSOLIDATED TOTAL FUNDED DEBT TO EBITDA RATIO. The Borrower shall not permit the Consolidated Total Funded Debt to EBITDA Ratio as at the end of any Fiscal Quarter to exceed 3.00 to 1.00 for the Cumulative Four Quarter Period then ending. (b) CONSOLIDATED TOTAL FUNDED DEBT. The Borrower shall not permit the Consolidated Total Funded Debt to exceed fifty percent (50%) of the sum of the Consolidated Total Funded Debt plus Consolidated Net Worth as at the end of any Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 1998. 56 65 6 EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default" under this Agreement: 6.1 PAYMENT FAILURE. Failure by the Borrower to: (a) make payment of principal on the Revolving Credit Notes or (b) pay interest on the Revolving Credit Notes or pay any other Obligation when required to be paid hereunder to the extent such failure is not remedied within Five (5) Business Days after such required date of payment hereunder; or 6.2 REPRESENTATIONS AND WARRANTIES. Any representation or warranty made or deemed made by the Borrower in respect of the Borrower or any Subsidiary of the Borrower in this Agreement, any Loan Document or any certificate, document or financial or other statement furnished at any time in compliance with or in reference to this Agreement shall prove to have been false or inaccurate in any material respect when made or deemed to have been made; or 6.3 REPORTING AND NOTICE PROVISIONS; VIOLATION OF CERTAIN AFFIRMATIVE COVENANTS. Failure by the Borrower (in respect of the Borrower or any Subsidiary of the Borrower): (a) to perform, keep, or observe any other term, provision, condition or covenant contained in Section 0(e) through 0(i) of this Agreement which is required to be performed, kept, or observed by the Borrower (in respect of the Borrower or any Subsidiary of the Borrower) and such failure shall continue without remedy for a period of ten (10) Days after written notice from the Agent and (b) to perform, keep or observe any other term, provision, condition or covenant contained in this Agreement (other than those provisions, terms or conditions referenced in Sections 0, 0 and 0 of this Agreement) which is required to be kept or observed by the Borrower (in respect of the Borrower or any Subsidiary of the Borrower) and such failure shall continue without remedy for a period of Thirty (30) Days; or 6.4 VIOLATION OF NEGATIVE COVENANTS; VIOLATION OF CERTAIN OTHER COVENANTS. Failure by the Borrower (in respect of the Borrower or any Subsidiary of the Borrower) to perform, keep, or observe any other term, provision, condition or covenant contained in Section 0(a) through 0(d), 0 or 0 of this Agreement which is required to be performed, kept, or observed by the Borrower (in respect of the Borrower or any Subsidiary of the Borrower); or 6.5 LOAN DOCUMENTS. Failure by the Borrower or any of its Subsidiaries to perform, keep, or observe any other term, provision, condition or covenant contained in this Agreement or any of the Loan Documents which is required to be performed, kept, or observed by the Borrower (in respect of the Borrower or any Subsidiary of the Borrower), subject to any cure periods set forth therein; or 6.6 CROSS-DEFAULT. Any indebtedness of the Borrower or any of its Subsidiaries for borrowed money (regardless of maturity) or any of its Funded Indebtedness shall be or become 57 66 "in default" (as defined below), unless the aggregate unpaid principal balance of all such indebtedness in default does not exceed Five Million Dollars ($5,000,000) at any one time outstanding or if any Event of Default occurs pursuant to the Note Purchase Agreement or upon the prepayment of the senior notes issued pursuant thereto upon a Change in Control as provided in Section 8.4 of the Note Purchase Agreement. In this subsection, "in default" means that (a) there shall have occurred (or shall exist) in respect of the indebtedness in question (either as in effect at the date of this Agreement or as in effect at the time in question) any event, condition or other thing which constitutes, or which with the giving of notice or the lapse of any applicable grace period or both would constitute, a default which would permit any creditor or creditors or representative or creditors to accelerate the maturity of any such indebtedness; or (b) any such indebtedness (other than any payable on demand) shall not have been paid in full at its stated maturity; or (c) any such indebtedness payable on demand shall not have been paid in full within ten (10) Banking Days after any actual demand for payment; or 6.7 TERMINATION OF EXISTENCE. The dissolution or termination of existence of the Borrower or the discontinuation of the business of the Borrower; or 6.8 CONTROL. The occurrence of any Change in Control; or 6.9 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT OR ANY LOAN DOCUMENT. If: (a) any material covenant, agreement or obligation of the Borrower (in respect of the Borrower or any Subsidiary of the Borrower) contained in or evidenced by this Agreement or any of the Loan Documents shall cease to be enforceable, or shall be determined to be unenforceable, in accordance with its terms or (b) the Borrower or any Subsidiary of the Borrower shall deny or disaffirm its obligations under this Agreement or any of the Loan Documents; or 6.10 JUDGMENTS. Any judgment for the payment of money (other than one which is covered by insurance and as to which the insurance carrier shall have acknowledged coverage in the amount of the insurance without any reservation of rights or shall have been ordered by a court of competent jurisdiction to pay such judgment) involving at any time an amount, when taken together with other such money judgments, in excess of Five Million Dollars ($5,000,000) in the aggregate, shall be rendered against the Borrower or any of its Subsidiaries and either: (a) such money judgment is not discharged, vacated, fully bonded or stayed within thirty (30) days after such judgment rendered, (b) any money judgment is docketed to become a Lien against assets of the Borrower or any of its Subsidiaries in an amount, when taken together with other such money judgments, in excess of Five Million Dollars ($5,000,000) or (c) any action shall be taken by a judgment creditor to attach or levy upon the assets of the Borrower or any of its Subsidiaries to enforce such judgment; or 6.11 FORFEITURE PROCEEDINGS. The institution against the Borrower of any criminal proceedings for which forfeiture of any asset or assets; or 58 67 6.12 PAYMENT OF DEBTS. The Borrower or any of its Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or 6.13 VOLUNTARY PROCEEDINGS. The Borrower or any of its Subsidiaries shall: (a) apply for or consent to the appointment of, or the taking of possession by, any receiver, custodian, trustee or liquidator for the Borrower or any of its Subsidiaries or for all or a substantial part of its assets, (b) make a general assignment for the benefit of creditors, (c) commence a voluntary case or proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (d) consent to the institution of, acquiesce in writing to, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Subsection 0 below, (e) file an answer admitting the material allegations of a petition filed against it in any such proceeding or (f) take any action for the purpose of effecting any of the foregoing; or 6.14 INVOLUNTARY PROCEEDINGS. The Borrower or any of its Subsidiaries shall have commenced or filed against it an involuntary proceeding or an involuntary petition seeking: (a) liquidation, reorganization or other relief in respect of the Borrower or any of its Subsidiaries, its debts or all or a substantial part of its assets under any Federal, state or foreign bankruptcy, insolvency, receivership, or similar law now or hereafter in effect or (b) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower, any of its Subsidiaries or for a substantial part of its assets, and, in any such case, either (i) such proceeding or petition shall continue undismissed for sixty (60) days or (ii) an order or decree approving or ordering any of the foregoing shall be entered. 7 REMEDIES. 7.1 OPTIONAL DEFAULTS. Upon the occurrence of an Event of Default described above in Sections 0 through 0 above, inclusive, the Agent may, with the consent of the Required Banks, and shall, upon the direction of the Required Banks, (a) declare all of the Obligations due or to become due from the Borrower to the Agent and the Banks, whether under this Agreement, the Revolving Credit Notes or otherwise, at the option of the Agent, immediately due and payable, anything in the Revolving Credit Notes or other evidence of the Obligations or in any of the other Loan Documents to the contrary notwithstanding and (b) terminate each Bank's Revolving Credit Commitment whereupon none of the Banks shall have any further obligation to make any Revolving Credit Loan hereunder. 7.2 AUTOMATIC DEFAULTS. If any Event of Default referred to in Sections 0 or 0 above shall occur, (a) each Bank's Revolving Credit Commitment shall automatically and immediately terminate (if not already expired or terminated by the Borrower or terminated pursuant to this Section 0) whereupon no Bank shall have any obligation thereafter to make any Revolving Credit Loan hereunder and (b) all of the Obligations and all other Indebtedness, if any, then owing to the Banks (other than Indebtedness, if any, already due and payable) shall thereupon become, and thereafter be, immediately due and payable in full, all without any presentment, demand or notice 59 68 of any kind, which are hereby waived by the Borrower. 7.3 GENERAL RIGHTS AND REMEDIES OF AGENT AND THE BANKS. The Agent and the Banks shall have all other legal and equitable rights to which the Agent and the Banks may be entitled, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, to the extent permitted by law, in addition to any other rights or remedies contained in this Agreement or in any of the other Loan Documents. Each Bank hereby expressly agrees that, unless requested by the Agent with the concurrence of the Required Banks, such Bank shall not take or cause to be taken, in respect of the Loans or the other Obligations, any action or remedy that is independent from the actions or remedies taken or to be taken by the Agent, except for any actions taken by any Bank in connection with any Event of Default described in Sections 0 or 0 of this Agreement. 7.4 SET-OFF. If any Event of Default referred to in Section 0 of this Agreement shall occur which has not been waived in writing by the Required Banks, each Bank shall have the right (in addition to such other rights as it may have by operation of Law or otherwise but subject to Section 0 of this Agreement) at any time to set off against and to appropriate and apply toward the payment of the Obligations and all other Indebtedness then owing to it (and any participation purchased or to be purchased pursuant to Section 0 below) whether or not the same shall then have matured, any and all deposit balances then owing by that Bank to or for the credit or account of the Borrower, all without notice to or demand upon the Borrower or any other Person, all such notices and demands being hereby expressly waived. 7.5 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT. Upon the occurrence of Event of Default (unless waived in writing by the Banks in accordance with this Agreement), to the extent that any Letters of Credit have been issued which then are outstanding, the Agent, for the benefit of the Letter of Credit Bank and the Banks, may, and upon the direction of the Required Bank's shall (whether in addition to taking any of the actions described in this Section 0 or otherwise), make demand upon Borrower to, and forthwith upon such demand the Borrower will, pay to the Agent in same day funds, for deposit in a special cash collateral account (the "Letter of Credit Collateral Account"), to secure the obligations of the Borrower in respect of any outstanding Letters of Credit, to be maintained at such office of the Agent as Agent shall direct, an amount equal to the maximum amount available to be drawn under the Letters of Credit. In the event that Borrower shall not deposit such funds upon demand by the Agent, the Agent may, in its sole discretion, deposit any other funds of Borrower in the possession of the Agent, to the Letter of Credit Collateral Account until the amount deposited in such account equals the maximum amount available to be drawn under the Letters of Credit. The Letter of Credit Collateral Account shall be in the name of Agent (as a cash collateral account), but under the sole dominion and control of the Agent and subject to the terms of this Agreement. 7.6 LETTER OF CREDIT COLLATERAL ACCOUNT. (a) APPLICATION. The Agent may, at any time or from time to time after 60 69 funds are deposited in the Letter of Credit Collateral Account, apply funds then held in the Letter of Credit Collateral Account to the payment of any amounts, in such order as the Agent may elect or shall be directed by the Banks, as shall have become or shall become due and payable by the Borrower to the Letter of Credit Bank under this Agreement or any Reimbursement Agreement first, in respect of the Letters of Credit and second, after the occurrence and during the continuance of any Event of Default, in respect of all other amounts constituting Obligations. (b) NO BORROWER OR THIRD PARTY CLAIMS. Neither the Borrower nor any Person claiming on behalf of or through Borrower shall have any right to withdraw any of the funds held in the Letter of Credit Collateral Account. (c) NO LIENS OR TRANSFERS OF ACCOUNT. The Borrower agrees that it will not: (i) sell or otherwise dispose of any interest in the Letter of Credit Collateral Account or any funds held therein, or (ii) create or permit to exist any lien, security interest or other charge or encumbrances upon or with respect to the Letter of Credit Collateral Account or any funds held therein, except as provided in or contemplated by this Agreement. (d) REASONABLE CARE. The Agent shall exercise reasonable care in the custody and preservation of any funds held in the Letter of Credit Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Agent accords its own property, it being understood that the Agent shall not have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any such funds. 61 70 7.7 TERMINATION; EFFECT ON BORROWER OBLIGATIONS. Any termination by the Agent and\or any Bank of its performance pursuant to this Section 0 shall not absolve, release, or otherwise affect the liability of the Borrower in respect of transactions prior to such termination or affect any of the Liens, rights, powers, and remedies of the Agent or such Bank, which such Liens, rights, powers and remedies shall, in all events, continue until all Obligations of the Borrower to the Agent and the Banks are satisfied. 7.8 EQUALIZATION. Each Bank agrees with the other Banks that if at any time it shall obtain any Advantage over the other Banks or any thereof in respect of the Loans it will purchase from such other Bank or Banks, for cash and at par, such additional participation in the Loans owing to the other or others as shall be necessary to nullify the Advantage. If any such Advantage resulting in the purchase of an additional participation as aforesaid shall be recovered in whole or in part from the Bank receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored (with interest and other charges if and to the extent actually incurred by the Bank receiving the Advantage) ratably to the extent of the recovery. During the existence of any Potential Default, any payment (whether made voluntarily or involuntarily, by offset of any deposit or other indebtedness or otherwise) of any Indebtedness owing by the Borrower to any Bank shall be applied to the Obligations owing to that Bank until the same shall have been paid in full before any thereof shall be applied to other Indebtedness owing to that Bank. 7.9 REMEDIES CUMULATIVE. The above-stated remedies are not intended to be exhaustive and the full or partial exercise of any of such remedies shall not preclude the full or partial exercise of any other remedy by the Agent under this Agreement, under any Loan Document, or at equity or under at law. 8 THE AGENT. 8.1 THE AGENT. Each Bank irrevocably appoints the Agent to act as agent under this Agreement and the Loan Documents for the benefit of such Bank, with full authority to take such actions, and to exercise such powers, on behalf of the Banks in respect of this Agreement and the Loan Documents as are herein and therein respectively delegated to the Agent or as are reasonably incidental to those delegated powers. The Agent in such capacity shall be deemed to be an independent contractor of the Banks. 8.2 NATURE OF APPOINTMENT. The Agent shall have no fiduciary relationship with any Bank by reason of this Agreement and the Loan Documents. The Agent shall not have any duty or responsibility whatsoever to any Bank except those expressly set forth in this Agreement and the Loan Documents. Without limiting the generality of the foregoing, each Bank acknowledges that the Agent is acting as such solely as a convenience to the Banks and not as a manager of the commitments or the Obligations evidenced by the Revolving Credit Notes. This Section 0 does not confer any rights upon the Borrower or anyone else (except the Banks), whether as a third party beneficiary or otherwise. 62 71 8.3 AGENT AS A BANK; OTHER TRANSACTIONS. The Agent's rights as a Bank under this Agreement and the Loan Documents shall not be affected by its serving as the Agent. The Agent and its Affiliates may generally transact any banking, financial, trust, advisory or other business with the Borrower (including, without limitation, the acceptance of deposits, the extension of credit and the acceptance of fiduciary appointments) without notice to the Banks, without accounting to the Banks, and without prejudice to the Agent's rights as a Bank under this Agreement and the Loan Documents except as may be expressly required under this Agreement. 8.4 INSTRUCTIONS FROM BANKS. The Agent shall not be required to exercise any discretion or take any action as to matters not expressly provided for by this Agreement and the Loan Documents (including, without limitation, collection and enforcement actions in respect of any Obligations under the Revolving Credit Notes or this Agreement and any collateral therefor), except that the Agent shall take such action, or omit to take such action (other than actions referred to in Section 0 of this Agreement), as may be reasonably requested, with instructions in writing, by the Required Banks or all of the Banks, as applicable pursuant to Section 0 of this Agreement and which actions and omissions shall be binding upon all of the Banks; provided, however, that the Agent shall not be required to act (or omit any act) if, in its judgment, any such action or omission might expose the Agent to personal liability or might be contrary to this Agreement, any Loan Document or any applicable Law. 8.5 BANK'S DILIGENCE. Each Bank: (a) represents and warrants that it has made its own decision to enter into this Agreement and the Loan Documents and (b) agrees that it will make its own decision as to taking or not taking future actions in respect of this Agreement and the Loan Documents; in each case without reliance on the Agent or any other Bank and on the basis of its independent credit analysis and its independent examination of and inquiry into such documents and other matters as it deems relevant and material. 8.6 NO IMPLIED REPRESENTATIONS. The Agent shall not be liable for any representation, warranty, agreement or obligation of any kind of any other party to this Agreement or anyone else, whether made or implied by any Borrower in this Agreement or any Loan Document or by a Bank in any notice or other communication or by anyone else or otherwise. 8.7 SUB-AGENTS. The Agent may employ agents and shall not be liable (except as to money or property received by it or its agents) for any negligence or misconduct of any such agent selected by it with reasonable care. 8.8 AGENT'S DILIGENCE. The Agent shall not be required: (a) to keep itself informed as to any Person's compliance with any provision of this Agreement or any Loan Document, (b) to make any inquiry into the properties, financial condition or operation of the Borrower or any other matter relating to this Agreement or any Loan Document, (c) to report to any Bank any information (other than which this Agreement or any Loan Document expressly requires to be so 63 72 reported) that the Agent or any of its Affiliates may have or acquire in respect of the properties, business or financial condition of the Borrower or any other matter relating to this Agreement or any Loan Document or (d) to inquire into the validity, effectiveness or genuineness of this Agreement or any Loan Document. 8.9 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge of any Potential Default or Event of Default unless and until it shall have received a written notice from the Borrower or any Bank describing it and citing the relevant provision of this Agreement or any Loan Document. The Agent shall give each Bank prompt notice of any such written notice other than the Bank that shall have given the written notice of the Event of Default. 8.10 AGENT'S LIABILITY. Neither the Agent nor any of its directors, officers, employees, attorneys, and other agents shall be liable for any action or omission on their respective parts except for gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (a) may treat the payee of any Revolving Credit Note as the holder thereof until the Agent receives a fully executed copy of the Assignment Agreement required by Section 0 of this Agreement signed by such payee and in form satisfactory to the Agent and the fee required by Section 0 of this Agreement; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice or such counsel, accountants or experts which have been selected by the Agent with reasonable care; (c) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document, including, without limitation, the truth of the statements made in any certificate delivered by the Borrower under Sections 0 or 0 of this Agreement or in any Credit Request, Rate Continuation/Conversion Request or any other similar notice or delivery, the Agent being entitled for the purposes of determining fulfillment of the conditions set forth therein to rely conclusively upon such certificates; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, the Revolving Credit Notes or any other Loan Document or to inspect the property (including the books and records) of the Borrower; (e) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, or collateral covered by any agreement or any other Loan Document and (f) shall incur no liability under or in respect of this Agreement, the Revolving Credit Notes or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it in good faith to be genuine and correct and signed or sent by the proper party or parties. Neither the Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrower on account of the failure of or delay in performance or breach by any Bank of any of its obligations hereunder or to any Bank on account of the failure of or delay in performance or breach by any other Bank or the Borrower of any of their respective obligations hereunder or under any Loan Document or in connection herewith or therewith. The 64 73 Banks each hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement, the Revolving Credit Notes or any other Loan Document unless it shall be requested in writing to do so by the Required Banks or all of the Banks, as applicable pursuant to Section 0 of this Agreement. 8.11 AGENT'S INDEMNITY. The Banks shall indemnify the Agent, in its capacity as Agent (to the extent the Agent is not reimbursed by the Borrower) from and against: (a) any loss or liability (other than any caused by the Agent's gross negligence or willful misconduct) incurred by the Agent acting in the capacity as Agent in respect of this Agreement, the Revolving Credit Notes or any Loan Document and (b) any out-of-pocket costs and expenses incurred in defending itself or otherwise related to this Agreement, the Revolving Credit Notes or any Loan Document (other than any caused by the Agent's gross negligence or willful misconduct) including, without limitation, reasonable fees and disbursements of legal counsel of its own selection (including, without limitation, the reasonable interdepartmental charges of its salaried attorneys) in the defense of any claim against it or in the prosecution and enforcement of its rights and remedies as the Agent (other than the loss, liability or costs incurred by the Agent in the defense of any claim against it by the Banks arising in connection with its actions in its capacity as Agent); provided, however, that each Bank shall be liable for only its Ratable Portion of the whole loss or liability. After any Agent's resignation as Agent pursuant to Section 0 of this Agreement, the provisions of this Section 0 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 65 74 8.12 RESIGNATION OF AGENT. The Agent may resign as Agent effective ten (10) Business Days after giving notice thereof to the Banks for any reason. If the Agent shall resign as Agent under this Agreement, the Required Banks shall appoint from among the Banks (other than the Bank that has resigned) a successor agent for the Banks, which successor agent shall be reasonably acceptable to the Borrower. In the case of resignation by the Agent, if no successor agent shall have been appointed by the time such resignation becomes effective, then the retiring Agent may, on behalf of the Banks, appoint a successor agent from among the remaining Banks. Upon appointment (whether effected by the Required Banks or the retiring Agent on behalf of the Banks), the successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent, effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holder of the Revolving Credit Notes. 9 TRANSFERS AND ASSIGNMENTS. 9.1 TRANSFER OF COMMITMENTS. Each Bank shall have the right at any time or times to transfer to another financial institution, without recourse, all or any part of: such Bank's Revolving Credit Commitment; any Loan made by such Bank; any Revolving Credit Note executed in favor of such Bank, and any participations, if any, purchased by the Bank pursuant to Section 0 of this Agreement; provided, however, in each such case, that the transferor and the transferee shall have complied with the following requirements: (a) PRIOR CONSENT. No transfer (other than a transfer by any Bank to any Affiliate of such Bank) may be consummated pursuant to this Section 0 in the minimum amount of Five Million Dollars ($5,000,000) without the prior written consent of the Borrower and the Agent, which shall not be unreasonably withheld; provided, however, that, (i) the consent of the Borrower shall not be required in the event a Bank transfers it's commitment to another Bank and (ii) no Bank shall make any transfer pursuant to this Section 0 if after giving effect to such transfer such Bank's Revolving Credit Commitment would be less than Five Million Dollars ($5,000,000) unless such Bank shall transfer all if its Revolving Credit Commitment and ceases to be a "Bank" under this Agreement; provided, further, that, if at the time of the proposed transfer the Borrower is the subject of a proceeding referenced in Sections 0 or 0 of this Agreement or an Event of Default has otherwise occurred which has not been waived by the Required Banks, the Borrower's consent shall not be required and any Bank may consummate a transfer contemplated by this Section 0 with the consent of the Agent. Notwithstanding anything to the contrary, any Bank may at any time (i) assign all or any portion of its rights under this Agreement and its Revolving Credit Notes to the Federal Deposit Insurance Corporation or other similar governmental agency, or (ii) create a security interest in all or any portion of such rights in favor of any Federal Reserve Bank, in each case in accordance with Regulation A or the Board of Governors of the Federal Reserve System, 66 75 and no such assignment or creation shall release such assigning Bank from its obligations hereunder. (b) AGREEMENT; TRANSFER FEE. The transferor: (i) shall remit to the Agent an administrative fee of Three Thousand Dollars ($3,000) and (ii) shall cause the transferee to execute and deliver to the Borrower, the Agent and each Bank (A) an Assignment Agreement, substantially in the form of Exhibit F attached hereto, and otherwise in form and substance satisfactory to the Agent and its counsel (a "Bank Assignment Agreement"), together with the consents and releases referenced therein and (B) such additional amendments, assurances and other writings as the Agent may reasonably require to effect such transfer. (c) REVOLVING CREDIT NOTES. The Borrower shall execute and deliver to the Agent, the transferor and the transferee, any consent or release (of all or a portion of the obligations of the transferor) to be delivered in connection with the Assignment Agreement. If a Bank's entire interest in its Revolving Credit Commitment and in all of its Loans have been transferred, the Borrower shall execute and deliver to the transferee appropriate Revolving Credit Notes against return of the Revolving Credit Notes (marked "replaced") held by the transferor. If only a portion of a Bank's interest in its Revolving Credit Commitment and Loans has been transferred, the Borrower shall execute and deliver a new Revolving Credit Note to each of the transferor and the transferee against return of the original such Revolving Credit Notes of the transferor (marked "replaced") held by the transferor. (d) PARTIES. Upon satisfaction of the requirements of this Section 0, including the payment of the fee and the delivery of the documents set forth in Section 0 above, (i) the transferee shall become and thereafter be deemed to be a "Bank" for the purposes of this Agreement and (ii) the transferor (A) shall continue to be a "Bank" for the purposes of this Agreement only if and to the extent that the transfer shall not have been a transfer of its entire interest in its Revolving Credit Commitment and Loans and (B) shall cease to be and thereafter shall no longer be deemed to be a "Bank" in the case of any transfer of its entire interest in its Revolving Credit Commitment and Loans and (iii) the signature pages hereto and Annex A hereto shall be automatically amended, without further action, to reflect the result of any such transfer. 9.2 SALE OF PARTICIPATIONS. Each Bank shall have the right at any time or times to sell one or more participations or subparticipations to a financial institution in all or any part of: such Bank's Revolving Credit Commitment; any Loan made by such Bank; any Revolving Credit Note executed in favor of such Bank, and any participations, if any, purchased by such Bank pursuant to Section 0 of this Agreement or this Section 0; provided, however, in each such case, that the transferor and the transferee shall have complied with the following requirements: (a) BENEFITS OF PARTICIPANT. The provisions of Section 0 of this Agreement 67 76 shall inure to the benefit of each purchaser of a participation or subparticipation (provided that each such participant shall look solely to the seller of its participation for those benefits and the Borrower's liabilities, if any, under any of those sections shall not be increased as a result of the sale of any such participation) and Agent shall continue to distribute payments pursuant to this Agreement as if no participation has been sold. (b) RIGHTS RESERVED. In the event any Bank shall sell any participation or subparticipation, that Bank shall, as between itself and the purchaser, retain all of its rights (including, without limitation, rights to enforce against the Borrower this Agreement and the Loan Documents) and duties pursuant to this Agreement and the Loan Documents, including, without limitation, that Bank's right to approve any waiver, consent or amendment pursuant to Section 0 of this Agreement, except if and to the extent that any such waiver, consent or amendment would (A) reduce any fee or commission allocated to the participation or subparticipation, as the case may be, (B) reduce the amount of any principal payment on any Loan allocated to the participation or subparticipation, as the case may be, or reduce the principal amount of any Loan so allocated or the rate of interest payable thereon, or (C) extend the time for payment of any amount allocated to the participation or subparticipation, as the case may be. (c) NO DELEGATION. No participation or subparticipation shall operate as a delegation of any duty of the seller thereof. Under no circumstance shall any participation or subparticipation be deemed a novation in respect of all or any part of the seller's obligations pursuant to this Agreement. 9.3 CONFIDENTIALITY. The Agent, the Letter of Credit Bank and each Bank hereby agrees to use commercially reasonable efforts to keep, and to cause its agents, attorneys and financial advisors to keep, any information delivered or made available by the Borrower or any of its Subsidiaries to it confidential from anyone other than Persons employed or retained by the Agent, the Letter of Credit Bank or any Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent the Agent, the Letter of Credit Bank or any Bank from disclosing such information (a) to any other Bank, (b) to any other person if reasonably incidental to the administration of the Loans, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority, (e) which has been publicly disclosed other than as a result of a disclosure by the Agent, the Letter of Credit Bank or any other Bank which is not permitted by this Agreement, (f) in connection with any litigation to which the Agent, the Letter of Credit or any Bank, or their respective Affiliates may be a party, (g) to the extent reasonably required in connection with the exercise of any remedy hereunder, (h) to the Agent's, the Letter of Credit Bank or such Bank's legal counsel and independent auditors, (i) to any actual or proposed participant or assignee of all or part of its rights hereunder so long as such participant or assignee has agreed in writing to be bound by the terms of this Section 0 and (j) to the extent required by Law. 68 77 10 INDEMNITIES. 10.1 INCREASED COSTS. If, due to either: (a) the introduction of any Law or regulation, or any change (other than any change by way of imposition or increase of reserve requirements in respect of LIBOR Rate Loans otherwise included in the Eurocurrency Reserve Percentage) in or in the interpretation of any Law or regulation or (b) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of Law), there shall be any increase in the cost to any Bank of agreeing to make or making, funding or maintaining Loans, then the Borrower shall from time to time, upon demand by such Bank (with a copy of such demand to the Agent), pay to the Agent for the account of such Bank additional amounts sufficient to indemnify such Bank for such increased cost. 10.2 RISK-BASED CAPITAL. If any Bank determines that: (a) compliance with any Law or regulation or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof or (b) compliance with any directive, guideline or request from any central bank or other governmental authority (whether or not having the force of Law) affects or would affect the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank and that the amount of such capital required to be so maintained is increased by or based upon the existence of such Bank's Revolving Credit Commitment to lend hereunder and other commitments of this type, then, upon demand by such Bank (with a copy of such demand to the Agent), the Borrower shall immediately pay to the Agent for the account of such Bank, from time to time as specified by such Bank, additional amounts sufficient to indemnify such Bank or such corporation, to the extent that such Bank reasonably determines such increase in capital to be allocable to the existence of such Bank's Revolving Credit Commitment to lend hereunder. 10.3 TAXES. (a) TAXES; WITHHOLDING. Any and all payments by the Borrower hereunder, under the Revolving Credit Notes or the other Loan Documents shall be made, in accordance with the provisions of Section 2, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank, the Letter of Credit Bank and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the Laws of which such Bank, the Letter of Credit Bank or the Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank's Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by Law to deduct any Taxes from or in respect of any sum payable hereunder or under any Revolving Credit Note to any Bank, the Letter of Credit Bank or the Agent and makes such deductions from the sums so payable: (i) the sum payable shall be increased as may 69 78 be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 0) such Bank, the Letter of Credit Bank or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Law. All such Taxes shall be paid by the Borrower prior to the date on which penalties attach thereto or interest accrues thereon; provided, however, that, if any such penalties or interest become due, the Borrower shall make prompt payment thereof to the appropriate governmental authority. (b) STAMP TAXES. The Borrower agrees to pay, and will indemnify each Bank, the Letter of Credit Bank or the Agent for, any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder, under the Revolving Credit Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Revolving Credit Notes or the Letters of Credit (hereinafter referred to as "Other Taxes"). (c) INDEMNIFICATION FOR OTHER TAXES. The Borrower will indemnify each Bank, the Letter of Credit Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 0) paid by such Bank, the Letter of Credit Bank or the Agent and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Any indemnification payment shall be made within thirty (30) days from the date such Bank, the Letter of Credit Bank or the Agent (as the case may be) makes written demand therefor. (d) REQUEST FOR REFUND. At the reasonable request of the Borrower, each Bank, the Letter of Credit Bank and the Agent shall apply at the Borrower's expense for a refund in respect of Taxes or Other Taxes previously paid by the Borrower pursuant to this Section 0 if in the good faith opinion of such Bank, the Letter of Credit Bank or the Agent there is a reasonable basis for such refund. Notwithstanding the foregoing, none of the Banks, the Letter of Credit Bank or the Agent shall be obligated to pursue such refund if, in the exercise of its good faith judgment, such action would be disadvantageous to it. If any Bank, the letter of Credit Bank or the Agent subsequently receives from a taxing authority a refund of any Tax previously paid by the Borrower and for which the Borrower has indemnified the Bank pursuant to this Section 0, such Bank, the letter of Credit Bank or the Agent, as the case may be, shall within thirty (30) days after receipt of such refund, and to the extent permitted by applicable law, pay to the Borrower the net amount of any such recovery after deducting taxes and expenses attributable thereto. (e) FURNISHING OF CERTIFICATE. Within thirty (30) days after the date of any payment of Taxes, the Borrower will furnish to the Agent, at its address referred to in 70 79 Section 0 of this Agreement, the original or a certified copy of a receipt evidencing payment thereof. If Taxes ever become payable in respect of any payment hereunder or under the Revolving Credit Notes made during a Fiscal Quarter, thereafter the Borrower will furnish to the Agent, within thirty (30) days after the end of such Fiscal Quarter, at such address, a certificate from the Borrower stating that any payments made during such Fiscal Quarter are exempt from or not subject to Taxes. (f) EXEMPTION CERTIFICATE. Not later than: (a) the Closing Date, (b) in the case of any bank or financial institution that becomes a Bank after the Closing Date pursuant to Section 0 of this Agreement, the date of the instrument of assignment pursuant to which such bank or financial institution became a Bank, (c) annually on each Anniversary Date thereafter or (d) such other times as the Agent or the Borrower may reasonably request: (i) each Bank organized under the laws of a jurisdiction outside the United States shall provide the Agent and the Borrower with duly completed copies of Form 1001 or Form 4224 or any successor form prescribed by the Internal Revenue Service of the United States certifying that such Bank is exempt from United States withholding taxes with respect to all payments to be made to such Bank hereunder or other document satisfactory to the Borrower and the Agent indicating that all payments to be made to such Bank hereunder are not subject to such taxes and (ii) each other Bank shall provide the Agent and the Borrower with a written statement which certifies that such Bank is not a non-resident alien or foreign corporation and which otherwise satisfies Treasury Regulation Section 1.1441-5(b) or any successor regulation under the Internal Revenue Code (each such certificate or statement, an "Exemption Certificate"). Unless the Agent and the Borrower have received an Exemption Certificate from such Bank, the Borrower, or the Agent if the Borrower has not withheld, may withhold taxes from such payments at the applicable statutory rate (subject, in the case of the Borrower to the requirements of Section 0 above); provided, however, that, if the Borrower has so withheld, the Borrower shall so notify the Agent. If the Borrower is required to pay additional amounts to any Bank pursuant to this Section 0, such Bank shall use commercially reasonable efforts to designate a different Lending Office if such designation will thereafter avoid the need for any additional payments under this Section 0 and will not, in the sole judgment of such Bank, be otherwise disadvantageous to such Bank. A Bank which ceases to be exempt from United States withholding taxes shall notify the Agent and the Borrower promptly thereof. If a Bank organized under the laws of a jurisdiction other than the United States or a political subdivision thereof fails to comply with the provisions of this Subsection (f), then the Borrower shall not have any obligation to increase the sum payable to such Bank pursuant to this Section 0 or to indemnify such Bank for Taxes as provided in this Section. (g) SURVIVAL OF PROVISION. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and liabilities of the Borrower contained in this Section 0 shall survive the payment in full of the Obligations. 71 80 10.4 LOSSES. If any payment of principal of, or Rate Conversion or Rate Continuation of, any LIBOR Rate Loan is not paid when due or is made on a day other than on the last day of an Interest Period relating to such Loan, as a result of a payment or Rate Conversion or Rate Continuation pursuant to the provisions of Section 0 of this Agreement or acceleration of the maturity of the Revolving Credit Notes pursuant to Section 0 of this Agreement or for any other reason, the Borrower shall, upon demand by any Bank (with a copy of such demand to the Agent), pay to the Agent for the account of such Bank any amounts required to compensate such Bank for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Rate Conversion or Rate Continuation, including, without limitation, any loss, cost or expense (other than any expenses directly attributable to loan origination efforts) incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain such Loan. 10.5 INDEMNIFICATION FOR REQUESTS. Whenever the Borrower: (a) shall revoke any Credit Request, any Rate Conversion/Continuation Request involving any LIBOR Rate Loan, (b) shall for any other reason fail to borrow pursuant to any such Request or otherwise comply therewith, (c) shall fail to fulfill, on or before the date specified in any such request, the applicable conditions set forth in Section 0 of this Agreement or (d) shall fail to honor any prepayment notice, then, in each case on any Bank's demand, the Borrower shall indemnify each Bank and the Agent against any loss, cost or expense incurred by such Bank or the Agent as a result of any such failure by the Borrower, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank or the Agent to fund the LIBOR Rate Loan to be made by such Bank or the Agent in connection with such request when such LIBOR Rate Loan, as a result of such failure by the Borrower, is not made on such date. 10.6 GENERAL INDEMNITY. The Borrower shall indemnify and hold harmless the Agent, the Letter of Credit Bank, and each Bank, and the respective directors, officers, employees and Affiliates thereof, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever including, without limitation, reasonable fees and disbursements of counsel and settlements costs, which may be imposed on, incurred by, or asserted against the Agent, the Letter of Credit Bank, or any Bank or the respective directors, officers, employees and Affiliates thereof in any in connection with any investigative, administrative or judicial proceeding (whether the Agent or such Bank is or is not designated as a party thereto) relating to or arising out of this Agreement or any Loan Document, the transactions contemplated thereby, or any actual or proposed use of proceeds hereunder or thereunder, except that neither the Agent, the Letter of Credit Bank, nor any Bank nor any such directors, officers, employees and Affiliates thereof shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. 10.7 ENVIRONMENTAL INDEMNITY. The Borrower shall, at its sole cost and expense, indemnify, defend and save harmless the Agent and the Banks (and each of their respective 72 81 officers, directors, employees, agents, representatives and contractors and any subsequent owner of the assets of the Borrower who purchases such assets through the Agent or pursuant to any enforcement action by the Agent) from and against any and all damages, losses, liabilities, obligations, penalties, claims, litigations, demands, defenses, judgments, suits, actions, proceedings, costs, disbursements and\or expenses (including, without limitation, reasonable attorneys' and experts' fees, expenses and disbursements) of any kind or nature whatsoever which may at any time be imposed upon, incurred by or asserted against any of such indemnified Persons relating to, resulting from or arising out of: (i) Environmental Claims (other than those caused by the wilful misconduct or gross negligence of the Agent of the Banks), (ii) a material misrepresentation or inaccuracy in any representation or warranty contained in this Agreement relating to the Borrower's compliance with Environmental Laws or (iii) a breach or failure to perform any covenant made by the Borrower in this Agreement relating to Environmental Laws or Environmental Claims which continues uncured after the expiration of any applicable grace period. The Borrower will pay any sums owing to the Agent or the Banks pursuant to this indemnification obligation ten (10) days after demand by the Agent, together with interest on such amount accruing from and after the expiration of such period at the default rate of interest hereunder. 10.8 CERTIFICATE FOR INDEMNIFICATION. Each demand by Agent or a Bank for payment pursuant to this Section 0 shall be accompanied by a certificate setting forth the reason for the payment, the amount to be paid, and the computations and assumptions in determining the amount, which certificate shall be presumed to be correct. In determining the amount of any such payment thereunder, each Bank may use reasonable averaging and attribution methods. 10.9 DUTY TO MITIGATE; STANDARD TREATMENT. Each Bank seeking payment pursuant to this Section 0 shall use reasonable efforts and take all reasonable actions to avoid the cause of the payment and to minimize the amount thereof. Each Bank agrees that it will not seek compensation or reimbursement provided for in this Section 0 unless such Bank as a matter of policy intends generally to seek comparable compensation or reimbursement from other borrowers similarly situated and with similarly documented financial accommodations. 73 82 11 GENERAL. This Agreement and the Loan Documents shall be governed by the following provisions: 11.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Agreement, the Revolving Credit Notes or any Loan Document, nor consent to any departure by the Borrower therefrom, nor waiver of any Event of Default under this Agreement, the Revolving Credit Notes or any Loan Document, shall in any event be effective unless the same shall be in writing and signed by the Required Banks (or, if unanimous consent of all Banks is required as hereinafter provided, all of the Banks), the Agent and the Borrower and, if relating to the Letter of Credit, the Letter of Credit Bank. Such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Unanimous waiver or consent of all Banks shall be required only with respect to: (a) the waiver of non-payment or extension of maturity of any Revolving Credit Note, or the payment date of interest, principal and/or fees thereunder, (b) any reduction in the rate of interest on the Revolving Credit Notes, or in any amount of principal or interest due on any Revolving Credit Note, or in the manner of pro rata application of any payments made by the Borrower to the Banks hereunder, (c) any change in the definition or calculation of "Required Banks", (d) any change in the dollar amount or percentage of any Bank's Revolving Credit Commitment, (e) any change in amount or timing of any fees payable under this Agreement, (f) any waiver of an Event of Default or Potential Default that would affect the rate of interest or the amount of fees otherwise payable under this Agreement, (g) any change in any provision of this Agreement which requires all of the Banks to take any action under such provision, (h) any amendment to or waiver under any Subsidiary Guaranty or (i) any change in Section 0, 0, 0 or this Section 0 itself. Notice of amendments or consents ratified by the Banks hereunder shall immediately be forwarded by the Borrower to all Banks. Each Bank or other holder of a Revolving Credit Note shall be bound by any amendment, waiver or consent obtained as authorized by this section, regardless of its failure to agree thereto. 11.2 CUMULATIVE PROVISIONS; INTEGRATION. Each right, power or privilege specified or referred to in this Agreement is in addition to and not in limitation of any other rights, powers and privileges that the Agent, the Letter of Credit Bank and the Banks may otherwise have or acquire by operation of Law, by other contract or otherwise. All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings of the Borrower contained in this Agreement, each of the Loan Documents, or in any document referred to in this Agreement or the Loan Document or contained in any agreement supplementary hereto or thereto, or any schedule or report given to the Agent, the Letter of Credit Bank or any Bank or contained in any other agreement between the Agent, the Letter of Credit Bank and the Banks and the Borrower, whether concurrently or hereafter entered into or delivered, shall be deemed cumulative to, and not in derogation or substitution of, any of the terms, covenants, conditions, or agreements of the Borrower contained in this Agreement. 11.3 BINDING EFFECT. This Agreement shall become effective when it shall have been 74 83 executed by the Borrower, the Agent, the Letter of Credit Bank and the Banks and shall be binding upon and inure to the benefit of the Borrower, the Agent, the Letter of Credit Bank and the Banks and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Agent, the Letter of Credit Bank and the Banks. The Banks may, in their sole discretion, assign, sell, transfer or sell participations or subparticipations subject to Section 0 of this Agreement. 11.4 COSTS AND EXPENSES. The Borrower agrees to pay on demand all reasonable costs and expenses of: (a) the Agent, and the Letter of Credit Bank (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent) in connection with the preparation, execution, delivery, administration, modification, amendment and waiver of any default of this Agreement and the Loan Documents and (b) the Agent, the Letter of Credit Bank and the Banks (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent, the Letter of Credit Bank and the Banks) in connection with the enforcement of, the exercise of remedies under, or the preservation of rights and remedies under this Agreement and any of the Loan Documents (including any collection, bankruptcy or other enforcement proceedings arising with respect to the Borrower, this Agreement, or any Event of Default under this Agreement). All amounts due under this Section 0 shall be payable upon written demand therefor accompanied by a detailed description of the amount due and the circumstances giving rise to the cost or expense involved. 11.5 SURVIVAL OF PROVISIONS. All representations and warranties made in or pursuant to this Agreement shall survive the execution and delivery of this Agreement and of the Revolving Credit Notes. The provisions of Sections 0, 0.1 through 0 and 0 of this Agreement shall survive the payment of the Obligations owed by the Borrower hereunder and the termination of this Agreement (whether by acceleration or otherwise). 11.6 IMMEDIATE U.S. FUNDS. Unless specifically designated otherwise, any reference to money is a reference to lawful money of the United States which, if in the form of credits, shall be in immediately available funds. 11.7 CAPTIONS. The several captions to different Sections and the respective subsections thereof are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. 11.8 INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, taken, received or reserved by the Agent, the Letter of Credit Bank or any Bank, shall exceed the maximum lawful rate that may be contracted for, charged, taken, received or reserved by the Agent, the Letter of Credit Bank or any Bank in accordance with applicable law, the rate of interest and all such charges payable, contracted for, charged, taken, received or reserved in respect of the Obligations of the Borrower hereunder 75 84 (including the Loans by the Banks to the Borrower) shall be limited to the maximum rate permitted by applicable Law. 11.9 ILLEGALITY. If any provision in this Agreement or any other Loan Document shall for any reason be or become illegal, void or unenforceable, in whole or in part, that illegality, voidness or unenforceability shall not affect the remainder of such provision or any other provision of this Agreement or Loan Document. 11.10 NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and shall be given solely: (a) by hand delivery or by overnight courier delivery service, with all charges paid, (b) by facsimile transmission, if confirmed same day in writing mailed by first class mail, or (c) by registered or certified mail, postage prepaid and addressed to the parties. For the purposes of this Agreement, such notices shall be deemed to be given and received: (i) if by hand or by overnight courier service, upon actual receipt, (ii) if by facsimile transmission, upon receipt of machine-generated confirmation of such transmission (and provided the above-stated written confirmation is sent) or (iii) if by registered or certified mail, upon actual receipt; provided, however, that requests from the Borrower to Agent or the Banks pursuant to any of the provisions hereof including, without limitation, Sections 0 and 0 of this Agreement, shall not be effective until actually received by the Agent or the Banks, as the case may be. Notices or other communications hereunder shall be addressed, if to the Borrower, at the address specified on the signature pages of this Agreement; if to the Agent or the Letter of Credit Bank, at the address of the Agent specified on the signature pages of this Agreement, and, if to a Bank, at the address of such Bank specified on the signature pages of this Agreement. 11.11 GOVERNING LAW. This Agreement and the Loan Documents and the respective rights and obligations of the parties hereto shall be governed by and construed in accordance with the internal laws of the State of Ohio (without giving effect to the conflict of laws rules thereof). 11.12 ENTIRE AGREEMENT. This Agreement, including the exhibits and schedules thereto, and the Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Except for the Agent Letter, any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the Loan Documents. Nothing in this Agreement or in the Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the Loan Documents. 11.13 JURY TRIAL WAIVER. EACH OF THE BORROWER, THE AGENT, THE LETTER OF CREDIT BANK AND EACH OF THE BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE BORROWER, THE AGENT, THE LETTER OF CREDIT BANK AND THE BANKS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP 76 85 ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY REVOLVING CREDIT NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. 11.14 JURISDICTION; VENUE; INCONVENIENT FORUM. (a) JURISDICTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN CUYAHOGA COUNTY, OHIO, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE REVOLVING CREDIT NOTES OR ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH OHIO STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. (b) VENUE; INCONVENIENT FORUM. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE REVOLVING CREDIT NOTES OR ANY OTHER LOAN DOCUMENT IN ANY OHIO STATE OR FEDERAL COURT SITTING IN OHIO. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. THE BORROWER CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE. 11.15 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. 77 86 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 78 87 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers or agents thereunto duly authorized, as of the date first above written. OM GROUP, INC. ------------------------------ Name: James M. Materna Title: Chief Financial Officer Address for notices: 3800 Terminal Tower Cleveland, Ohio 44113-2204 Attention: Chief Financial Officer Telecopy: (216) 781-0902 79 88 NATIONAL CITY BANK, as Agent and Letter of Credit Bank ------------------------------------------ Name: Timothy G. Healy Title: Vice President Address for Notices: National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Timothy G. Healy Metro Group Telecopy: (216) 575-9396 Payment Office: National City Bank National City Center 1900 East Ninth Street Cleveland, Ohio 44114 80 89 BANKS ABN AMRO BANK N.V., as Co-Agent and a Bank ------------------------------------- Name: Roy D. Hasbrook Title: Group Vice President ------------------------------------- Name: Louis K. McLinden Title: Vice President Address for Notices: ABN Amro Bank N.V. One PPG Place, Suite 2950 Pittsburgh, PA 15222-5400 Attention: Roy D. Hasbrook Telecopy: (412) 566-2266 Lending Office: ABN Amro Bank N.V. One PPG Place, Suite 2950 Pittsburgh, Pennsylvania 15222-5400 81 90 NBD BANK, as a Bank ---------------------------- Name: Paul R. DeMelo Title: Vice President Address for Notices: NBD Bank 611 Woodward Avenue Detroit, Michigan 48336 Attention: Paul R. DeMelo Telecopy: (313)225-1212 Lending Office: NBD Bank 611 Woodward Avenue Detroit, Michigan 48336 82 91 HARRIS TRUST AND SAVINGS BANK, as a Bank ----------------------------------- Name: William A. McDonnell Title: Vice President Address for Notices: Harris Trust and Savings Bank 111 West Monroe Street PO Box 755 Chicago, Illinois 60690 Attention: William A. McDonnell Telecopy: (312)461-5225 Lending Office: Harris Trust and Savings Bank 111 West Monroe Street PO Box 755 Chicago, Illinois 60690 83 92 KEYBANK NATIONAL ASSOCIATION, as a Bank ---------------------------------- Name: Richard A. Pohle Title: Vice President Address for Notices: KeyBank National Association 127 Public Square OH-01-27-0606 6th Floor Cleveland, Ohio 44114 Attention: William J. Kysela Telecopy: (216) 689-4981 Lending Office: KeyBank National Association 127 Public Square Cleveland, Ohio 44114 84 93 MELLON BANK, N.A., as a Bank ----------------------------- Name: Henry W. Centa Title: Vice President Address for Notices: Mellon Bank, N.A. 200 Public Square, 29th Floor Cleveland, Ohio 44114 Attention: Henry W. Centa Telecopy: (216) 575-0513 Lending Office: Mellon Bank, N.A. 200 Public Square, 29th Floor Cleveland, Ohio 44114 85 94 NATIONAL CITY BANK, as a Bank ----------------------------- Name: Timothy G. Healy Title: Vice President Address for Notices: National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Timothy G. Healy Metro Group Telecopy: (216) 575-9396 Lending Office: National City Center 1900 East Ninth Street Cleveland, Ohio 44114 86 95 ANNEX I COMMITMENTS Credit Agreement, dated as of January 30, 1998, among OM Group, Inc., the Agent, the Co-Agent, the Letter of Credit Bank and the Banks ================================================================================ Revolving Credit Bank Commitment ================================================================================ National City Bank $ 63,750,000 25.50% ================================================================================ ABN Amro Bank N.V. $ 60,000,000 24.00% ================================================================================ KeyBank National Association $ 38,125,000 15.25% ================================================================================ Mellon Bank, N.A. $ 38,125,000 15.25% ================================================================================ Harris Trust and Savings Bank $ 25,000,000 10.00% ================================================================================ NBD Bank $ 25,000,000 10.00% ================================================================================ Aggregate Bank Commitments $250,000,000.00 100.00% ================================================================================ Annex I - 1 96 Annex II SUPPLEMENTAL SCHEDULE Credit Agreement, dated as of January 30, 1998, among OM Group, Inc., the Agent, the Co-Agent, the Letter of Credit Bank and the Banks Annex II - 1 97 EXECUTION COPY REVOLVING CREDIT NOTE $25,000,000 Dated: January 30, 1998 FOR VALUE RECEIVED, the undersigned, OM Group, Inc, a Delaware corporation ("Borrower"), hereby promises to pay to the order of NBD Bank [Harris Bank and Trust Company] (the "Bank"), in immediately available funds on the Revolving Credit Termination Date, the lesser of [________________________] Dollars ($25,000,000) or the aggregate outstanding principal amount of the Revolving Credit Loans made by the Bank to the Borrower pursuant to the Credit Agreement (as hereinafter defined). Each capitalized term used herein and not otherwise defined herein shall have the meaning ascribed to such term in that certain Credit Agreement, dated as of January 30, 1998 (as the same may from time to time be amended, supplemented, restated or otherwise modified, the "Credit Agreement"), among the Borrower, the banks which are signatories thereto (the "Banks"), ABN Amro Bank N.V., as Co-Agent, National City Bank, as Letter of Credit Banks ("Letter of Credit Banks"), and National City Bank, as Agent for the Banks, the Co-Agent and the Letter of Credit Bank ("Agent"). The Borrower promises to pay interest on the unpaid principal amount of each Revolving Credit Loan evidenced hereby from the date of such Revolving Credit Loan until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. The Borrower promises to pay on demand interest on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at the rate or rates provided in the Credit Agreement. Both principal and interest in respect of each Revolving Credit Loan are payable in lawful money of the United States of America to the Agent at the Payment Office of the Agent in same day funds. Each Revolving Credit Loan made by the Bank to the Borrower pursuant to the Credit Agreement, and all payments made on account of the principal amount thereof, shall be recorded by the Agent and the Bank on its books and records and, prior to any transfer hereof, endorsed on the grid attached hereto which is a part of this Revolving Credit Note; provided, however, that the failure of the holder hereof to make such a notation or any error in such a notation shall not affect the obligations of the Borrower under this Revolving Credit Note. This Revolving Credit Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Revolving Credit Loans by the Bank to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the Bank's Revolving Credit Commitment, the indebtedness of the Borrower resulting from each such Revolving Credit Loan being evidenced by this Revolving Credit Note, (ii) contains provisions for acceleration of the 98 maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof and (iii) provides for the amendment or waiver of certain terms of the Credit Agreement, all upon the terms and conditions therein specified. The Borrower hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The nonexercise by the holder of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance. This Revolving Credit Note shall be binding upon the undersigned and its successors and assigns, and shall inure to the benefit of the Bank, its successors and assigns and all subsequent holders of this Note. THIS REVOLVING CREDIT NOTE HAS BEEN MADE AND EXECUTED IN CLEVELAND, CUYAHOGA COUNTY, OHIO, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF OHIO WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW. IF ANY PROVISION HEREOF IS IN CONFLICT WITH ANY STATUTE OR RULE OF LAW OF THE STATE OF OHIO OR IS OTHERWISE UNENFORCEABLE FOR ANY REASON WHATSOEVER, THEN SUCH PROVISION SHALL BE DEEMED SEPARABLE FROM AND SHALL NOT INVALIDATE ANY OTHER PROVISION OF THIS NOTE. OM GROUP, INC. ("BORROWER") -------------------------------- By: James M. Materna Title: Chief Financial Officer 2 99 LOANS AND PAYMENTS OF PRINCIPAL CREDIT AGREEMENT, DATED AS OF January 30, 1998
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3 100 EXHIBIT B FORM OF CREDIT REQUEST From: OM Group, Inc. (the "Borrower") To: National City Bank, as Agent Date: __________________, 199___ Subject: Amended and Restated Credit Agreement, dated as of January 30, 1998 (as amended from time to time, the "Credit Agreement"), among the Borrower, the banks which are signatories thereto (the "Banks"), ABN Amro Bank N.V., as Co-Agent, National City Bank, as Letter of Credit Bank ("Letter of Credit Banks"), and National City Bank, as Agent for the Banks, the Co-Agent and the Letter of Credit Bank ("Agent") Greetings: Each capitalized term in this Credit Request shall be defined in accordance with the Credit Agreement. Pursuant to the Credit Agreement, we request: ( ) the Banks to grant us an Alternate Base Rate Borrowing in the aggregate principal sum of $_______________, to be made available on the _____________ day of ____________________, 199____. ( ) the Banks to grant us a LIBOR Rate Borrowing in the aggregate principal sum of $_______________, to be made available on the ________ day of ________________, 199___, and to have an initial Interest Period of _______________. ( ) a Letter of Credit Bank to issue a [Standby Letter of Credit] [Trade Letter of Credit], dated as of _______________, 199___, for the account of the Borrower and to and for the benefit of __________________________________, as beneficiary, for an aggregate face amount of [$_______________]; and in connection therewith we enclose a more detailed application and a Reimbursement Agreement. 101 and, in the case of any requested Borrowing or Letter of Credit issuance, to disburse the proceeds thereof, or issue such Letter of Credit, as follows: ______________________________________________________________________________ ______________________________________________________________________________ _____________________________________________________________________________. The undersigned hereby certifies that conditions set forth in Section 3.2 of the Credit Agreement are satisfied on the date hereof, and will be satisfied on the date of the Rate Conversion or Rate Continuation, as the case may be, before and after giving effect thereto and to the application of the proceeds therefrom. Very truly yours, OM GROUP, INC., as Borrower _____________________________ By: ____________________ Its: ____________________ -2- 102 EXHIBIT C FORM OF RATE CONVERSION/CONTINUATION REQUEST From: OM Group, Inc. (the "Borrower") To: National City Bank, as Agent Date: __________________, 199___ Subject: Amended and Restated Credit Agreement, dated as of January 30, 1998 (as amended from time to time, the "Credit Agreement"), among the Borrower, the banks which are signatories thereto (the "Banks"), ABN Amro Bank N.V., as Co-Agent, National City Bank, as Letter of Credit Bank ("Letter of Credit Banks"), and National City Bank, as Agent for the Banks, the Co-Agent and the Letter of Credit Bank ("Agent") Greetings: Each capitalized term used in this Rate Conversion/Continuation Request shall have the meaning ascribed to such term in the Credit Agreement. Pursuant to the Credit Agreement, the Borrower requests: ( ) the Banks to convert $_________________ principal amount of the [LIBOR Rate Loans] [Alternate Base Rate Loans] comprising the Revolving Credit Borrowing (or portion thereof) [made] [converted] [continued] on _____________, 199_ in the original aggregate principal sum of $___________________, on _________________, 199_, into [LIBOR Rate Loans to have an Interest Period of ___ months from the date thereof commencing on _________________, 199_.] [Alternate Base Rate Loans.] ( ) the Banks to continue $_________________ principal amount of the LIBOR Rate Loans comprising the Revolving Credit Borrowing (or portion thereof) [made] [converted] [continued] on _____________, 199_ with a ___ month Interest Period in the original aggregate principal sum of $___________________ as LIBOR Rate Loans having an Interest Period of the same duration commencing on _________________, 199_. ( ) the Banks to convert $__________________ principal amount of the LIBOR Rate Loans comprising the Revolving Credit Borrowing (or portion thereof) [made][converted] [continued] on _____________, 199__ with a ____ month Interest Period in the original aggregate principal sum of [$______________] to LIBOR Rate Loans having an Interest 103 Period of ____ months commencing on ________________, 199__.(1) The undersigned represents and warrants that this request is made in compliance with Section 2.7 of the Credit Agreement. The undersigned hereby certifies that conditions set forth in Section 3.2 of the Credit Agreement are satisfied on the date hereof, and will be satisfied on the date of the Rate Conversion or Rate Continuation, as the case may be, before and after giving effect thereto and to the application of the proceeds therefrom. Very truly yours, OM GROUP, INC., as Borrower _________________________________ By: _____________________________ Its: ____________________________ Contact Phone: (_____) ______________ Contact Fax: (_____) ______________ - -------- (1) In the event that Borrower desires to request more than one rate conversion or rate continuation on the same day, the Borrower may deliver more than one Rate Conversion/Continuation Request (subject to the limitations of Section 2.11). 2 104 EXHIBIT D FORM OF SUBSIDIARY GUARANTY AGREEMENT This GUARANTY AGREEMENT (this "Guaranty Agreement") is made as of the _____ day of _____________, 1998, by [ ___________________], a __________________ corporation (the "Guarantor"), in favor of National City Bank, as Agent (the "Agent"), for the benefit of the Banks (as defined below), the Co-Agent (as defined below) and the Letter of Credit Bank (as defined below). RECITALS WHEREAS, the Agent, OM Group, Inc. (the "Borrower"), the banks which are party thereto (the "Banks"), ABN Amro Bank, N.V., as Co-Agent (the "Co-Agent") and National City Bank, as Letter of Credit Bank (the "Letter of Credit Bank"), will enter into that certain Amended and Restated Credit Agreement (as the same may from time to time be amended or otherwise modified or supplemented, the "Credit Agreement"), pursuant to which the Banks will make certain loans and other financial accommodations available to the Borrower; WHEREAS, the Guarantor is a wholly-owned subsidiary of the Borrower and therefore will benefit from the loans and financial accommodations made available to the Borrower; and WHEREAS, it is a condition precedent to the Banks' making of financial accommodations available to the Borrower and the Letter of Credit Bank's issuing of letters of credit under the Credit Agreement that the Guarantor shall have executed and delivered this Guaranty Agreement; NOW, THEREFORE, in consideration of these premises and in order to induce the Banks to make loans and other financial accommodations available to the Borrower under the Credit Agreement, the Guarantor hereby agrees with the Agent, for the benefit of the Banks, the Co-Agent and the Letter of Credit Bank as follows: SECTION 1. Definitions. The capitalized terms used herein which are defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. SECTION 2. Guaranty. The Guarantor hereby unconditionally guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations the Borrower may now or hereafter owe to the Agent, the Banks or the Letter of Credit Bank, of every type and description, including, but not limited to, the Borrower's 105 obligations under the Credit Agreement and the Loan Documents (all such obligations of the Borrower being referred to herein as of the "Guaranteed Obligations") and agrees to pay any and all expenses (including counsel fees and expenses) incurred by the Agent, the Banks or the Letter of Credit Bank in enforcing any rights under this Guaranty Agreement. SECTION 3. Maximum Liability. The maximum liability of the Guarantor under this Guaranty Agreement shall be the greatest amount which, after taking into consideration all other valid and enforceable debts and liabilities of the Guarantor, an applicable court has determined (after any appeals) would not render the Guarantor insolvent, unable to pay its debts as they become due, inadequately capitalized for the business which it intends to conduct, or unable to pay a judgment rendered upon a claim that is the subject of an action or proceeding pending at the time when the obligations of this Guaranty Agreement are incurred or increased. SECTION 4. Guaranty Absolute. The Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Credit Agreement and the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or the Banks with respect thereto. The liability of the Guarantor under this Guaranty Agreement shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Credit Agreement, the Loan Documents or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from the Credit Agreement, the Loan Documents or any other agreement or instrument relating thereto; (c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) failure by the Agent or any Bank to take any steps to perfect and maintain its or their security interest in, or preserve its rights to, any security or collateral for the Guaranteed Obligations; (e) the Agent's or any Bank's election in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. Section 101 et seq.) (the "Bankruptcy Code"), or the application of Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code; or 2 106 (g) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any guarantor. This Guaranty Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Agent, any Bank or the Letter of Credit Bank upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. SECTION 5. Waiver. The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Agent, any Bank or the Letter of Credit Bank protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Borrower or any other person or entity or any collateral. SECTION 6. Subrogation. The Guarantor shall have no right of subrogation, reimbursement or contribution and hereby waives any right to enforce any remedy which the Agent, any Bank or the Letter of Credit Bank now has or may hereafter have against the Borrower, any endorser or any other guarantor, of all or any part of the Guaranteed Obligations, and the Guarantor hereby waives any benefit of, and any right to participate in, any security or collateral given to the Agent to secure payment of the Guaranteed Obligations or any other liability of the Borrower to the Agent, the Banks or the Letter of Credit Bank. The Guarantor also waives all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty Agreement . The Guarantor further waives all notices of the existence, creation or incurring of new or additional indebtedness, arising either from additional loans extended to the Borrower or otherwise, and also waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the Guaranteed Obligations is due, notices of any and all proceedings to collect from the maker, any endorser or any other guarantor of all or any part of the Guaranteed Obligations, or from anyone else, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or other collateral given to the Agent or any Bank to secure payment of the Guaranteed Obligations. SECTION 7. Financial Condition of Borrower. The Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of the Borrower and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations or any part thereof that diligent inquiry would reveal and the Guarantor hereby agrees that neither the Agent nor any Bank shall have any duty to advise the Guarantor of information known to the Agent or any such Bank regarding such condition or any such circumstances. In the event the Agent or any Bank, in its sole discretion, undertakes at any time or from time to time to provide any such information to the Guarantor, neither the Agent or such Bank shall be under any obligation (i) to undertake any investigation not a part of its regular business routine (ii) to disclose any 3 107 information which, pursuant to accepted or reasonable commercial finance practices, the Agent or such Bank wishes to maintain confidential or (iii) to make any other or future disclosures of such information or any other information to the Guarantor. SECTION 8. Marshalling of Assets. The Guarantor consents and agrees that the Agent, the Banks and the Letter of Credit Bank shall not be under any obligation to marshall any assets in favor of the Guarantor or against or in payment of any or all of the Guaranteed Obligations. The Guarantor further agrees that, to the extent that the Borrower makes a payment or payments to the Agent, any Bank or the Letter of Credit Bank, or the Agent, any Bank or the Letter of Credit Bank receives any proceeds of collateral, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to Borrower, its estate, trustee, receiver or any other party, including, without limitation, the Guarantor, under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the Guaranteed Obligations or part thereof which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. SECTION 9. Representations and Warranties; Incumbency. (a) The Guarantor hereby represents and warrants that (i) the Guarantor is a corporation duly organized and existing in good standing and has full power and authority to make and deliver this Guaranty Agreement; (ii) the execution, delivery and performance of this Guaranty Agreement by the Guarantor have been duly authorized by all necessary action of its directors and shareholders and do not and will not violate the provisions of, or constitute a default under, any presently applicable law or its Certificate of Incorporation or By-Laws or any agreement presently binding on it; (iii) this Guaranty Agreement has been duly executed and delivered by the authorized officers of the Guarantor and constitutes its lawful, binding and legally enforceable obligation (subject to the United States Bankruptcy Code and other similar laws generally affecting the enforcement of creditors' rights); (iv) the authorization, execution, delivery and performance of this Guaranty Agreement do not require notification to, registration with, or consent or approval by, any federal, state or local regulatory body or administrative agency; and (v) there are no actions, suits or proceedings pending or threatened against or affecting the Guarantor, or any of its properties, before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, if adversely determined, may (A) call into question the legality, validity or enforceability of this Guaranty Agreement or any Loan Document, or (B) have a material adverse effect on the condition, financial or otherwise, operations, properties or prospects of the Guarantor. (b) The Guarantor shall deliver to the Agent, concurrently with the execution of this Guaranty Agreement, (i) a certificate executed by an authorized officer of the Guarantor certifying (A) the resolutions of the Board of Directors of the Guarantor authorizing the execution, performance and delivery of this Guaranty Agreement and the other Loan Documents 4 108 to which the Guarantor is a party, (B) the names and signatures of the officers of the Guarantor executing or attesting to this Guaranty Agreement and such other Loan Documents, and (C) as true, correct, complete and in full force and effect, without amendment or revocation as of the date hereof, the Guarantor's Certificate of Incorporation and By-Laws and (ii) a good standing certificate for the Guarantor issued by the Secretary of State of the state of its incorporation. SECTION 10. Negative Covenants. The Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid or the Revolving Credit Commitment remains outstanding, the Guarantor will not, without the prior written consent of the Agent, for the benefit of the Banks: (a) Liens, Etc. Except as permitted by the Credit Agreement, create or suffer to exist any lien, security interest or other charge or encumbrance, upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign any right to receive income, in each case to secure any Indebtedness of any Person. (b) Sales, Etc. of Assets. Except as permitted by the Credit Agreement, sell, lease, transfer or otherwise dispose of any of its assets. (c) Change in Nature of Business. Make any material change in the nature of its business as carried on at the date of this Guaranty Agreement. SECTION 11. Authorization. The Agent, on behalf of the Banks and the Letter of Credit Bank, is hereby authorized, without notice or demand and without affecting the liability of the Guarantor hereunder, from time to time, to (i) renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, the Guaranteed Obligations, or otherwise modify, amend or change the terms of the Credit Agreement, the Loan Documents, or any other promissory note or other agreement, document or instrument now or hereafter executed by the Borrower and delivered to the Agent, any Bank or the Letter of Credit Bank; (ii) accept partial payments on the Guaranteed Obligations; (iii) take and hold security or collateral for the payment of this Guaranty Agreement, any other guarantees of the Guaranteed Obligations or other liabilities of the Borrower and the Guaranteed Obligations guaranteed hereby or thereby, and exchange, enforce, waive and release any such security or collateral; (iv) apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; and (v) settle, release, compromise, collect or otherwise liquidate the Guaranteed Obligations and any security or collateral therefor in any manner, without affecting or impairing the obligations of the Guarantor hereunder. At any time upon the occurrence and during the continuation of an Event of Default, the Agent, any Bank or the Letter of Credit Bank may, in its sole discretion, without notice to the Guarantor and regardless of the acceptance of any security or collateral for the payment hereof, appropriate and apply toward the payment of the Guaranteed Obligations (i) any indebtedness due or to become due from the Agent, any Bank or the Letter of Credit Bank to the 5 109 Guarantor, and (ii) any moneys, credits or other property belonging to the Guarantor, at any time held by or coming into the possession of the Agent, any Bank or the Letter of Credit Bank. SECTION 12. Amendments, Etc. No amendment or waiver of any provisions of this Guaranty Agreement nor consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Agent and all of the Banks, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No release or termination of this Guaranty Agreement shall be effected unless the same shall be in writing and executed by the Agent. SECTION 13. No Waiver; Remedies. No failure on the part of the Agent or any Bank or the Letter of Credit Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 14. Right of Set-off. Upon the occurrence and during the continuance of any Event of Default, the Agent, each Bank and the Letter of Credit Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent, such Bank or the Letter of Credit Bank to or for the credit or the account of the Guarantor against any and all of the obligations of the Guarantor now or hereafter existing under this Guaranty Agreement, irrespective of whether or not the Agent, such Bank or the Letter of Credit Bank shall have made any demand under this Guaranty Agreement and although such obligations may be contingent and unmatured. The Agent, each such Bank and the Letter of Credit Bank agrees promptly to notify the Guarantor after any such set-off and application made by the Agent, such Bank or the Letter of Credit Bank, as the case may be, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent, each Bank and the Letter of Credit Bank under this Section 14 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Agent, such Bank or the Letter of Credit Bank may have. SECTION 15. Continuing Guaranty; Transfer of Advances. This Guaranty Agreement is a continuing guaranty and shall (i) remain in full force and effect until the Guaranteed Obligations are paid in full and each Bank's Revolving Credit Commitment is terminated, and shall continue in effect thereafter until this Guaranty Agreement is revoked prospectively as to future transactions by written notice to that effect actually received by the Agent (but such notice shall not be effective as to any Guaranteed Obligations or the Revolving Credit Commitment outstanding at that time, any additional interest, premiums or fees to become payable with respect thereto or any renewals, extensions, or refinancings of the same), (ii) be binding upon the Guarantor, its successors and assigns, and (iii) inure to the benefit of and be enforceable by the Agent and its successors, transferees and assigns. Without limiting the 6 110 generality of the foregoing clause (iii), subject to the limitations, if any, set forth in the Credit Agreement, the Agent and each Bank may assign or otherwise transfer any portion of the Advances held by it to any other person or entity, and such other person or entity shall thereupon become vested with all the rights in respect thereof granted to the Agent herein or otherwise. SECTION 16. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telecopy, telegraphic, telex or cable communication) and mailed, telecopied, telegraphed, telexed, cabled or delivered, if to the Guarantor, at its address shown below its signature hereto; and if to the Agent, at its address specified in the Credit Agreement, or as to each party at such other address as shall be designated by such party in a written notice to the other party. All such notices and other communications shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective five (5) Business Days after deposit in the mails, and on the date telecopied, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively. SECTION 17. Solvency. The Guarantor is solvent (as described in the Guarantor Credit Agreement). The Guarantor does not believe that final judgments, if any, against the Guarantor in actions for money damages presently pending will be rendered at a time when, or in an amount such that, the Guarantor will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered). The cash flow of the Guarantor, after taking into account all other anticipated uses of the cash of the Guarantor (including the payments on or in respect of debt referred to in this Section 17), will at all times be sufficient to pay all such judgments promptly in accordance with their terms. SECTION 18. Waiver of Jury Trial. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS GUARANTY AGREEMENT, THE CREDIT AGREEMENT OR THE LOAN DOCUMENTS (AS DEFINED IN THE CREDIT AGREEMENT) WOULD INVOLVE DIFFICULT AND COMPLEX ISSUES AND THEREFORE AGREE THAT ANY LAWSUIT GROWING OUT OF OR INCIDENTAL TO ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY. SECTION 19. Jurisdiction; Venue; Inconvenient Forum. (a) Jurisdiction. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN CUYAHOGA COUNTY, OHIO, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT, THE CREDIT AGREEMENT OR THE LOAN DOCUMENTS, 7 111 OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH OHIO STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. (b) Venue; Inconvenient Forum. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT, THE CREDIT AGREEMENT OR ANY LOAN DOCUMENT IN ANY OHIO STATE OR FEDERAL COURT SITTING IN CUYAHOGA COUNTY, OHIO. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. THE GUARANTOR CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE. SECTION 20. Governing Law. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Ohio. 8 112 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. [____________________________], ("GUARANTOR") ____________________________________________ By: ________________________________________ Its:________________________________________ Address for Notices: ____________________________________________ ____________________________________________ ____________________________________________ Accepted and Agreed to by: NATIONAL CITY BANK, as Agent ____________________________________ By: Timothy G. Healy Its: Vice President 9 113 EXHIBIT F FORM OF BANK ASSIGNMENT AGREEMENT This Assignment Agreement (this "Assignment Agreement") between _____________________________________________________________________ (the "Assignor") and ________________________________________ (the "Assignee") is dated as of ________________, 19___. The parties hereto agree as follows: 1. PRELIMINARY STATEMENT. The Assignor is a party to an Amended and Restated Credit Agreement, dated as of January 30, 1998 (which, as it may be amended, modified, renewed or extended from time to time, is herein called the "Credit Agreement"), among OM Group, Inc. (the "Borrower"), the banks which are signatories thereto (the "Banks"), ABN Amro Bank N.V., as Co-Agent (the "Co-Agent"), National City Bank as Letter of Credit Bank (the "Letter of Credit Bank"), and National City Bank as agent for the Banks and the Letter of Credit Bank (the "Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. The Assignor desires to assign to the Assignee, and the Assignee desires to assume from the Assignor, an undivided interest (the "Purchased Percentage") in the Revolving Credit Commitment of the Assignor such that after giving effect to the assignment and assumption hereinafter provided, the Revolving Credit Commitment of the Assignee shall equal ________________________ Dollars ($___________) and its percentage of the aggregate amount of the Revolving Credit Commitments shall equal ________________________ percent (____%). 2. ASSIGNMENT. For and in consideration of the assumption of obligations by the Assignee set forth in Section 3 hereof and the other consideration set forth herein, and effective as of the Effective Date (as hereinafter defined), the Assignor does hereby sell, assign, transfer and convey all of its right, title and interest in and to the Purchased Percentage of (i) the Revolving Credit Commitment of the Assignor (as in effect on the Effective Date), (ii) any Revolving Credit Loan made by the Assignor which is outstanding on the Effective Date, (iii) the Assignor's Ratable Portion of each Letter of Credit, (iv) any Note delivered to the Assignor pursuant to the Credit Agreement, and (v) the Credit Agreement and the other Loan Documents. Pursuant to Section 9.1(d) of the Credit Agreement, on and after the Effective Date the Assignee shall have the same rights, benefits and obligations as the Assignor had under the Loan Documents with respect to the Purchased Percentage of the Loan Documents, all determined as if the Assignee were a "Bank" under the Credit Agreement with ____________________ Dollars ($_____________) equaling _____________ percent (_____%) of the aggregate amount of the Revolving Credit Commitments. The Effective Date (the "Effective Date") shall be two Business Days (or such shorter period agreed to by the Agent) after a Notice of Assignment substantially in the form of Attachment I hereto and any consents substantially in the form of Attachment II hereto required to be delivered to the Agent by Section 9.1(b) of the Credit Agreement have been delivered to the Agent; provided, however, that, in the event that the Borrower shall appropriately deliver a Credit Request prior to the time at which all of conditions 114 to the effectiveness of this Assignment shall have been met, the Effective Date shall be the Business Day immediately following the day upon which the Advances by the Bank are to be made under such Credit Request. In no event will the Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Effective Date under Section 4 are not made on or prior to the proposed Effective Date. The Assignor will notify the Assignee of the proposed Effective Date on the Business Day prior to the proposed Effective Date and will notify the Assignee of any pending Credit Request which would delay such proposed Effective Date. 3. ASSUMPTION. For and in consideration of the assignment of rights by the Assignor set forth in Section 2 hereof and the other consideration set forth herein, and effective as of the Effective Date, the Assignee does hereby accept that assignment, and assume and covenant and agree fully, completely and timely to perform, comply with and discharge, each and all of the obligations, duties and liabilities of the Assignor under the Credit Agreement which are assigned to the Assignee hereunder, which assumption includes, without limitation, the obligation to fund the unfunded portion of the aggregate amount of the Revolving Credit Commitments in accordance with the provisions set forth in the Credit Agreement and to participate in the Letters of Credit pursuant to its Ratable Portion thereof as if the Assignee were a "Bank" under the Credit Agreement with ______________________ Dollars ($_______________) equaling ____________ percent (______%) of the aggregate amount of the Revolving Credit Commitments. The Assignee agrees to be bound by all provisions relating to "Bank" under and as defined in the Credit Agreement, including, without limitation, provisions relating to the dissemination of information and the payment of indemnification. 4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee shall be entitled to receive from the Agent all payments of principal, interest and fees with respect to the Purchased Percentage of the Assignor's Revolving Credit Commitment, Advances and reimbursement with respect to Letters of Credit. The Assignee shall advance funds directly to the Agent with respect to all Advances and reimbursement payments made on or after the Effective Date. In consideration for the sale and assignment of Advances hereunder the Assignee shall pay the Assignor, on the Effective Date, an amount in Dollars equal to the Purchased Percentage of all such Advances. On and after the Effective Date, the Assignee will also remit to the Assignor any amounts of interest on Advances and fees received from the Agent which relate to the Purchased Percentage of Advances made by the Assignor accrued for periods prior to the Effective Date and not heretofore paid by the Assignee to the Assignor. In the event that either party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement, then the party receiving such amount shall promptly remit it to the other party hereto. 5. CONFIDENTIALITY. By executing and delivering this Assignment, the Assignee acknowledges and agrees to the provisions of Section 9.3 of the Credit Agreement. 6. CREDIT DETERMINATION; LIMITATIONS ON ASSIGNOR'S LIABILITY. The Assignee represents and warrants to the Assignor, the Borrower, the Agent and the Bank (a) that it is capable of making and has made and shall continue to make its own credit determinations and analysis based upon such information as the Assignee deemed sufficient to enter into the transaction contemplated hereby and not based on any statements or 2 115 representations by the Assignor, (b) the Assignee confirms that it meets the requirements to be an assignee as set forth in Sections 9.1(a) and 9.1(b) of the Credit Agreement; (c) the Assignee confirms that it is able to fund the Advances, and (d) the Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the Loan Documents as are required to be performed by it as a Bank thereunder. It is understood and agreed that the assignment and assumption hereunder are made without recourse to the Assignor and that the Assignor makes no representation or warranty of any kind to the Assignee and shall not be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of the Credit Agreement or any Loan Documents, (ii) any representation, warranty or statement made in or in connection with the Credit Agreement or any of the Loan Documents, (iii) the financial condition or creditworthiness of the Borrower or any guarantor, (iv) the performance of or compliance with any of the terms or provisions of the Credit Agreement or any of the Loan Documents, (v) inspecting any of the property, books or records of the Borrower or (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Advances. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be liable for any mistake, error of judgment, or action taken or omitted to be taken in connection with the Advances, the Credit Agreement or the Loan Documents, except for its or their own bad faith or willful misconduct. The Assignee appoints the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the terms thereof; 7. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor harmless against any and all losses, costs and expenses (including, without limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee's performance or non-performance of obligations assumed under this Assignment Agreement. 8. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall have the right pursuant to Section 9.1 of the Credit Agreement to assign the rights which are assigned to the Assignee hereunder to any entity or person, provided that (i) any such subsequent assignment does not violate any of the terms and conditions of the Credit Agreement, any of the Loan Documents, or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Credit Agreement or any of the Loan Documents has been obtained, (ii) the assignee under such assignment from the Assignee shall agree to assume all of the Assignee's obligations hereunder in a manner satisfactory to the Assignor and (iii) the Assignee is not thereby released from any of its obligations to the Assignor hereunder. 9. REDUCTIONS OF AGGREGATE AMOUNT OF COMMITMENTS. If any reduction in the aggregate amount of the Revolving Credit Commitments occurs between the date of this Assignment Agreement and the Effective Date, the percentage of the aggregate amount of the Revolving Credit Commitments assigned to the Assignee shall remain the percentage specified in Section 1 hereof and the dollar amount of the Revolving Credit Commitment of the Assignee shall be recalculated based on the reduced aggregate amount of the Revolving Credit Commitments. 3 116 10. ENTIRE AGREEMENT. This Assignment Agreement and the attached consent embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings between the parties hereto relating to the subject matter hereof. 11. GOVERNING LAW. This Assignment Agreement shall be governed by the internal law, and not the law of conflicts, of the State of Ohio. 12. NOTICES. Notices shall be given under this Assignment Agreement in the manner set forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the address set forth under each party's name on the signature pages hereof. IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] _____________________________________ By:__________________________________ Its:_________________________________ [NAME OF ASSIGNEE] _____________________________________ By:__________________________________ Its:_________________________________ 4 117 ATTACHMENT I TO FORM OF BANK ASSIGNMENT AGREEMENT NOTICE OF ASSIGNMENT To: OM Group, Inc, 3800 Terminal Tower Cleveland, Ohio 44113 Attention: __________________ NATIONAL CITY BANK, as Agent 1900 East Ninth Street 10th Floor Cleveland, Ohio 44114 Attention: ____________________ From:[NAME OF ASSIGNOR] [NAME OF ASSIGNEE] ______________, 19___ 1. We refer to that certain Credit Agreement, dated as of ______________, 1998 (which, as it may be amended, modified, renewed or extended from time to time, is herein called the "Credit Agreement"), among OM Group, Inc. (the "Borrower"), the banks which are signatories thereto (the "Banks"), ABN Amro Bank N.V., as Co-Agent (the "Co-Agent"), National City Bank as Letter of Credit Bank (the "Letter of Credit Bank"), and National City Bank as agent for the Banks and the Letter of Credit Bank (the "Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. This Notice of Assignment (this "Notice" ) is given and delivered to ****[the Borrower and]**** the Agent pursuant to Section 9.1(a) of the Credit Agreement. 3. ___________________________("Assignor") and ______________________ (the "Assignee") have entered into an Assignment Agreement, dated as of ____________, 19___, pursuant to which, among other things, the Assignor has sold, assigned, delegated and transferred to the Assignee, and the Assignee has purchased, accepted and assumed from the Assignor, an undivided interest in and to all of the Assignor's rights and obligations under the Credit Agreement such that Assignee's percentage of the aggregate amount of the Revolving Credit Commitments shall equal __________________ Dollars - ---------- *to be included only if consent must be obtained from the Company pursuant to Section 9.01 of the Credit Agreement. 5 118 ($________________________) __________________ percent (____%), effective as of the "Effective Date" (as hereinafter defined). 4. The "Effective Date" shall be the later of ____________, 19___ or two Business Days (or such shorter period as agreed to by the Agent) after this Notice of Assignment and any consents required by Sections 9.1(a), 9.1(b) and 9.1(c) of the Credit Agreement have been delivered to the Agent, provided that the Effective Date shall not occur if any condition precedent agreed to by the Assignor and the Assignee has not been satisfied; provided, however, that, in the event that the Borrower shall appropriately deliver a Credit Request prior to the time at which all of conditions to the effectiveness of this Assignment shall have been met, the Effective Date shall be the Business Day immediately following the day upon which the Advances by the Bank are to be made under such Credit Request. 5. As of this date, the Ratable Portion of the Assignor in the aggregate amount of the Revolving Credit Commitments, Advances and the LC Exposure is _____% (____________________________ Dollars ($_______________)). As of the Effective Date, the Ratable Portion of the Assignor in the aggregate amount of the Revolving Credit Commitments, Advances and LC Exposure will be _____% (_______________________ Dollars ($________________)) (as such percentage may be reduced or increased by assignments which become effective prior to the assignment to the Assignee becoming effective) and the Ratable Portion of the Assignee in the aggregate amount of the Revolving Credit Commitments, Advances and the LC Exposure will be _____% (__________________________ Dollars ($________________)). 6. The Assignor and the Assignee hereby give to the Borrower and the Agent notice of the assignment and delegation referred to herein. The Assignor will confer with the Agent before ________________, 19___ to determine if the Assignment Agreement will become effective on such date pursuant to Section 3 hereof, and will confer with the Agent to determine the Effective Date pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall notify the Agent if the Assignment Agreement does not become effective on any proposed Effective Date as a result of the failure to satisfy the conditions precedent agreed to by the Assignor and the Assignee. At the request of the Agent, the Assignor will give the Agent written confirmation of the occurrence of the Effective Date. 7. The Assignee hereby accepts and assumes the assignment and delegation referred to herein and agrees as of the Effective Date (i) to perform fully all of the obligations under the Credit Agreement which it has hereby assumed and (ii) to be bound by the terms and conditions of the Credit Agreement as if it were a "Bank". 8. The Assignor and the Assignee request and agree that any payments to be made by the Agent to the Assignor on and after the Effective Date shall, to the extent of the assignment referred to herein, be made entirely to the Assignee, it being understood that the Assignor and the Assignee shall make between themselves any desired allocations. 9. The Assignor and the Assignee request and direct that the Agent prepare and cause the Borrower to execute and deliver the Notes or, as appropriate, replacements notes, to the Assignor and the Assignee in accordance with Section 9.1(c) of the Credit Agreement. The 6 119 Assignor [and the Assignee] agree[s] to deliver to the Agent the original Note received from it by the Borrower upon its receipt of a new Note in the amount set forth above. The Assignee advises the Agent that the address listed below is its address for notices under the Credit Agreement: ___________________________________ ___________________________________ ___________________________________ The Assignee advises the Agent that the address listed below is the address of its Lending Office and the wire transfer instructions for delivery of funds by the Agent thereto: ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ASSIGNOR ______________________________________________________________ By:___________________________________________________________ Its: _________________________________________________________ ASSIGNEE ______________________________________________________________ By:___________________________________________________________ Its:__________________________________________________________ 7 120 ATTACHMENT II TO FORM OF BANK ASSIGNMENT AGREEMENT CONSENT AND RELEASE TO:[NAME OF ASSIGNOR] ____________________________ ____________________________ [NAME OF ASSIGNEE] ____________________________ ____________________________ ________________, 19___ 1.We acknowledge receipt from __________________________ (the "Assignor") and ________________________ (the "Assignee") of the Notice of Assignment, dated as of _______________, 19____ (the "Notice"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Notice. 2.In consideration of the assumption by the Assignee of the obligations of the Assignor as referred to in the Notice, [the Borrower****] and the Agent hereby (i) irrevocably consent[s], pursuant to Section 9.1(a) of the Credit Agreement, to the assignment and delegation referred to in the Notice and (ii) as of the Effective Date, irrevocably reduces the percentage of the Assignor in the aggregate amount of the Revolving Credit Commitments, the Advances and the Letters of Credit by the percentage of the aggregate amount of the Revolving Credit Commitments, the Advances and the Letters of Credit assigned to the Assignee and releases the Assignor from all of its obligations to the Borrower under the Credit Agreement and any of the Loan Documents to the extent that such obligations have been assumed by the Assignee. ****[3.The Borrower directs the Agent to prepare for issuance by the Borrower of new Notes requested by the Assignor and the Assignee in the Notice.]**** 4.In consideration of the assumption by the Assignee of the obligations of the Assignor as referred to in the Notice, the Agent and each of the Bank executing below (which constitute the Required Banks under the Credit Agreement) hereby (i) irrevocably consents, pursuant to Section 9.1(a) of the Credit Agreement, to the assignment and delegation referred to in the Notice, (ii) as of the Effective Date, irrevocably releases the Assignor from its obligations to the Agent under the Credit Agreement or any of the Loan Documents to the extent that such obligations have been assumed by the Assignee, and (iii) agrees that, as of the Effective Date, the Agent shall consider the Assignee as a "Bank" for all purposes under the Credit Agreement and 8 121 any of the Loan Documents to the extent of the assignment and delegation referred to in the Notice. OM GROUP, INC. ______________________________________________________________ By:___________________________________________________________ Its:__________________________________________________________ NATIONAL CITY BANK, as Agent ______________________________________________________________ By:___________________________________________________________ Its:__________________________________________________________ To be included only if the consent of the Borrower is required pursuant to Section 9.1(a) of the Credit Agreement. 9 122 EXHIBIT 4.4 FORM OF OPINION OF SPECIAL COUNSEL TO THE COMPANY Matters To Be Covered In Opinion of Special Counsel To the Company ----------------------------------------- 1. Each of the Company, its domestic Restricted Subsidiaries and KCO being duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and having requisite corporate power and authority to issue and sell the Notes and to execute and deliver and to perform its obligations under the Notes and the Note Agreements. 2. Each of the Company, its domestic Restricted Subsidiaries and KCO being duly qualified and in good standing as a foreign corporation in appropriate jurisdictions. 3. The Guarantors being corporations validly existing in good standing under the laws of their state of incorporation having requisite corporate power and authority to operate and deliver and to perform their obligations under the Guaranty Agreements. 4. Due authorization and execution of the Notes, Note Agreements and Guaranty Agreements and such documents being legal, valid, binding and enforceable. 5. No conflicts with charter documents, laws or other agreements and no creation of Liens in respect of any property of the Company, the Guarantors or any other Restricted Subsidiary. 6. All consents required to issue and sell the Notes and to execute and deliver the Notes, Note Agreements and Guaranty Agreements having been obtained. 7. No litigation questioning validity of documents. 8. The Notes not requiring registration under the Securities Act of 1933, as amended; no need to qualify an indenture under the Trust Indenture Act of 1939, as amended. 9. No violation of Regulations G, T, U or X of the Federal Reserve Board. 10. Company and each Guarantor not an "investment company", or a company "controlled" by an "investment company", under the Investment Company Act of 1940, as amended. Company and each Guarantor not a "public utility" as such term is defined in the 123 Federal Power Act, as amended. Company and each Guarantor not subject to regulation under any Federal, Ohio or Delaware law which limits its ability to incur Indebtedness. -2- EX-4.6 3 EXHIBIT 4.6 1 Exhibit 4.6 ================================================================================ OM GROUP, INC. $30,000,000 6.82% Senior Notes due 2007 6.99% Senior Notes due 2009 ------------------------- NOTE PURCHASE AGREEMENT ------------------------- Dated October 24, 1997 ================================================================================ 2 TABLE OF CONTENTS SECTION PAGE - ------- ---- 1. AUTHORIZATION OF NOTES ........................................... 1 2. SALE AND PURCHASE OF NOTES ....................................... 1 3. CLOSING .......................................................... 2 4. CONDITIONS TO CLOSING ............................................ 2 4.1. Representations and Warranties ........................... 2 4.2. Performance; No Default .................................. 2 4.3. Compliance Certificates .................................. 3 4.4. Opinions of Counsel ...................................... 3 4.5. Purchase Permitted By Applicable Law, etc ................ 3 4.6. Sale to Other Purchaser .................................. 3 4.7. Payment of Special Counsel Fees .......................... 4 4.8. Private Placement Number ................................. 4 4.9. Changes in Corporate Structure ........................... 4 4.10. Approvals ................................................ 4 4.11. Guaranty Agreements ...................................... 4 4.12. Credit Agreement, etc .................................... 5 4.13. Debt Repayment ........................................... 5 4.14. Amendments to Credit Agreement; Existing Note Purchase Agreements ...................................... 5 4.15. Proceedings and Documents ................................ 5 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................... 5 5.1. Organization; Power and Authority ........................ 5 5.2. Authorization, etc ....................................... 6 5.3. Disclosure ............................................... 6 5.4. Organization, Power and Authority, and Ownership of Shares of Subsidiaries; Affiliates .................... 6 5.5. Financial Statements ..................................... 7 5.6. Compliance with Laws, Other Instruments, etc ............. 7 5.7. Governmental Authorizations, etc ......................... 8 5.8. Litigation; Observance of Agreements, Statutes and Orders ............................................... 8 5.9. Taxes .................................................... 8 5.10. Title to Property; Leases; Investments ................... 8 5.11. Licenses, Permits, etc ................................... 9 5.12. Compliance with ERISA, etc ............................... 9 5.13. Private Offering by the Company .......................... 10 5.14. Use of Proceeds; Margin Regulations ...................... 11 i 3 SECTION PAGE - ------- ---- 5.15. Existing Indebtedness; Future Liens ...................... 11 5.16. Foreign Assets Control Regulations, etc .................. 11 5.17. Status under Certain Statutes ............................ 11 5.18. Environmental Matters .................................... 12 6. REPRESENTATIONS OF THE PURCHASER ................................. 12 6.1. Purchase for Investment .................................. 12 6.2. Source of Funds .......................................... 12 7. INFORMATION AS TO COMPANY ........................................ 13 7.1. Financial and Business Information ....................... 13 7.2. Officer's Certificate .................................... 16 7.3. Inspection ............................................... 17 8. PAYMENT AND PREPAYMENT OF THE NOTES .............................. 17 8.1. Payment at Maturity ...................................... 17 8.2. Optional Prepayments with Make-Whole Amount .............. 18 8.3. Allocation of Partial Prepayments ........................ 18 8.4. Prepayment of Notes Upon Change of Control ............... 18 8.5. Maturity; Surrender, etc ................................. 18 8.6. Purchase of Notes ........................................ 19 8.7. Make-Whole Amount ........................................ 19 9. AFFIRMATIVE COVENANTS ............................................ 20 9.1. Compliance with Law ...................................... 20 9.2. Insurance ................................................ 21 9.3. Maintenance of Properties ................................ 21 9.4. Payment of Taxes and Claims .............................. 21 9.5. Corporate Existence; Licenses ............................ 21 9.6. Books and Records ........................................ 22 9.7. Environmental Matters .................................... 22 9.8. Prepayment of Notes Upon Change of Control ............... 22 10. NEGATIVE COVENANTS ............................................... 23 10.1. Maintenance of Certain Financial Conditions .............. 23 10.2. Indebtedness; Restricted Subsidiary Indebtedness ......... 23 10.3. Liens .................................................... 27 10.4. Investments, etc ......................................... 29 10.5. Restricted Payments; Restricted Additional Investments ... 31 10.6. Subsidiary Stock and Indebtedness ........................ 33 10.7. Consolidation, Merger, Sale of Assets, etc ............... 34 10.8. Sale Leasebacks .......................................... 37 10.9. Lines of Business ........................................ 38 10.10. Transactions with Affiliates ............................. 38 ii 4 SECTION PAGE - ------- ---- 10.11. Restrictions on Subsidiary Dividends and Payments ........ 38 11. EVENTS OF DEFAULT ................................................ 38 12. REMEDIES ON DEFAULT, ETC ......................................... 41 12.1. Acceleration ............................................. 41 12.2. Other Remedies ........................................... 41 12.3. Rescission ............................................... 42 12.4. No Waivers or Election of Remedies, Expenses, etc ........ 42 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES .................... 42 13.1. Registration of Notes 42 13.2. Transfer and Exchange of Notes 43 13.3. Replacement of Notes ....................................... 43 14. PAYMENTS ON NOTES ................................................ 43 14.1. Place of Payment ......................................... 43 14.2. Home Office Payment ...................................... 44 15. EXPENSES, ETC .................................................... 44 15.1. Transaction Expenses ..................................... 44 15.2. Survival ................................................. 45 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT ................................................. 45 17. AMENDMENT AND WAIVER ............................................. 45 17.1. Requirements ............................................. 45 17.2. Solicitation of Holders of Notes ......................... 45 17.3. Binding Effect, etc ...................................... 46 17.4. Notes held by Company, etc ............................... 46 18. NOTICES .......................................................... 46 19. REPRODUCTION OF DOCUMENTS ........................................ 47 20. CONFIDENTIAL INFORMATION ......................................... 47 21. SUBSTITUTION OF PURCHASER ........................................ 48 22. MISCELLANEOUS .................................................... 48 22.1. Successors and Assigns ................................... 48 22.2. Payments Due on Non-Business Days ........................ 49 22.3. Severability ............................................. 49 iii 5 SECTION PAGE - ------- ---- 22.4. Construction; Accounting Terms ........................... 49 22.5. Counterparts ............................................. 50 22.6. Governing Law ............................................ 50 SCHEDULE A -- Information Relating to Purchasers SCHEDULE B -- Defined Terms SCHEDULE B-1 -- Form of Subordination Provisions SCHEDULE 5.4 -- Subsidiaries and Affiliates SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.10 -- Investments SCHEDULE 5.12 -- Covered Contracts and Related Contracts SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Indebtedness EXHIBIT 1 -- Form of 6.82% Senior Note due 2007 EXHIBIT 1A -- Form of 6.99% Senior Note due 2009 EXHIBIT 4.4 -- Form of Opinion of Special Counsel to the Company and the Guarantor EXHIBIT 4.11 -- Form of Guaranty Agreement iv 6 OM GROUP, INC. 3800 TERMINAL TOWER CLEVELAND, OHIO 44113-2204 6.82% Senior Notes due 2007 6.99% Senior Notes due 2009 October 24, 1997 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: OM Group, Inc., a Delaware corporation (the "COMPANY"), agrees with you as follows: 1. AUTHORIZATION OF NOTES. The Company will authorize the issue and sale of $15,000,000 aggregate principal amount of its 6.82% Senior Notes due October 27, 2007 (the "2007 NOTES") and $15,000,000 of its 6.99% Senior Notes due October 27, 2009 (the "2009 NOTES") (collectively, the "NOTES", such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreement (as hereinafter defined)). The Notes shall be substantially in the form set out in Exhibits 1 and 1A, with such changes therefrom, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount and with the maturities specified opposite your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company is entering into a separate Note Purchase Agreement (the "OTHER AGREEMENT") identical with this Agreement with the other purchaser named in Schedule A (the "OTHER PURCHASER"), providing for the sale at such Closing to the Other Purchaser of Notes in the principal amount and with the maturities specified opposite its name in Schedule A. Your obligations hereunder and the obligations of the Other Purchaser under the Other Agreement are several and not joint obligations and you shall have no obligation under the Other Agreement and no liability to any Person for the performance or non-performance by the Other Purchaser thereunder. 7 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchaser shall occur at the offices of Whitman Breed Abbott & Morgan LLP, 200 Park Avenue, New York, New York 10166, at 10:00 a.m., New York City time, at a closing (the "CLOSING") on October 24, 1997 or on such other Business Day thereafter on or prior to October 31, 1997 as may be agreed upon by the Company and you and the Other Purchaser (the "CLOSING DATE"). At the Closing, the Company will deliver to you the Notes of the maturity so designated to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $500,000 as you may request) dated the Closing Date and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 001-2669111 at National City Bank, Cleveland, Ohio. If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company in this Agreement, and the representations and warranties of each of OMG Americas, Inc., an Ohio corporation, OMG Apex, Inc., a Delaware corporation, and SCM Metal Products, Inc., a Delaware corporation, each a Wholly Owned Restricted Subsidiary (individually, a "GUARANTOR" and collectively, the "GUARANTORS"), in each Guaranty Agreement, and all representations and warranties otherwise made in writing by or on behalf of the Company or each Guarantor in connection with the transactions contemplated hereby, shall be correct when made and at the time of the Closing. 4.2. PERFORMANCE; NO DEFAULT. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing. -2- 8 4.3. COMPLIANCE CERTIFICATES. (a) OFFICER'S CERTIFICATE. The Company shall have delivered to you an Officer's Certificate, dated the Closing Date, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) SECRETARY'S CERTIFICATES. The Company shall have delivered to you a certificate of the Secretary or an Assistant Secretary of the Company certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes, this Agreement and the Other Agreement; and each Guarantor shall have delivered to you a certificate of the Secretary or an Assistant Secretary of such Guarantor certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of its Guaranty Agreement. 4.4. OPINIONS OF COUNSEL. You shall have received opinions in form and substance satisfactory to you, dated the Closing Date (a) from Squire, Sanders & Dempsey, special counsel for the Company and the Guarantor in connection with the transactions contemplated hereby, covering the matters set forth in Exhibit 4.4 and covering such other matters incident to such transactions as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you), (b) from Raikkonen & Ramo Ltd., Finnish counsel to OMG Kokkola Chemicals Oy, a Wholly Owned Restricted Subsidiary, and (c) from Whitman Breed Abbott & Morgan LLP, your special counsel in connection with such transactions, covering such matters as you may reasonably request. 4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the Closing Date your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject (without recourse to basket or leeway provisions of said laws, such as Section 1405(a)(8) of the New York Insurance Law), (ii) not violate any applicable law or regulation (including, without limitation, Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation is not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. Approvals, in form, scope and substance satisfactory to you and your special counsel shall have been delivered to you and your special counsel. 4.6. SALE TO OTHER PURCHASER. The Other Agreement shall have been duly entered into and, contemporaneously with the purchase of the Notes to be purchased by you at the Closing, the Company shall sell to the Other Purchaser and the Other Purchaser shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A. -3- 9 4.7. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing Date the fees, charges and disbursements of your special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing. 4.8. PRIVATE PLACEMENT NUMBER. Private Placement numbers issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the 2007 Notes and the 2009 Notes. 4.9. CHANGES IN CORPORATE STRUCTURE. Neither the Company nor any Restricted Subsidiary shall have changed its jurisdiction of incorporation or been a party to any merger or consolidation or shall have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10. APPROVALS. All actions, approvals, consents, waivers, exemptions, orders, authorizations, registrations, declarations, filings and recordings (collectively, "APPROVALS"), if any, which are required to be taken, given, obtained, filed or recorded, as the case may be, by or from or with (a) any Governmental Authority, (b) any trustee or holder of any indebtedness, obligation or securities of the Company or any of its Subsidiaries or (c) any other Person, in connection with the legal and valid execution and delivery by the Company of this Agreement and the Other Agreement and the consummation of the transactions contemplated hereby, the issuance and sale by the Company of the Notes and the legal and valid execution and delivery by each Guarantor of its Guaranty Agreement, shall have been duly taken, given, obtained, filed or recorded, as the case may be, and all such Approvals shall be final, subsisting and in full force and effect on the Closing Date, and shall not be subject to any further proceedings or appeals or any conditions subsequent not approved by you. Certified copies or other appropriate evidence of all such Approvals, in form, scope and substance satisfactory to you and your special counsel, shall have been delivered to you and your special counsel. 4.11. GUARANTY AGREEMENTS. Each Guarantor shall have duly authorized, executed and delivered a Guaranty Agreement substantially in the form of Exhibit 4.11 (as amended or otherwise modified and in effect from time to time, the "GUARANTY AGREEMENTS"); the Guaranty Agreements shall be in full force and effect; and you and your special counsel shall have each received an original fully executed counterpart thereof. -4- 10 4.12. CREDIT AGREEMENT, ETC. You and your special counsel shall have each received copies of the Credit Agreement and the Bank Guaranty Agreements, certified as true and complete copies thereof, in each case as in effect on the Closing Date. 4.13. DEBT REPAYMENT. The Indebtedness of the Company identified on Schedule 5.15 as being repaid on or prior to the Closing Date shall have been repaid to the extent specified on Schedule 5.15, and all Liens, if any, securing any of such Indebtedness identified thereon as being repaid in full shall have been released and discharged (or provision satisfactory to you and your counsel shall have been made for the simultaneous repayment of such Indebtedness and release and discharge of such Liens). You and your special counsel shall have each received appropriate evidence of such repayment, release and discharge. 4.14. Amendments to Credit Agreement; Existing Note Purchase Agreements. The Company and the Banks shall have amended the Credit Agreement and the 1995 Note Purchasers shall have amended the 1995 Note Purchase Agreements to allow for the transactions contemplated hereby; and the amendments shall be in full force and effect. 4.15. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that: 5.1. ORGANIZATION; POWER AND AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreement and the Notes and to perform the provisions hereof and thereof. -5- 11 5.2. AUTHORIZATION, ETC. This Agreement, the Other Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company and the Guaranty Agreements have been duly authorized by all necessary corporate action on the part of each Guarantor; and this Agreement constitutes, and upon execution and delivery thereof by the Company each Note will constitute, and upon execution and delivery thereof by the Guarantors the Guaranty Agreements will constitute, a legal, valid and binding obligation of the Company or each Guarantor, as the case may be, enforceable against the Company or each Guarantor, as the case may be, in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3. DISCLOSURE. This Agreement, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in one of the documents, certificates or other writings delivered to you, or in the financial statements listed in Schedule 5.5, since June 30, 1997, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. 5.4. ORGANIZATION, POWER AND AUTHORITY, AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES. (a) Schedule 5.4 contains complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, its designation as a Restricted or Unrestricted Subsidiary, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and senior officers. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary (except for directors' qualifying shares) free and clear of any Lien. -6- 12 (c) Each Subsidiary identified in Schedule 5.4 is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact and, in the case of each Guarantor, to execute and deliver the Guaranty Agreement to which it is a party and to perform the provisions thereof. (d) No Subsidiary is a party to, or otherwise subject to, any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. 5.5. FINANCIAL STATEMENTS. The Company has delivered to you and the Other Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). 5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. Neither the execution, delivery and performance by the Company of this Agreement and the Notes nor the execution, delivery and performance by each Guarantor of the Guaranty Agreement to which it is a party will (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company, any Guarantor or any other Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-law, or any other agreement or instrument to which the Company, any Guarantor or any other Subsidiary is bound or by which the Company, any Guarantor or any other Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company, any Guarantor or any other Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company, any Guarantor or any other Subsidiary. -7- 13 5.7. GOVERNMENTAL AUTHORIZATIONS, ETC. No Approval by, from or with any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes or by the Guarantors of the Guaranty Agreements. 5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS. (a) There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9. TAXES. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended December 31, 1995. 5.10. TITLE TO PROPERTY; LEASES; INVESTMENTS. (a) The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of -8- 14 Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect. (b) Schedule 5.10 correctly lists all Investments of the Company and each Subsidiary (other than (i) Investments in Subsidiaries and (ii) investments of the character described in clause (b) of the definition set forth in Schedule B of the term "Investment") which are existing on the date hereof. 5.11. LICENSES, PERMITS, ETC. (a) The Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others. (b) To the best knowledge of the Company, no product Material to the Company or any Subsidiary infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person. (c) To the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. 5.12. COMPLIANCE WITH ERISA, ETC. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the -9- 15 meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the respective meanings specified in section 3 of ERISA. (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you. (f) Attached hereto as Schedule 5.12 is a complete list (i) of each covered plan which has an interest as a contractholder in (or as the beneficial owner of) any insurance or annuity contract (a "Covered Contract") issued by any of the Purchasers (together with sufficient information to identify such contract and the Purchaser issuing such contract) and (ii) of each related plan which has an interest as a contractholder in (or as the beneficial owner of) any insurance or annuity contract issued by the Purchaser issuing a Covered Contract (together with a description of such contract (a "Related Contract")). As used in the immediately preceding sentence, the following terms shall have the following meanings: "covered plan" shall mean an employee benefit plan as defined in Section 3(3) of ERISA, or a plan as defined in Section 4975(e)(1) of the Code, with respect to which the Company is a party in interest (as defined in Section 3(14) of ERISA) or a disqualified person (as defined in Section 4975(e)(2) of the Code), or with respect to which the Notes could constitute an employer security (as defined in Section V(c) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")); "related plan" shall mean, with respect to any Covered Contract, any employee benefit plan maintained by the same employer (or any affiliate of such employer) or employee organization maintaining the covered plan identified pursuant to clause (i) with respect to such Covered Contract; and "affiliate" shall mean an affiliate as defined in Section V(a) of PTCE 95-60. 5.13. PRIVATE OFFERING BY THE COMPANY. Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you, the Other Purchaser and not more than 25 other Institutional Investors, each of which has been offered the Notes at private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or -10- 16 will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act. 5.14. USE OF PROCEEDS; MARGIN REGULATIONS. The Company will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 5% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 5% of the value of such assets. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said Regulation G. 5.15. EXISTING INDEBTEDNESS; FUTURE LIENS. (a) Schedule 5.15 sets forth a complete and correct list of all outstanding Funded Debt of the Company and its Subsidiaries as of the date hereof and as of the Closing Date. Neither the Company nor any Subsidiary is in default in, and no waiver of default is currently in effect relating to, the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.3. 5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17. STATUS UNDER CERTAIN STATUTES. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. -11- 17 5.18. ENVIRONMENTAL MATTERS. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing, (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. 6. REPRESENTATIONS OF THE PURCHASER. 6.1. PURCHASE FOR INVESTMENT. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, PROVIDED that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 6.2. SOURCE OF FUNDS. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "SOURCE") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: -12- 18 (a) if you are an insurance company, the Source does not include assets allocated to any separate account maintained by you in which any employee benefit plan (or its related trust) has any interest, other than a separate account that is maintained solely in connection with your fixed contractual obligations under which the amounts payable, or credited, to such plan and to any participant or beneficiary of such plan (including any annuitant) are not affected in any manner by the investment performance of the separate account; or (b) the Source is either (i) an insurance company pooled separate account, within the meaning of Prohibited Transaction Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source is a governmental plan; or (d) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (d); or (e) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. Each Purchaser whose source of funds includes assets of its insurance company general account (as defined in Section V(e) of PTCE 95-60), and with respect to which a Covered Contract is disclosed by the Company on Schedule 5.12, hereby represents to the Company that the reserves and liabilities with respect to such general account for such Covered Contract and all Related Contracts, if any, identified by the Company with respect thereto do not exceed 10% of the sum of all reserves and liabilities of such general account plus the surplus of such Purchaser, such reserves and liabilities and such surplus in each case being calculated in accordance with the applicable provisions of PTCE 95-60. As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 7. INFORMATION AS TO COMPANY. 7.1. FINANCIAL AND BUSINESS INFORMATION. The Company shall deliver to each holder of Notes that is an Institutional Investor: -13- 19 (a) QUARTERLY STATEMENTS -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), copies of; (i) a consolidated balance sheet of the Company and its Restricted Subsidiaries as at the end of such quarter; (ii) consolidated statement of income of the Company and its Restricted Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter; and (iii) consolidated statement of cash flows of the Company and its Restricted Subsidiaries for the portion of the fiscal year ending with such quarter; setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, PROVIDED that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) ANNUAL STATEMENTS -- within 105 days after the end of each fiscal year of the Company, copies of; (i) a consolidated balance sheet of the Company and its Restricted Subsidiaries, as at the end of such year; and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Restricted Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied (A) by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and -14- 20 (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof, PROVIDED that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountant's certificate described in clause (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC AND OTHER REPORTS -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (d) NOTICE OF DEFAULT OR EVENT OF DEFAULT __ promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA MATTERS -- promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or -15- 21 (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; or (iv) the existence, at any time after the Closing, of any Covered Contracts or Related Contracts which are not listed on Schedule 5.12 as of the Closing Date; (f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any event within 10 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (g) NOTICE OF CHANGE OF CONTROL -- promptly, and in no event later than 15 days prior to the date of any Change of Control, written notice thereof in the form of an Officer's Certificate describing in reasonable detail the facts and circumstances giving rise to such Change of Control, specifying the date such Change of Control is expected to occur, and making reference to Section 9.8 of this Agreement and the right of the holders of Notes to require the prepayment of the Notes on the terms and conditions provided for in such Section 9.8; and (h) REQUESTED INFORMATION -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested in writing by any such holder of Notes. 7.2. OFFICER'S CERTIFICATE. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) COVENANT COMPLIANCE -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.1 through Section 10.11 hereof, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms -16- 22 of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) EVENT OF DEFAULT -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under such officer's supervision, a review of the transactions and conditions of the Company and its Restricted Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review has not disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Restricted Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company has taken or proposes to take with respect thereto. 7.3. INSPECTION. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) NO DEFAULT -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Restricted Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Restricted Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) DEFAULT -- if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. 8. PAYMENT AND PREPAYMENT OF THE NOTES. 8.1. PAYMENT AT MATURITY. The Company will pay the entire outstanding principal amount of the 2007 Notes, together with all interest accrued thereon, on October 27, 2007, and will pay the entire -17- 23 outstanding principal amount of the 2009 Notes, together with all interest accrued thereon, on October 27, 2009. 8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT. The Notes shall not be subject to prepayment at the option of the Company except as provided in this Section 8.2. The Company may, at its option, at any time on or after October 27, 1998, upon notice as provided below, prepay the Notes at any time in whole, or from time to time in part (in a minium principal amount of $500,000 and in integral multiples of $1,000, in excess thereof), at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the maturity of Notes and the aggregate principal amount of such Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. 8.3. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial prepayment of the Notes (other than any such prepayment pursuant to Section 8.4), the principal amount of the Notes to be prepaid shall be allocated between the 2007 Notes and the 2009 Notes in proportion to the aggregate principal amount of each such Note outstanding immediately prior to such prepayment. 8.4. PREPAYMENT OF NOTES UPON CHANGE OF CONTROL. The Company shall be required to prepay Notes of each holder thereof which shall have given notice to the Company of its election to require such prepayment in connection with a Change of Control, as contemplated by Section 9.8, each such purchase to be made at the price and otherwise upon the terms set forth and on the date determined in accordance with, and otherwise as provided in, Section 9.8. 8.5. MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and -18- 24 Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.6. PURCHASE OF NOTES. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 8.7. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, PROVIDED that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, 0.5% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on Telerate Access Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. -19- 25 Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than the Remaining Average-Life and (2) the actively traded U.S. Treasury security with the duration closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, PROVIDED that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. 9. AFFIRMATIVE COVENANTS. The Company covenants and agrees that from the date of this Agreement through the Closing Date, and thereafter so long as any Note shall remain outstanding: 9.1. COMPLIANCE WITH LAW. The Company will, and will cause each of its Restricted Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. -20- 26 9.2. INSURANCE. The Company will, and will cause each of its Restricted Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3. MAINTENANCE OF PROPERTIES. The Company will, and will cause each of its Restricted Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, PROVIDED that this Section shall not prevent the Company or any Restricted Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause each of its Restricted Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Restricted Subsidiary, PROVIDED that neither the Company nor any Restricted Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Company or such Restricted Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Restricted Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Restricted Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5. CORPORATE EXISTENCE; LICENSES. (a) The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.6 and 10.7, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Restricted Subsidiaries (unless merged into the Company or a Wholly Owned Restricted Subsidiary) and all rights and franchises of the Company and its Restricted Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and -21- 27 effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. (b) The Company will, and will cause each of its Restricted Subsidiaries to, maintain the validity of all Licenses necessary in any material respect for the conduct of the Business of the Company and its Restricted Subsidiaries. 9.6. BOOKS AND RECORDS. The Company will, and will cause each of its Restricted Subsidiaries to, (a) keep proper books of record and account in which full, true and correct entries will be made of all its material business dealings and transactions in accordance with GAAP applied on a consistent basis and (b) maintain a system of accounting established and administered in accordance with GAAP, and set aside on its books from its earnings for each fiscal period all proper reserves, accruals and provisions which, in accordance with GAAP, should be set aside from such earnings in connection with its business, including, without limitation, provisions for depreciation, obsolescence and/or amortization, and accruals for taxes for such period. 9.7. ENVIRONMENTAL MATTERS. (a) The Company will, and will cause each of its Restricted Subsidiaries to, (i) obtain and maintain in full force and effect all Environmental Permits that may be required from time to time under any Environmental Law for the conduct of any Material portion of the business of the Company or any Restricted Subsidiary and (ii) be and remain in compliance in all material respects with all terms and conditions of all such Environmental Permits and with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in all applicable Environmental Laws. (b) The Company will not, and will not permit any of its Restricted Subsidiaries to, (i) cause or allow (A) any Hazardous Material to be present at any time on, in, under or above any real properties owned, leased or operated by the Company or any Restricted Subsidiary or (B) any such real properties or any part thereof to be used at any time to manufacture, generate, refine, process, distribute, use, sell, treat, receive, store, dispose of, transport, arrange for transport of, handle, or be involved in any other activity involving, any Hazardous Material, or (ii) conduct any such activities described in the foregoing clause (i)(B) on any such real properties or anywhere else, except, in each case referred to in the foregoing clauses (i) and (ii), in a manner that is in compliance in all material respects with all applicable Environmental Laws and Environmental Permits and to an extent that will not have a Material Adverse Effect. 9.8. PREPAYMENT OF NOTES UPON CHANGE OF CONTROL. At any time following the occurrence of a Change of Control (subject to the next succeeding paragraph of this Section), each holder of a Note shall have the right at its option exercisable by the giving of notice to the Company (a "PREPAYMENT ELECTION NOTICE") to elect to require the prepayment by the Company of all Notes then held by such holder on the -22- 28 prepayment date specified by such holder in such Prepayment Election Notice (which shall not in any event be less than 10 days nor more than 30 days after the date on which such holder shall have given such Prepayment Election Notice), such prepayment to be at a price equal to 100% of the principal amount of such Notes together with interest accrued thereon to such prepayment date. On the prepayment date specified in any Prepayment Election Notice given by any holder of a Note, the Company will prepay all Notes held by such holder at the prepayment price provided for in the first sentence of this Section. The right of the holder of a Note to give a Prepayment Election Notice requiring the prepayment of such Note pursuant to this Section following a Change of Control shall expire at the close of business in New York City on the thirtieth day following the later of (x) the date of the occurrence of such Change of Control and (y) actual receipt by such holder of notice of such Change of Control pursuant to Section 7.1(g). Notwithstanding any provision hereof to the contrary, no failure on the part of the holder of any Note to exercise such holder's right to require the prepayment thereof by the Company pursuant to this Section following a Change of Control shall be deemed a waiver of or otherwise impair the rights of such holder pursuant to this Section in respect of all other events or circumstances that shall constitute a Change of Control. 10. NEGATIVE COVENANTS. The Company covenants and agrees that from the date of this Agreement through the Closing Date, and thereafter so long as any Note shall remain outstanding: 10.1. MAINTENANCE OF CERTAIN FINANCIAL CONDITIONS. (a) CONSOLIDATED NET WORTH. The Company will not permit Consolidated Net Worth to be less than the sum of (i) $110,000,000, PLUS (ii) 25% of Consolidated Net Income (but only if a positive number) for the period commencing on June 30, 1995 and ending on the then most recent Determination Date. (b) COVERAGE RATIO. The Company will not permit the Coverage Ratio as of any Determination Date to be less than 4. (c) FUNDED DEBT RATIO. The Company will not permit the Funded Debt Ratio as of any Determination Date to be greater than (i) 0.60 through December 31, 1997, and (ii) 0.50 thereafter. 10.2. INDEBTEDNESS; RESTRICTED SUBSIDIARY INDEBTEDNESS. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Indebtedness, except that the Company and the Guarantors may become and be liable with respect to the Indebtedness evidenced by the Notes and guaranteed pursuant to the Guaranty Agreements and except that, subject (to the extent applicable) to the last sentence of this subdivision (a): -23- 29 (i) any Restricted Subsidiary may incur Indebtedness of such Restricted Subsidiary owing to the Company or a Wholly Owned Restricted Subsidiary; and the Company may incur Indebtedness of the Company owing to Restricted Subsidiaries, but only to the extent permitted by the last sentence of this Section 10.2; (ii) the Company and the Guarantors may incur Indebtedness represented by revolving credit borrowings made by the Company pursuant to the Credit Agreement and guaranteed by the Guarantors pursuant to the Bank Guaranty Agreements, PROVIDED that, on the date of incurrence of any such Indebtedness and after giving effect thereto and to the application of the proceeds thereof, (A) no Default or Event of Default shall have occurred and be continuing, and (B) the aggregate principal amount of all such Indebtedness outstanding shall not exceed the Permitted Credit Agreement Amount; (iii) the Company and (subject to subdivision (b) of this Section 10.2) any Restricted Subsidiary may incur additional Indebtedness, PROVIDED that, on the date of incurrence of any such additional Indebtedness and after giving effect thereto and to the application of the proceeds thereof, (A) no Default or Event of Default shall have occurred and be continuing, and (B) the Pro Forma Coverage Ratio shall be greater than 4; (iv) the Company and (subject to subdivision (b) of this Section 10.2) any Restricted Subsidiary may incur Indebtedness ("REFINANCING INDEBTEDNESS") solely for the purpose of refinancing its Indebtedness outstanding on the date hereof and described in Schedule 5.15 or Indebtedness theretofore incurred by it pursuant to subdivision (a)(ii) or (a)(iii) of this Section 10.2 (any such currently outstanding or previously incurred Indebtedness "REFINANCED INDEBTEDNESS"), PROVIDED that, it shall be a condition to the incurrence of any Refinancing Indebtedness to refinance any Refinanced Indebtedness that, (A) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of such Refinanced Indebtedness, (B) the stated maturity of such Refinancing Indebtedness shall not be earlier than the stated maturity of such Refinanced Indebtedness, (C) the Weighted Average Life to Maturity of such Refinancing Indebtedness shall not be less than the Weighted Average Life to Maturity of such Refinanced Indebtedness, -24- 30 (D) such Refinancing Indebtedness shall not rank prior in right of payment to such Refinanced Indebtedness or be entitled to the benefits of any collateral or security to which such Refinanced Indebtedness is not entitled, (E) such Refinancing Indebtedness shall not bear interest at an effective rate per annum higher than that borne by such Refinanced Indebtedness unless such Refinanced Indebtedness shall constitute Indebtedness incurred under the Credit Agreement as permitted by subdivision (a)(ii) of this Section 10.2, in which case such Refinancing Indebtedness shall not bear interest at a rate exceeding the then prevailing market rate for borrowers of similar creditworthiness to the Company, and (F) on the date of incurrence of such Refinancing Indebtedness and after giving effect thereto and to the application of the proceeds thereof, no Default or Event of Default shall have occurred or be continuing; (v) the Company may incur Indebtedness consisting of (A) Swap Obligations in respect of interest rate swaps, (B) liabilities of the Company in respect of performance bonds and commercial bank letters of credit issued in the ordinary course of business of the Company and not in connection with the borrowing of money (including, without limitation, letters of credit issued in connection with the procurement and maintenance by the Company of workers' compensation insurance), and (C) overdrafts of demand deposit accounts maintained with commercial banks which are unsecured (other than through customary rights of set-off), each of which is repaid within three Business Days of its creation, and the aggregate amount of which does not at any time exceed $1,000,000; and (vi) the Company and (subject to subdivision (b) of this Section 10.2) any Restricted Subsidiary may incur Indebtedness not otherwise permitted by this subdivision (a), PROVIDED that, (A) on the date of incurrence of any such Indebtedness and after giving effect thereto and to the application of the proceeds thereof, no Default or Event of Default shall have occurred and be continuing, and (B) the aggregate principal amount of all such Indebtedness of the Company and its Restricted Subsidiaries at any time outstanding shall not exceed $10,000,000. It shall be a further condition to the incurrence by the Company or any Restricted Subsidiary of any Indebtedness otherwise permitted to be incurred by it pursuant to this Section 10(a) (other than (x) Indebtedness permitted to be incurred pursuant to clause (ii) hereof and, to the extent incurred to refinance any such Indebtedness permitted pursuant to said clause (ii), and (y) Refinancing Indebtedness incurred pursuant to clause (iv) hereof), that, on the date of such -25- 31 incurrence and immediately after giving effect thereto and to the substantially concurrent incurrence of any other Indebtedness by the Company and its Restricted Subsidiaries, and to the application of the proceeds of all such Indebtedness (and, if such Indebtedness is proposed to be incurred pursuant to clause (iii) hereof, assuming, whether or not in fact the case, that the aggregate principal amount of Indebtedness outstanding under the Credit Agreement on such date was equal to the Permitted Credit Agreement Amount), Consolidated Funded Debt shall not exceed an amount equal to (A) 60% of the sum of (1) Consolidated Funded Debt, plus (2) Consolidated Net Worth at any time through December 31, 1997, and (B) at any time after December 31, 1997, 50% of the sum of (1) Consolidated Funded Debt, PLUS (2) Consolidated Net Worth. (b) The Company will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Indebtedness, except that: (i) any Person designated a Restricted Subsidiary on Schedule 5.4 may incur Indebtedness, PROVIDED that, on the date of incurrence of any such Indebtedness and immediately after giving effect thereto and to the application of the proceeds thereof, the sum (without duplication) of (A) the aggregate principal amount outstanding of Included Restricted Subsidiary Debt, PLUS (B) the aggregate principal amount outstanding of Included Secured Debt, shall not exceed the greater of (x) $10,000,000 and (y) 7% of Consolidated Net Worth, and (ii) any Person designated a Restricted Subsidiary at any time subsequent to the date of this Agreement may remain liable for Indebtedness of such Person existing at such time (and deemed incurred by it at such time in accordance with subdivision (c) of this Section 10.2), PROVIDED that, the sum of (1) the aggregate principal amount of all such Indebtedness of such Person existing on the date it is designated a Restricted Subsidiary PLUS (2) the aggregate principal amount of all Indebtedness of each other Person theretofore designated a Restricted Subsidiary at any time subsequent to the date of this Agreement which Indebtedness existed on the date such Person was designated a Restricted Subsidiary, shall not exceed the greater of (x) $20,000,000 and (y) 15% of Consolidated Net Worth. Nothing in this subdivision (b) shall be deemed to permit the incurrence on any date by any Restricted Subsidiary (including any Person designated a Restricted Subsidiary on such date) of any Indebtedness not permitted to be incurred by it on such date pursuant to subdivision (a) of this Section 10.2. -26- 32 (c) For purposes of the foregoing subdivisions (a) and (b) of this Section 10.2, (i) in the event the Company or a Restricted Subsidiary shall extend, renew, refund or refinance any Indebtedness, the Company or such Restricted Subsidiary, as the case may be, shall be deemed to have incurred such Indebtedness at the time of such extension, renewal, refunding or refinancing, and (ii) any Person designated a Restricted Subsidiary at any time after the date of this Agreement shall be deemed to have incurred all of its outstanding Indebtedness at such time. The Company will not in any event create, incur, assume or permit to exist any Indebtedness of the Company to a Subsidiary, except that the Company may incur and remain liable with respect to Indebtedness owing to a Restricted Subsidiary which constitutes Subordinated Intercompany Indebtedness. 10.3. LIENS. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any character of the Company or any such Restricted Subsidiary (whether owned or held on the date hereof or hereafter acquired) or any interest therein or any income or profits therefrom except, subject to compliance with the last paragraph of this Section 10.3: (a) Liens (other than Liens created or imposed under ERISA) for taxes, assessments or governmental charges or levies the payment of which is not at the time required by Section 9.4; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Persons, in each case incurred in the ordinary course of business for sums either not yet due or the payment of which is not at the time required by Section 9.4; (c) Liens (other than Liens created or imposed under ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or to secure the performance of tenders, statutory obligations, surety bonds, bids, leases (other than Capital Leases), government contracts, performance and return-of-money bonds and other similar obligations (exclusive in any case of obligations incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property); (d) Liens incidental to the conduct of business or to the ownership or improvement of property of a character which customarily exist on properties of corporations engaged in similar activities and similarly situated and which were not incurred in connection with the borrowing of money, the obtaining of advances of credit or the payment of the deferred purchase price of property, and which do not, individually or in the aggregate, interfere with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries or detract from the value or use of the properties subject to any such Liens; -27- 33 (e) any attachment or judgment Lien arising in connection with court proceedings, so long as (i) the execution or other enforcement of such Lien is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings diligently conducted and effective to prevent the forfeiture or sale of any property of the Company or any of its Restricted Subsidiaries or any interference with the ordinary use thereof by the Company or any of its Restricted Subsidiaries, and (ii) such reserve or other appropriate provision, if any, in the amount and of the type as shall be required by GAAP shall be maintained therefor; (f) Liens on property or assets of any Restricted Subsidiary securing Indebtedness or other obligations of such Restricted Subsidiary owing to the Company or to a Wholly Owned Restricted Subsidiary; (g) any Lien created to secure all or any part of the purchase price, or to secure Indebtedness incurred or assumed to pay all or any part of the purchase price or cost of construction, of property (or any improvement thereon) acquired or constructed by the Company or a Restricted Subsidiary after the Closing Date, PROVIDED that (i) each such Lien shall extend solely to the item or items of such property (or improvement thereon) so acquired or constructed and, if required by the terms of the instrument originally creating such Lien, other property (or improvement thereon) which is an improvement to or is acquired for specific use in connection with such acquired or constructed property (or improvement thereon) or which is real property being improved by such acquired or constructed property (or improvement thereon), (ii) the principal amount of the Debt secured by each such Lien shall at no time exceed an amount equal to the lesser of (A) the cost to the Company or such Restricted Subsidiary of the property (or improvement thereon) so acquired or constructed and (B) the fair market value (as determined in good faith by the Board of Directors) of such property (or improvement thereon) at the time of such acquisition or construction, and (iii) each such Lien shall be created contemporaneously with, or within 180 days after, the acquisition or construction of such property; (h) any Lien existing on property of a Person immediately prior to its being consolidated with or merged into the Company or a Restricted Subsidiary or its becoming, after the Closing Date, a Restricted Subsidiary, or any Lien existing on any property acquired by the Company or any Restricted Subsidiary at the time such property is so acquired (whether or not the Indebtedness secured thereby shall have been assumed), PROVIDED that (i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person's becoming a Restricted Subsidiary or such acquisition of property, and (ii) each such Lien shall extend solely to the item or items of property so acquired and, if required by the terms of the instrument -28- 34 originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property; (i) other Liens not otherwise permitted by subdivisions (a) through (h) of this Section 10.3, PROVIDED that such Liens shall be permitted pursuant to the first sentence of the last paragraph of this Section 10.3; and (j) any Lien renewing, extending or refunding any Lien permitted by subdivision (g), (h) or (i) of this Section 10.3, PROVIDED that (i) the principal amount of Indebtedness secured by such Lien immediately prior to such extension, renewal or refunding is not increased or the maturity thereof reduced, and (ii) such Lien is not extended to any other property. It shall be a further condition to the creation, incurrence, assumption, extension, renewal, refunding or refinancing of any Lien otherwise permitted by subdivision (h), (i) or (j) of this Section that, on the date on which the Company or any of its Restricted Subsidiaries proposes to take any such action and immediately after giving effect thereto, to the substantially concurrent incurrence of any Indebtedness and the substantially concurrent retirement of any other Indebtedness and to the application of the proceeds of all such Indebtedness, (A) the Company shall be permitted to incur at least $1.00 of additional Indebtedness pursuant to subdivision (a)(iii) of Section 10.2 and (B) the sum (without duplication) of (1) the aggregate principal amount outstanding of Included Restricted Subsidiary Debt, PLUS (2) the aggregate principal amount outstanding of Included Secured Debt shall not exceed the greater of (x) $10,000,000 and (y) 7% of Consolidated Net Worth. For all purposes of this Section 10.3, (1) Liens existing on or with respect to any property or assets of any Person at the time it becomes a Restricted Subsidiary shall be deemed to have been created at such time, (2) any extension, renewal, refunding or refinancing of any Lien by the Company or any of its Restricted Subsidiaries shall be deemed to be an incurrence of such Lien at the time of such extension, renewal, refunding or refinancing, and (3) any Lien existing on any property at the time it is acquired by the Company or any of its Restricted Subsidiaries shall be deemed to have been created at the time of such acquisition. 10.4. INVESTMENTS, ETC. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make or own any Investments except: (a) the Company and its Restricted Subsidiaries may make and own Investments in (i) readily marketable direct obligations of the United States of America or of any agency or instrumentality thereof or readily marketable obligations unconditionally guaranteed by the United States of America or by any such agency or instrumentality, in each case so long as such obligation or guarantee shall have the benefit of the full faith and credit of the United States of America and such Investment shall mature within 365 days from the date of acquisition thereof, (ii) certificates of deposit, time deposits or bankers' acceptances maturing within 365 days from the date of acquisition thereof issued by, or demand deposit accounts maintained with, any -29- 35 commercial bank or trust company organized under the laws of the United States of America or any state thereof or the Republic of Finland, the long-term unsecured debt obligations of which bank or trust company are rated (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank or trust company are rated) at least "A2" by Moody's Investors Service Inc. ("MOODY'S") or at least "A" by Standard & Poor's Rating Group ("S&P"), and which has combined capital and surplus of at least $250,000,000 (any such bank or trust company, an "ELIGIBLE BANK"), (iii) repurchase agreements with respect to securities of the type referred to in the foregoing subdivision (a)(i) transacted with Eligible Banks organized under the laws of the United States of America or a state thereof, PROVIDED that each such repurchase agreement obligates an Eligible Bank to repurchase the securities which are the subject thereof no later than 30 days after the acquisition of such repurchase agreement; (iv) obligations of any state of the United States of America or any municipality of any such state, the interest with respect to which is exempt from federal income taxation under Section 103 of the Code, in each case rated at least "A2" by Moody's or at least "AA" by S&P and maturing within 365 days of the acquisition thereof; and (v) open market commercial paper of United States corporations maturing not later than 270 days from the acquisition thereof and having a rating of at least P-2 by Moody's or at least A-2 by S&P; (b) the Company and its Restricted Subsidiaries may continue to own (i) Investments in Restricted Subsidiaries of the Company existing on the date hereof, and (ii) other Investments existing on the date hereof and described in Schedule 5.10; (c) the Company and its Restricted Subsidiaries may make and own Investments in any Restricted Subsidiary or in any Person that concurrently with such Investment becomes a Restricted Subsidiary; and Restricted Subsidiaries may make and own Investments consisting of Subordinated Intercompany Debt incurred by the Company pursuant to and in compliance with Section 10.2; (d) the Company and its Restricted Subsidiaries may make and own Investments in property to be used in the ordinary course of business of the Company and its Restricted Subsidiaries, as such business is permitted to be conducted pursuant to Section 10.9; (e) the Company and each Restricted Subsidiary may make and own Investments consisting of travel and other like advances in the ordinary course of its business, as permitted to be conducted hereby, to its officers and employees; (f) the Company and each Restricted Subsidiary may make and own Investments consisting of loans to its officers, directors and employees, provided that, the aggregate amount that may be so loaned to any one individual shall not exceed $500,000 at any time outstanding and the aggregate amount of all such loans by the Company and all Restricted Subsidiaries shall not exceed $2,000,000 at any time outstanding; -30- 36 (g) the Company and its Restricted Subsidiaries may make and own Investments in currency futures contracts, PROVIDED that such contracts are entered into in the ordinary course of business in accordance with the practices of the Company and its Restricted Subsidiaries prior to the date hereof and solely for the purpose of hedging currency fluctuation risk of the Company and its Restricted Subsidiaries and not in any event for speculative purposes; (h) the Company and its Restricted Subsidiaries may make and own Investments in interest rate swap contracts, PROVIDED that such contracts are entered into in the ordinary course of business and solely for the purpose of hedging interest rate fluctuation risk and reducing interest rate expense of the Company and its Restricted Subsidiaries and not in any event for speculative purposes; (i) the Company and its Restricted Subsidiaries may make and own Investments consisting of promissory notes or other securities or other non-cash consideration received in exchange for assets sold pursuant to and in compliance with subdivision (a)(vi) of Section 10.7, PROVIDED that, (i) the aggregate unliquidated amount of all such Investments permitted by this subdivision (i) shall not at any time exceed $10,000,000 and (ii) in the event that any such Investments shall be converted to cash, at maturity, upon the disposition thereof or otherwise, and the amount of such cash, when taken together with all cash into which any other such Investments shall have been converted and not previously applied pursuant to this clause (ii), shall equal or exceed $2,000,000, the Company shall, during the period of 180 days commencing with the date of such event, apply all such cash realized in respect of all such Investments to (x) the purchase or acquisition of Alternative Assets, (y) the Retirement of Indebtedness, or (z) in part to the purchase or acquisition of Alternative Assets and in part to the Retirement of Indebtedness, such application of cash to be made in the same manner as if the aggregate amount of such cash constituted the Net Sale Proceeds of an Excess Sale effected pursuant to subdivision (a)(vi) of Section 10.7; (j) the Company and its Restricted Subsidiaries may make and own Investments in Unrestricted Subsidiaries, PROVIDED that the aggregate amount of all such Investments does not exceed $20,000,000; and (k) in addition to the Investments permitted by the foregoing subdivisions (a) through (j) of this Section 10.4, the Company and its Restricted Subsidiaries may make Restricted Additional Investments to the extent permitted by Section 10.5. For purposes of this Section, Investments owned by any Person or for which it is obligated at the time it becomes a Restricted Subsidiary shall be deemed to be made at such time. 10.5. RESTRICTED PAYMENTS; RESTRICTED ADDITIONAL INVESTMENTS. The Company will not, directly or indirectly, declare, order, pay, distribute, make, or set apart any sum or property for any Restricted Payment, and the Company will not, -31- 37 and will not permit any Restricted Subsidiary to, make or become obligated to make any Restricted Additional Investment, in each case unless, both at the time of and immediately after effect has been given to such proposed action: (a) no Default or Event of Default shall have occurred and be continuing, (b) the Company shall be permitted to incur at least $1.00 of additional Indebtedness pursuant to subdivision (a)(iii) of Section 10.2, and (c) the aggregate amount of: (i) all sums and property included in all Restricted Payments directly or indirectly declared, ordered, paid, distributed, made or set apart by the Company during the period (taken as one accounting period) from and including June 30, 1995 (the "BASE DATE") to and including the date of such proposed action (the "COMPUTATION PERIOD"), PLUS (ii) the aggregate amount of all Restricted Additional Investments of the Company and all Restricted Subsidiaries made during the Computation Period and all commitments for such Restricted Additional Investments made by the Company or any Restricted Subsidiary outstanding on the date of such proposed action, shall not exceed the sum of (A) $20,000,000, PLUS (B) 50% of Consolidated Net Income for the period (the "BASE PERIOD") from and including the Base Date to and including the Determination Date occurring on or most recently prior to the date of such proposed action (or minus 100% of Consolidated Net Income in the case of a deficit); PLUS (C) the aggregate amount of cash proceeds (net of all placement, underwriting and brokerage fees and expenses and all other costs and out-of-pocket expenses in connection therewith) received by the Company during the Base Period from the sale of capital stock (other than mandatorily redeemable Preferred Stock) of the Company, from the sale of rights and warrants to purchase such capital stock, and as consideration for the issuance of debt securities convertible into such capital stock (but only to the extent, in the case of any such debt securities, the same have been converted into such capital stock during the Base Period). For all purposes of this Section 10.5, (1) the amount involved in any Restricted Payment directly or indirectly declared, ordered, paid, distributed, made or set apart in property, and the amount of any Restricted Additional Investment made through the transfer of property, -32- 38 shall be deemed to be the greater of (x) the fair value of such property (as determined in good faith by the Board of Directors) and (y) the net book value thereof on the books of the Company or any of its Restricted Subsidiaries (as determined in accordance with GAAP), in each case as determined on the date such Restricted Payment is declared, ordered, paid, distributed, made or set apart, or the date such Restricted Additional Investment is made or committed to be made, as the case may be, and (2) all Investments of any Person existing immediately after such Person becomes a Restricted Subsidiary which would be Restricted Additional Investments if made by such Person while subject to the provisions of this Agreement shall be deemed to be Restricted Additional Investments and to have been made at the time such Person becomes a Restricted Subsidiary. The Company will not pay any dividend which it has not declared or declare any dividend on any shares of any class of its capital stock which is payable more than 60 days after the date of declaration thereof. 10.6. SUBSIDIARY STOCK AND INDEBTEDNESS. The Company will not: (a) directly or indirectly, sell, assign, pledge or otherwise dispose of any Indebtedness or any shares of stock or other securities of (or warrants, rights or options to acquire stock or other securities of) any Restricted Subsidiary, except to a Wholly Owned Restricted Subsidiary and except as directors' qualifying shares if required by applicable law; or (b) permit any Restricted Subsidiary to, directly or indirectly, sell, assign, pledge or otherwise dispose of any Indebtedness or any shares of stock or other securities of (or warrants, rights or options to acquire stock or other securities of) any other Restricted Subsidiary, except to the Company or a Wholly Owned Restricted Subsidiary and except as directors' qualifying shares if required by applicable law; or (c) permit any Restricted Subsidiary to, directly or indirectly, issue or sell any shares of its stock (or warrants, rights or options to acquire any stock) of such Restricted Subsidiary except to the Company or another Restricted Subsidiary and except (i) as directors' qualifying shares and (ii) pursuant to a common stock dividend or other issuance of common stock after giving effect to which the Company shall own (directly or through Restricted Subsidiaries) the same percentage ownership of each class of capital stock of such issuing Restricted Subsidiary as it owned immediately prior to such issuance; PROVIDED, HOWEVER, that all shares of stock and all Indebtedness and other securities of any Restricted Subsidiary owned by the Company and its other Restricted Subsidiaries may be sold as an entirety to any Person other than an Unrestricted Subsidiary for a consideration at least equal to the fair market value thereof (as determined by the Board of Directors) if (i) such Restricted Subsidiary being sold does not at that time own, directly or indirectly, any stock, Indebtedness or other security of any other Restricted Subsidiary all of the stock, Indebtedness -33- 39 and other securities of which is not being simultaneously sold as permitted by this proviso, or any Indebtedness of the Company, (ii) the amount of assets of such Restricted Subsidiary represented by the equity interest to be so transferred is such that the sale of such amount of assets would then be permitted pursuant to subdivision (vi) of Section 10.7 (in which case such amount of assets shall be considered and deemed a disposition of assets for the purposes of said subdivision (vi)) and (iii) at the time of the consummation of such transaction and after giving effect thereto (A) no Default or Event of Default shall have occurred and be continuing and (B) the Company shall be permitted to incur at least $1.00 of additional Indebtedness pursuant to subdivision (a)(iii) of Section 10.2. 10.7. CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, consolidate or merge with or into any other Person, or permit any other Person to consolidate with or merge with or into it, or participate in a share exchange with or sell, lease, transfer, contribute or otherwise dispose of any of its assets to any other Person, except that, subject in any event to compliance with subdivision (b) of this Section 10.7: (i) the Company and any Restricted Subsidiary may (i) sell inventory held for sale or (ii) sell or otherwise dispose of equipment, fixtures, supplies or materials no longer required in the business of the Company or such Restricted Subsidiary or that is obsolete, in each case referred to in the foregoing clause (i) or (ii), in the ordinary course of business as such business is permitted to be conducted hereby; (ii) any Restricted Subsidiary may (i) consolidate with or merge into the Company or any Wholly Owned Restricted Subsidiary if the Company or such Wholly Owned Restricted Subsidiary shall be the continuing or surviving corporation or (ii) consolidate or merge with any other corporation if such Restricted Subsidiary shall be the continuing or surviving corporation; (iii) any Restricted Subsidiary may sell, lease, transfer, contribute or otherwise dispose of its assets in whole or in part to the Company or any Wholly Owned Restricted Subsidiary; (iv) the Company may consolidate or merge with any other Person if the Company shall be the continuing or surviving corporation; (v) the Company may consolidate with or merge into, or sell, transfer or otherwise dispose of its assets as an entirety or substantially as an entirety, to any other Person (a "SUCCESSOR"; any such consolidation, merger or disposition of assets being hereinafter referred to as a "SUCCESSOR TRANSACTION"), but only if such Successor (i) is a solvent corporation duly organized, validly existing and in good standing under the laws of the United States of America or a state thereof and (ii) expressly assumes, not later than the consummation of such Successor Transaction, pursuant to a written instrument satisfactory in form, scope and substance to the holders of the Notes, the due and punctual payment of the principal of, Make-Whole Amount, if any, and interest on -34- 40 the Notes according to their tenor, and the due and punctual performance and observance of the obligations of the Company under this Agreement, an executed counterpart of which instrument shall have been furnished to each holder of Notes together with a favorable opinion of counsel satisfactory to each such holder covering such legal matters relating to such Successor, the Successor Transaction, such assumption and such instrument as such holder may reasonably request; and (vi) the Company or any Restricted Subsidiary, in addition to making any sale, lease, transfer or other disposition permitted by the foregoing provisions of this Section, may sell any of its assets for a consideration at least equal to the fair market value thereof (as determined by the Board of Directors) at the time of such sale; PROVIDED that, no such proposed sale of any assets shall be permitted under this subdivision (a)(vi) unless (A) immediately after giving effect to such sale (1) the Disposition Value of all assets sold as permitted by this subdivision (a)(vi) (including all deemed dispositions pursuant to the proviso to Section 10.6, but excluding all Excess Sales effected in compliance with clause (B) of this subdivision (a)(vi)) during the period of 365 days ending on the date of such proposed sale shall not exceed 10% of Total Assets determined as of the last day of the then most recently completed fiscal year of the Company and (2) the Disposition Value of all assets sold as permitted by this subdivision (a)(vi) (including all such deemed dispositions but excluding all such Excess Sales) during the period commencing on the date of this Agreement and ending on the date of such proposed sale shall not exceed 20% of such Total Assets determined as of the last day of such most recently completed fiscal year, or (B) such sale shall not meet the requirements of, and shall not be permitted pursuant to, the foregoing clause (A) (any such sale, an "EXCESS SALE") but each of the following conditions shall be satisfied with respect thereto: (1) the Company shall furnish to each holder of a Note (x) prior to the consummation of such Excess Sale, a notice specifying the anticipated date of such sale, briefly describing the assets to be sold and setting forth the Disposition Value of such assets and the aggregate consideration and Net Sale Proceeds to be received for such assets in connection with such sale and, (y) promptly following the consummation of such sale, a further notice confirming the date of such sale ("SALE DATE") and the other information set forth in the notice in respect thereof given pursuant to the foregoing clause (x) and specifying the manner in which the Company intends to apply (or cause to be applied) the Net Sale Proceeds of such Excess Sale in compliance with the further provisions of this clause (B), (2) the Company shall, during the period of 180 days commencing with the Sale Date (the "APPLICATION PERIOD"), apply (or -35- 41 cause to be applied) an amount equal to such Net Sale Proceeds from such Excess Sale to (x) the purchase or acquisition of Alternative Assets, (y) the Retirement of Indebtedness or (z) in part to the purchase or acquisition of Alternative Assets and in part to the Retirement of Indebtedness, and (3) pending application of an amount equal to such Net Sale Proceeds from such Excess Sale in accordance with the foregoing clause (B)(2), the Company shall cause an amount equal to such Net Sale Proceeds (or so much thereof as shall not have been theretofore so applied) to be invested in Investments of the character described in subdivision (a) of Section 10.4. (b) No consolidation, merger, sale, lease, transfer, contribution or other disposition referred to in subdivisions (a)(ii) through (a)(vi) of this Section 10.7 shall be permitted unless (i) immediately after giving effect to such transaction, (A) no Default or Event of Default shall have occurred and be continuing and (B) the Company shall be permitted to incur at least $1.00 of additional Indebtedness pursuant to subdivision (a)(iii) of Section 10.2, and (ii) if such transaction shall involve or result in a Change of Control, the Company shall comply with Section 9.8 in connection therewith. Nothing contained in this Section 10.7 shall permit the disposition of assets consisting of Indebtedness, stock or other securities (or warrants, rights or options to acquire stock or other securities) of any Restricted Subsidiary unless such disposition is also permitted by Section 10.6. No consolidation, merger, sale, lease, transfer, contribution or other disposition permitted by this Section 10.7 shall release the Company, or any Person which shall have become a Successor to the Company in the manner permitted hereby, from any of its liability as obligor in respect of the Notes. (c) For purposes of this Section 10.7: (i) "ALTERNATIVE ASSETS" means, in connection with any proposed sale of assets constituting an Excess Sale,(A) assets (whether new, additional or replacement assets but exclusive of assets acquired in the course of regular upkeep and maintenance) which (1) are similar in nature to other assets owned or leased by the Company and or its Restricted Subsidiaries prior to or at the time of the acquisition of such assets and useful in the conduct of the business of the Company and its Restricted Subsidiaries as permitted to be conducted pursuant to Section 10.9 and (2) have a fair market value at least equal to the amount required pursuant to subdivision (vi)(B)(2) of Section 10.7(a) to be applied to the purchase thereof, or (B) capital stock of a corporation (1) the assets of which consist substantially in their entirety of assets of the character described in the foregoing clause (A)(1) of this definition and have a fair market value satisfying the requirement described in the foregoing clause (A)(2) hereof, and (2) which, substantially concurrently with the acquisition thereof by the Company or a Restricted Subsidiary, shall become a Wholly Owned Restricted Subsidiary. (ii) "DISPOSITION VALUE" of any assets sold or proposed to be sold during any period shall mean the aggregate net book value of such assets determined as of the date of sale or proposed sale thereof. -36- 42 (iii) "NET SALE PROCEEDS" means, with respect to any sale or other disposition by the Company or a Restricted Subsidiary of any property or assets, an amount equal to the excess of (x) the aggregate amount of the consideration (valued at the fair market value thereof at the time of such sale or other disposition as determined by the Board of Directors) received by the Company or such Restricted Subsidiary in connection with such sale or other disposition over (y) the reasonable and customary out-of-pocket expenses actually incurred by the Company or such Restricted Subsidiary in connection therewith. (iv) "RETIREMENT OF INDEBTEDNESS" means, in connection with the application of the Net Sale Proceeds of any Excess Sale (or any part of such Net Sale Proceeds), the application by the Company of an amount equal to such Net Sale Proceeds (or such part thereof) to the payment or prepayment of an equivalent principal amount of Indebtedness of the Company (other than (A) Indebtedness owing to any Restricted Subsidiary or any Affiliate of the Company and (B) Indebtedness in respect of any revolving credit or similar credit facility, including the Credit Agreement, providing the Company with the right to obtain loans or other extensions of credit from time to time, except to the extent that in connection with such payment or prepayment the availability of credit under such credit facility is permanently reduced by an amount not less than the amount so paid or prepaid). (v) "TOTAL ASSETS" means, as of any date, the aggregate net book value of the consolidated assets of the Company and its Restricted Subsidiaries (exclusive of assets deemed intangibles in accordance with GAAP). 10.8. SALE LEASEBACKS. The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale leaseback, except that the Company or any Restricted Subsidiary may enter into a Sale leaseback relating solely to property acquired by it subsequent to the Closing if such Sale Leaseback is entered into within the period of 180 days commencing with the date of such acquisition and if: (a) the sale of such property in connection with such Sale Leaseback is permitted by, and is effected pursuant to and in compliance with, Section 10.7; (b) if the lease of such property by the Company or a Restricted Subsidiary as the case may be, in connection with such Sale Leaseback constitutes a Capital lease, such transaction is permitted pursuant to Section 10.3; and (c) at the time of and after giving effect to such Sale Leaseback no Default or Event of Default shall have occurred and be continuing and the Company shall be permitted to incur at least $1.00 of additional Indebtedness pursuant to subdivision (a)(iii) of Section 10.2. -37- 43 10.9. LINES OF BUSINESS. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage to any substantial extent in any business other than the production and marketing of specialty chemicals (the "Business"). 10.10. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or be a party to any transaction (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate unless such transaction is entered into upon terms that are fair and reasonable and no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those which might be obtained at the time in a comparable arm's-length transaction with any Person which is not such an Affiliate; PROVIDED that, the foregoing restrictions shall not apply to (i) transactions in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's Business, or (ii) any transaction between the Company and a Restricted Subsidiary or between one Restricted Subsidiary and another Restricted Subsidiary. 10.11. RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND PAYMENTS. The Company will not permit any Restricted Subsidiary to enter into or remain a party to any agreement or arrangement which restricts or has the effect of restricting such Restricted Subsidiary's ability or right to C)i pay dividends, (ii) make other distributions with respect to its capital stock, or (iii) make advances to the Company if such agreement or arrangement can reasonably be expected to impair in any material respect the ability of the Company to perform its obligations under this Agreement or the Notes or the ability of the Guarantors to perform their obligations under the Guaranty Agreements. 11. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if any of the following conditions or events shall occur and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or judicial or governmental or administrative action or otherwise): (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in Sections 10.1 through 10.8, inclusive; or -38- 44 (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11); or (e) any representation or warranty made in writing by or on behalf of the Company or any Guarantor or by any officer of the Company or any Guarantor in this Agreement or the Guaranty Agreements or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Restricted Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or Make-Whole Amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Restricted Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, if the effect of any such default or other condition referred to in this clause (ii) is to cause or permit any such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Restricted Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000, or (y) one or more Persons have the right to require the Company or any Restricted Subsidiary so to purchase or repay such Indebtedness; or (g) the Company or any Restricted Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Restricted -39- 45 Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Restricted Subsidiaries, or any such petition shall be filed against the Company or any of its Restricted Subsidiaries and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $1,000,000 are rendered against one or more of the Company and its Restricted Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (j) any "Event of Default" shall occur, and be continuing under (and as the term "Event of Default" is defined in) the Credit Agreement; or (k) any Guaranty Agreement or any material provision thereof shall not be, or shall cease to be, valid and enforceable and in full force and effect; or any Guarantor shall disaffirm or repudiate any of its obligations under the Guaranty Agreement to which it is a party; or any Guarantor shall default in the performance or observance of any covenant, agreement or condition in the Guaranty Agreement to which it is a party and (except in the case of Section 1 thereof) such default shall have continued for a period of 30 days after any Guarantor has knowledge of such default (through notice or otherwise); or (l) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans with any unfunded benefit liabilities, determined in accordance with Title IV of ERISA, shall exceed $2,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect. -40- 46 As used in Section 11(l), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 12. REMEDIES ON DEFAULT, ETC. 12.1. ACCELERATION. (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 35% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default is intended to provide compensation for the deprivation of such right under such circumstances. 12.2. OTHER REMEDIES. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. -41- 47 12.3. RESCISSION. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 66 2/3% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1. REGISTRATION OF NOTES. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. -42- 48 13.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $1,000,000, PROVIDED that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $1,000,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2. 13.3. REPLACEMENT OF NOTES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or an Institutional Investor, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 14. PAYMENTS ON NOTES. 14.1. PLACE OF PAYMENT. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made at the principal office of the -43- 49 Company. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be the principal office of a bank or trust company in such jurisdiction or New York County, State of New York. 14.2. HOME OFFICE PAYMENT. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 15. EXPENSES, ETC. 15.1. TRANSACTION EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and the Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). -44- 50 15.2. SURVIVAL. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 17. AMENDMENT AND WAIVER. 17.1. REQUIREMENTS. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. 17.2. SOLICITATION OF HOLDERS OF NOTES. (a) SOLICITATION. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this -45- 51 Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) PAYMENT. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 17.3. BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4. NOTES HELD BY COMPANY, ETC. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 18. NOTICES. All notices and communications provided for hereunder shall be in waiting and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, -46- 52 (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of its Chief Financial Officer, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, PROVIDED that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or -47- 53 any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. 21. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 22. MISCELLANEOUS. 22.1. SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. -48- 54 22.2. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 22.3. SEVERABILITY. 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, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 22.4. CONSTRUCTION; ACCOUNTING TERMS. (a) Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) Except as specifically provided herein, all accounting terms used herein which are not expressly defined in this Agreement have the meanings given to them in accordance with GAAP and all computations made pursuant to this Agreement shall be made in accordance with GAAP. All balance sheets and other financial statements delivered pursuant to Section 7.1 shall be prepared in accordance with GAAP. If any changes in accounting principles from those used in the preparation of the most recent financial statements referred to in Section 5.5 are hereafter required by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto) and are adopted by the Company with the agreement of its independent certified public accountants and such changes result or could result (for any present or future period) in a change in the method of calculation of any of the financial covenants, standards or terms in or relating to Section 10, the parties hereto agree to enter into discussions with a view to amending such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating the financial condition of the Company and its Restricted Subsidiaries shall be the same after such changes as if such changes had not been made, provided, that no change in GAAP that would affect or could affect (for any present or future period) the method of calculation of any of said financial covenants, standards or terms shall be given effect in such calculations until such provisions are amended, in a manner satisfactory to the Company and the Required Holders, to so reflect such change in GAAP. -49- 55 22.5. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 22.6. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. -50- 56 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, OM GROUP, INC. By /s/ --------------------------------- Title: CFO The foregoing is hereby agreed to as of the date thereof. GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY By /s/ Ernie P. Friesen ---------------------------------- Title: ERNIE P. FRIESEN Assistant Vice President Investments By /s/ James G. Lowery ---------------------------------- Title: JAMES G. LOWERY Assistant Vice President Investments -51- 57 SCHEDULE A ---------- INFORMATION RELATING TO PURCHASES PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF 2007 NOTES OF 2009 NOTES NAME AND ADDRESS OF PURCHASER TO BE PURCHASED TO BE PURCHASED - ----------------------------- --------------- --------------- NATIONWIDE LIFE INSURANCE $15,000,000 COMPANY PAYMENTS - -------- All payments on or in respect of such Note issued in the name of Nationwide Life Insurance Company to be by bank wire transfer of Federal or other immediately available funds to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Life Insurance Company Attn: P + I Department PPN# 670872 A# 7 Security Description: OM Group, Inc. With notice of each such payment to: Nationwide Life Insurance Company c/o The Bank of New York P.O. Box 19266 Newark, NJ 07195 Attention: P + I Department With a copy to: Nationwide Life Insurance Company Attention: Investment Accounting One Nationwide Plaza (1-32-05) Columbus, OH 43215-2220 58 Send all notices and communications to: Nationwide Life Insurance Company One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities The Original Note should be registered in the name of Nationwide Life Insurance Company and delivered to: The Bank of New York One Wall Street 3rd Floor - Window A New York, New York 10286 F/A/O Nationwide Life Insurance Company Acct #267829 Tax I.D. #31-4156830 2 59 PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF 2007 NOTES OF 2009 NOTES NAME AND ADDRESS OF PURCHASER TO BE PURCHASED TO BE PURCHASED - ----------------------------- --------------- --------------- GREAT-WEST LIFE & ANNUITY $15,000,000 INSURANCE COMPANY Payments - -------- All payments on or in respect of such Note issued in the name of Great-West Life & Annuity Insurance Company to be by bank wire or intra-bank transfer of Federal or other immediately available funds (identifying the issue upon which payment is being made, PPN# 670872 A@ 9, the application of payment as between interest and principal and a confirmation of the principal balance remaining after application of such payment to: Norwest Bank Minnesota, N.A. ABA #091-000-019 (NW MPLS/TRUST CLEARING) Account No.08-40-245 Attention: Account No.12468800 3 60 Notices - ------- All notices and confirmations in connection with such payments shall be delivered or mailed to: Norwest Bank Minnesota, N.A. 733 Marquette Avenue, Investors Bldg., 5th Floor Minneapolis, Minnesota 55479-0047 Attn: Income Collections All other communications shall be delivered or mailed to: Great-West Life & Annuity Insurance Company 8515 East Orchard Road 3rd Floor, Tower 2 Englewood, Colorado 80111 Attention: U.S. Private Placements Fax: (303) 689-6193 Tax I.D. Number: 84-0467907 The original Note shall be delivered to: Norwest Bank Minnesota, N.A. 733 Marquette Avenue, 5th Floor Minneapolis, Minnesota 55479-0047 Attention: Security Clearance 4 61 SCHEDULE B ---------- DEFINED TERMS ------------- As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "AFFILIATE" means, at any time, and with respect to any Person, any other Person (a) that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (b) that beneficially owns or holds 5% or more of the voting securities or other equity interest of such first Person, or (c) 5% or more of the voting securities or other equity interests of which are beneficially owned or held by such first Person. As used in this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "ALTERNATIVE ASSETS" is defined in Section 10.7(c). "APPLICATION PERIOD" is defined in Section 10.7(a). "APPROVALS" is defined in Section 4.10. "BANK GUARANTY AGREEMENTS" means the Guaranty Agreements, dated January 21, 1997, by OMG Americas, Inc., OMG Apex, Inc. and SCM Metal Products, Inc. in favor of the Banks, as the same may be amended or otherwise modified and in effect from time to time. "BANKS" means National City Bank, ABN AMRO Bank N.V., Keybank National Association and Mellon Bank, N.A. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any duly authorized committee of said Board. "BUSINESS" is defined in Section 10.9. "BUSINESS DAY" means (a) for the purposes of Section 8.7 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York or Cleveland, Ohio are required or authorized to be closed. "CAPITAL LEASE" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. 62 "CAPITAL LEASE OBLIGATION" as at any date, with respect to any Capital Lease, the amount of the obligation the lessee thereunder which would, in accordance with GAAP, appear as a liability on a balance sheet of such lessee or in the notes thereto in respect of such Capital Lease. "CHANGE OF CONTROL" means any of the following events or circumstances (whether or not in a transaction permitted by Section 10.7): (a) all or substantially all of the assets of the Company are sold or otherwise transferred, either in a single transaction or a series of related transactions; (b) a merger, consolidation or similar transaction (or series of related transactions) involving the Company at the completion of and after giving effect to which neither (x) the Persons owning the voting stock of the Company prior to such transaction (or prior to the first of such series of transactions) nor (y) Acceptable Persons own 50% or more of the total voting power of all classes of the Company's voting stock outstanding immediately after giving effect to such transaction or series of transactions; or (c) the acquisition or holding by any person (as such term is used in Section 13(d) and Section 14(d)(2) of the Exchange Act as in effect on the Closing Date), or related Persons constituting a group (as such term is used in Rule 13d-5 under the Exchange Act as in effect on the Closing Date), other than an Acceptable Person or such a group comprised entirely of Acceptable Persons, of beneficial ownership of in excess of 35% of the total voting power of all classes of the Company's voting stock then outstanding. As used in this definition, "ACCEPTABLE PERSON" means, at any time, any Person who has been a director, officer or full-time employee of the Company for a continuous period immediately preceding such time of not less than 365 days. "CLOSING" is defined in Section 3. "CLOSING DATE" is defined in Section 3. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "COMPANY" means OM Group, Inc., a Delaware corporation. "CONFIDENTIAL INFORMATION" is defined in Section 20. "CONSOLIDATED FUNDED DEBT" means, as of any date, the aggregate principal amount of all Funded Debt of the Company and its Restricted Subsidiaries on such date determined in accordance with GAAP on a consolidated basis. -2- 63 "CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum (without duplication) of the following amounts for the Company and its Restricted Subsidiaries on a consolidated basis after eliminating all intercompany transactions: (a) the aggregate amount of all interest accrued during such period (whether or not actually paid) in respect of Indebtedness of the Company and its Restricted Subsidiaries (including, without limitation, imputed interest on Capital Lease Obligations), plus (b) amortization of debt discount and expense during such period, plus (c) all fees and commissions payable in connection with any letters of credit during such period. "CONSOLIDATED NET INCOME" means, for any period, the net income (or deficit) of the Company and its Restricted Subsidiaries for such period (taken as a cumulative whole) after deducting, without duplication, operating expenses, provisions for all taxes and reserves (including reserves for deferred income taxes) and all other proper deductions, all determined in accordance with GAAP on a consolidated basis, after eliminating all inter-company items and after deducting portions of income properly attributable to outside minority interests in the stock and surplus of any Restricted Subsidiary; PROVIDED, HOWEVER, that there shall in any event be excluded from Consolidated Net Income (without duplication): (a) the income (or deficit) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any Restricted Subsidiary; (b) any amount representing the interest of the Company or any Restricted Subsidiary in the earnings of any Person other than a Restricted Subsidiary, except to the extent that any such earnings have been actually received by the Company or such Restricted Subsidiary in the form of cash dividends or similar distributions; (c) any portion of the net income of a Restricted Subsidiary which for any reason is unavailable for the payment of dividends to the Company or another Restricted Subsidiary; (d) any deferred credit (or amortization of a deferred credit) representing the excess of the equity in any Person at the date of acquisition thereof over the cost of the Investment in such Person; (e) any gain during such period arising from (i) the sale, exchange or other disposition of capital assets (such term to include all fixed assets, whether tangible or intangible, and all securities) to the extent the aggregate gains from such transactions exceed losses during such period from such transactions, (ii) any reappraisal, revaluation or write-up of assets after the date of the most recent audited financial statements referred to in Section 5.5, (iii) the acquisition of any securities of the Company or a Restricted Subsidiary, or (iv) the termination of any Plan; (f) the proceeds of any life insurance policy; -3- 64 (g) any portion of such net income that cannot be freely converted into U.S. Dollars; and (h) any item properly classified as extraordinary in accordance with GAAP. "CONSOLIDATED NET WORTH" means, as of any date, the sum of the capital stock (but excluding capital stock subscribed for and unissued, treasury stock and redeemable Preferred Stock) and surplus (including retained earnings, additional paid-in capital and the balance of the current profit and loss account not transferred to surplus) accounts of the Company and its Restricted Subsidiaries appearing on a consolidated balance sheet of the Company and its Restricted Subsidiaries prepared in accordance with GAAP as of such date, after eliminating all intercompany transactions and all amounts properly attributable to outside minority interests in Restricted Subsidiaries; PROVIDED that, there shall be excluded therefrom any amounts appearing on such consolidated balance sheet in respect of (a) any write-up in the book value of any assets resulting from a revaluation thereof after the date of the most recent audited financial statements referred to in Section 5.5 and (b) Restricted Additional Investments. "COVERED CONTRACT" is defined in Section 5.12(f). "COVERAGE RATIO" means, as of any Determination Date, the number obtained by dividing (a) EBDAIT for the period of four consecutive fiscal quarters of the Company ended on such Determination Date by (b) Consolidated Interest Expense for such period. "CREDIT AGREEMENT" means the Second Amended and Restated Credit Agreement, dated January 21, 1997, by and among the Company, the Banks and National City Bank, as Agent, as the same may be amended or otherwise modified and in effect from time to time. "DEFAULT" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "DEFAULT RATE" means that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York, New York as its "base" or "prime" rate. "DETERMINATION DATE" means each date which shall be the last day of a fiscal quarter of the Company. "DISPOSITION VALUE" is defined in Section 10.7(c). "EBDAIT" means, for any period, Consolidated Net Income for such period plus all amounts deducted in the computation of such Consolidated Net Income on account of (a) depreciation, amortization and other non-cash charges, (b) Consolidated Interest Expense, and (c) taxes imposed on or measured by income or excess profits. -4- 65 "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ENVIRONMENTAL PERMITS" means, collectively, any and all permits, consents, licenses, approvals and registrations of any nature at any time required pursuant to or in order to comply with any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" means any trade or business (whether or not incorporated) that is or was at any relevant time treated as a single employer together with the Company under section 414 of the Code. "EVENT OF DEFAULT" is defined in Section 11. "EXCESS SALE" is defined in Section 10.7(a). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FUNDED DEBT" means, with respect to any Person, as of any date, all Indebtedness of such Person which would be classified upon a balance sheet of such Person prepared as of such date in accordance with GAAP as long term or funded debt, including in any event (without duplication) all Indebtedness of such Person, whether secured or unsecured, having a final maturity (or which, pursuant to the terms of a revolving credit agreement or otherwise, is renewable or extendable at the option of such Person for a period ending) one year or more after the date of creation thereof, notwithstanding the fact that (a) payments in respect thereof (whether installment, serial maturity or sinking fund payments or otherwise) are required to be made by such Person on demand or within one year after the creation thereof or (b) all or any part of the amount thereof is at the time also included in current liabilities of such Person. "FUNDED DEBT RATIO" means, as of any Determination Date, the number obtained by dividing (a) Consolidated Funded Debt as of such Determination Date by (b) the sum of (i) Consolidated Funded Debt as of such Determination Date, plus (ii) Consolidated Net Worth as of such Determination Date. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "GOVERNMENTAL AUTHORITY" means -5- 66 (a) the government of (i) the United States of America or any state or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Restricted Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Restricted Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "GUARANTOR" is defined in Section 4.1. "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "GUARANTY AGREEMENTS" collectively, the Guaranty Agreements, each dated October 24, 1997 between the Company and each of the Guarantors. "HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, -6- 67 handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "HOLDER" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "INCLUDED RESTRICTED SUBSIDIARY DEBT" means, as of any date, the aggregate principal amount outstanding on such date of all Indebtedness of Restricted Subsidiaries other than (a) Indebtedness of Restricted Subsidiaries incurred pursuant to subdivision (a)(i) of Section 10.2, (b) Indebtedness of the Guarantors consisting of (i) their Guaranty of Indebtedness of the Company incurred pursuant to subdivision (a)(ii) of Section 10.2, (ii) their Guaranty of the Notes pursuant to the Guaranty Agreements, and (iii) Indebtedness outstanding on the date hereof and described on Schedule 5.15 in a principal amount not exceeding $4,000,000, and (c) Indebtedness of Restricted Subsidiaries incurred pursuant to subdivision (a)(iii) or (a)(vi) of Section 10.2 and secured by Liens permitted by subdivision (g) or (h) of Section 10.3, or consisting of obligations in respect of letters of credit, but only to the extent that all Indebtedness described in this clause (c) shall not exceed $500,000 (or the equivalent amount of any currency other than United States Dollars) in aggregate principal amount outstanding. "INCLUDED SECURED DEBT" means, as of any date, the aggregate principal amount outstanding on such date of all Indebtedness secured by Liens incurred as permitted by subdivision (i) of Section 10.3. "INDEBTEDNESS" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) all Capital Lease Obligations of such Person; -7- 68 (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not such Person has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swap Obligations of such Person; and (g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5 % of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "INVESTMENT" as applied to any designated Person, means any direct or indirect purchase or other acquisition by such designated Person for cash or other property of (a) stock, debt or other securities of any other Person, or any direct or indirect loan, advance, extension of credit or capital contribution by such designated Person to any other Person or any Guaranty by such designated Person with respect to the Indebtedness of such other Person, including all Indebtedness of and accounts receivable from any such other Person which are not current assets or did not arise from sales to such other Person in the ordinary course of business, or (b) any interest in any kind of property or assets, whether real, personal or mixed, tangible or intangible. In computing the amount involved in any Investment, (i) undistributed earnings of, and interest accrued in respect of Indebtedness owing by, any such other Person accrued after the date of such Investment shall not be included, (ii) there shall not be deducted from the amounts invested in any such other Person any amounts received as earnings (in the form of dividends, interest or otherwise) on such Investment or as loans or advances from such other Person, and (iii) unrealized increases or decreases in value, or write-ups, write-downs or write-offs, of Investments in any such other Person shall be disregarded. "LIEN" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any Vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). -8- 69 "MAKE-WHOLE AMOUNT" is defined in Section 8.7. "MATERIAL" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Restricted Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement or the Notes. "MEMORANDUM" is defined in Section 5.3. "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "NET SALE PROCEEDS" is defined in Section 10.7(c). "1995 NOTE PURCHASE AGREEMENTS" means the Note Purchase Agreements, dated August 30, 1995, between the Company and each of the 1995 Note Purchasers. "1995 NOTE PURCHASERS" means the Purchasers named on Schedule A hereto and The Mutual Life Insurance Company of New York. "NOTES" is defined in Section 1. "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "OTHER AGREEMENT" is defined in Section 2. "OTHER PURCHASER" is defined in Section 2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "PCTE 95-60" is defined in Section 5.12(f). "PERMITTED CREDIT AGREEMENT AMOUNT" means, on any date, the maximum aggregate principal amount of revolving credit borrowings which the Company is permitted to have outstanding pursuant to the Credit Agreement as originally executed and delivered (the "Initial Amount"); PROVIDED, HOWEVER, that if, at any time or from time to time subsequent to the Closing Date: -9- 70 (a) the Company and the banks party thereto shall enter into an amendment to the Credit Agreement increasing the principal amount of such borrowings which the Company is permitted to have outstanding thereunder to an amount (the "Increased Amount") in excess of the Initial Amount, (b) the Company would be permitted pursuant to subdivision (a)(iii) of Section 10.2, on the date the Officer's Certificate referred to in clause (c) below is furnished by the Company to the holders of the Notes, after giving effect to all Indebtedness incurred and all Indebtedness retired on such date by the Company and its Restricted Subsidiaries, to incur additional Indebtedness in an amount at least equal to the amount by which said Increased Amount exceeds the Initial Amount, and (c) the Company shall furnish a copy of said amendment to the Credit Agreement to each holder of a Note or Notes, accompanied by an Officer's Certificate certifying (i) that such copy is true and complete and said amendment, and the Credit Agreement as amended thereby, is in full force and effect and (ii) to the effect set forth in clause (b) above (and setting forth calculations in reasonable detail demonstrating compliance with the condition contained in said clause (b)), then, effective from and after the date said Officer's Certificate is so furnished, the Permitted Credit Agreement Amount shall be increased to an amount equal to said Increased Amount (subject to further increase thereafter in accordance with the further operation of the foregoing provisions of this definition); BUT PROVIDED FURTHER, HOWEVER, that the Permitted Credit Agreement Amount shall not in any event on any date exceed the maximum aggregate principal amount of revolving credit borrowings by the Company which would then be permitted to be outstanding under the Credit Agreement. "PERSON" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "PLAN" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "PREFERRED STOCK" means, in respect of any corporation, shares of capital stock of such corporation that are entitled to preference or priority over any other shares of the capital stock of such corporation in respect of payment of dividends or distribution of assets upon liquidation. "PREPAYMENT ELECTION NOTICE" is defined in Section 9.8. "PRO FORMA COVERAGE RATIO" means, in connection with the incurrence on any date of Indebtedness ("INCURRED INDEBTEDNESS") pursuant to subdivision (a)(iii) of Section 10.2, -10- 71 the number obtained by dividing (a) EBDAIT for the period ("COVERAGE PERIOD") of four consecutive fiscal quarters ended on the Determination Date occurring on or most recently prior to such date by (b) Consolidated Interest Expense for the Coverage Period; PROVIDED, HOWEVER, that, in computing EBDAIT and Consolidated Interest Expense for purposes of determining the Pro Forma Coverage Ratio, it shall be assumed that the Incurred Indebtedness had been incurred by the Company or a Restricted Subsidiary on, and all Indebtedness, if any, to be retired with the proceeds of the Incurred Indebtedness substantially concurrently with the incurrence thereof had been retired immediately prior to, the first day of the Coverage Period, and that all such Incurred Indebtedness, and no such retired Indebtedness, remained outstanding and bore interest during the Coverage Period. "PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "REFINANCED INDEBTEDNESS" is defined in Section 10.2(a)(vi). "REFINANCING INDEBTEDNESS" is defined in Section 10.2(a)(vi). "RELATED CONTRACT" is defined in Section 5.12(f). "REQUIRED HOLDERS" means, at any time, the holders of at least 66.67% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this agreement. "RESTRICTED ADDITIONAL INVESTMENT" means any Investment other than an Investment permitted by subdivisions (a) through (j) of Section 10.4. "RESTRICTED PAYMENT" means any payment or distribution or the incurrence of any liability to make any payment or distribution, in cash, property or other assets (other than shares of any class of capital stock of the Company) upon or in respect of any share of any class of capital stock of the Company or any warrants, rights or options evidencing a right to purchase or acquire any securities of the Company, including, without limiting the generality of the foregoing, payments or distributions as dividends and payments or distributions for the purpose of purchasing, acquiring, retiring or redeeming any such shares of stock (or any warrants, rights or options to purchase or acquire any such securities) or the making of any other distribution in respect of any such shares of stock (or any warrants, rights or options evidencing a right to purchase or acquire any such securities). "RESTRICTED SUBSIDIARY" means, at any time, a Subsidiary of the Company: -11- 72 (a) more than 50% (by number of votes) of the Voting Stock of which shall be owned by the Company and/or one or more of its other Restricted Subsidiaries, and (b) which is either (i) designated as a Restricted Subsidiary in Schedule 5.4 or (ii) designated as a Restricted Subsidiary subsequent to the Closing Date in the manner and subject to the terms and conditions set forth below. The Company may designate any Unrestricted Subsidiary (including any Subsidiary hereafter acquired or created) as a Restricted Subsidiary by furnishing notice of such designation, identifying such Subsidiary, to each holder of a Note, accompanied by an Officer's Certificate, signed by a Senior Financial Officer of the Company, certifying that the conditions to such designation hereinafter set forth have been complied with; PROVIDED that, (A) at the time of and after giving effect to any such designation, no Default or Event of Default shall have occurred and be continuing and (B) no Subsidiary of a Person which shall constitute an Unrestricted Subsidiary may be designated a Restricted Subsidiary for so long as such Person shall remain an Unrestricted Subsidiary. The Company may not designate any Restricted Subsidiary as an Unrestricted Subsidiary. "RETIREMENT OF INDEBTEDNESS" is defined in Section 10.7(c)(iv). "SALE DATE" is defined in Section 10.7(a). "SALE LEASEBACK" means any transaction or series of transactions pursuant to which the Company or any Restricted Subsidiary shall sell or transfer to any Person (other than the Company or a Restricted Subsidiary) any property, whether now owned or hereafter acquired, and, as part of the same transaction or series of transactions, the Company or any Restricted Subsidiary shall rent or lease as lessee, or similarly acquire the right to possession or use of, such property or one or more properties which it intends to use for the same purpose or purposes as such property. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "SUBORDINATED INTERCOMPANY INDEBTEDNESS" means unsecured Indebtedness of the Company incurred and owing to a Restricted Subsidiary which is validly and effectively made subordinate and junior in right of payment to the Notes pursuant to subordination provisions (to which the holder of such Indebtedness shall have agreed in writing to be bound) contained in the instrument evidencing such Indebtedness or under which the same is outstanding (and to which appropriate reference shall be made in the instrument evidencing such Indebtedness), substantially in the form of Schedule B-i. "SUBSIDIARY" means, as to any Person, any corporation more than 50% (by number of votes) of the Voting Stock of which shall be owned by such Person and/or one or -12- 73 more of its other Subsidiaries. Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "SUCCESSOR" is defined in Section 10.7(a). "SUCCESSOR TRANSACTION" is defined in Section 10.7(a). "SWAP OBLIGATIONS" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of any Swap Obligation shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap Obligation had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap Obligation provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "TOTAL ASSETS" is defined in Section 10.7(c). "UNRESTRICTED SUBSIDIARY" means any Subsidiary other than a Restricted Subsidiary. "VOTING STOCK" means the capital stock of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or persons performing similar functions) of such corporation. "WEIGHTED AVERAGE LIFE TO MATURITY" means, as applied to any indebtedness at any date, the number of years (or portions of years) obtained by dividing (a) the then outstanding principal amount of such indebtedness into (b) the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the date on which such payment is to be made. "WHOLLY OWNED RESTRICTED SUBSIDIARY" means, at any time, any Restricted Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly Owned Restricted Subsidiaries at such time. -13- 74 SCHEDULE B-1 to Note Purchase Agreements FORM OF SUBORDINATION PROVISIONS TO BE MADE APPLICABLE TO SUBORDINATED INTERCOMPANY INDEBTEDNESS In order for any indebtedness to constitute Subordinated Intercompany Indebtedness under and as defined in the Note Purchase Agreements, such indebtedness shall be evidenced by an instrument or instruments each containing, or referring to an agreement governing the provisions of such instrument or instruments containing, subordination provisions substantially similar to those set forth below. SUBORDINATION Section [__] SUBORDINATION. (a) SENIOR DEBT; SUBORDINATED DEBT. Payments of principal, premium, if any, and interest in respect of the indebtedness [evidenced by] [issued pursuant to) this Subordinated Note [Agreement] (such indebtedness being hereinafter called "SUBORDINATED DEBT") shall be subordinate and junior in right of payment, to the extent and in the manner set forth in this Section [__], to all indebtedness, obligations and liabilities of OM GROUP, INC., a Delaware corporation (the "COMPANY"), under the Note Purchase Agreements dated October __, 1997 (the "NOTE AGREEMENTS"), between the Company and the respective note purchasers named therein, whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, howsoever evidenced, held or acquired, as such indebtedness, obligations and liabilities may be modified, extended, renewed or replaced from time to time, and including without limitation, the obligation of the Company to pay the principal of and the makewhole amount, if any, and interest on the Company's 6.82% Senior Notes due 2007 and on its 6.99% Senior Notes due 2009 issued and sold pursuant to the Note Agreements (all such indebtedness, obligations and liabilities being hereinafter called "SENIOR DEBT"), and each holder of Subordinated Debt, by its acceptance [hereof] [thereof], agrees to be bound by such subordination. (b) PAYMENTS ON ACCOUNT OF SUBORDINATED DEBT. Upon the maturity of any Senior Debt, whether at stated maturity, by prepayment, acceleration or otherwise, all principal thereof, makewhole amount, premium, and interest thereon or any other amounts owing in respect thereof, in each case to the extent due and owing, shall first be paid in full, or such payment duly provided for in cash or in a manner satisfactory to the holder or holders of such Senior Debt, before any payment is made on account of the principal of, premium, if any, or interest on, or any amount otherwise owing in respect of, the Subordinated Debt. (c) SUBORDINATION UPON EVENT OF DEFAULT UNDER SENIOR DEBT. No payment on account of the principal of, or interest or premium on, or amounts otherwise owing in respect of, the Subordinated Debt shall be made at any time that a Default or Event of Default shall 75 have occurred and be continuing under the Note Agreements or any other instrument or agreement evidencing or securing any Senior Debt, or governing the terms thereof. The holders of Subordinated Debt may not accept or receive any payment on account of Subordinated Debt if such payment would constitute a violation of Section 10.5 of the Note Agreements. (d) NO PROCEEDINGS. Unless and until all Senior Debt shall have been paid in full, no holder of Subordinated Debt will commence any proceeding against the Company, or join with any creditor in any such proceeding, under any bankruptcy, reorganization, readjustment of debt, arrangement of debt, receivership, liquidation or insolvency law or statute of the Federal or any state government, unless the holders of Senior Debt shall also join in bringing such proceeding. (e) SUBORDINATION IN EVENT OF INSOLVENCY, ETC. Upon any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company (whether in any bankruptcy or other proceeding referred to in paragraph (d) or otherwise): (i) the holders of all Senior Debt shall first be entitled to receive payment in full of the principal thereof, Make-Whole Amount, premium, and interest due thereon before any holder of Subordinated Debt is entitled to receive any payment on account of the principal of or interest or premium on or any other amount owing in respect of the Subordinated Debt; and (ii) all principal of, premium, if any, and interest on Subordinated Debt shall forthwith (notwithstanding the terms of paragraphs (b) and (c)) become due and payable, and any payment or distribution of any character, whether in cash, securities or other property, which would otherwise (but for the terms hereof) be payable or deliverable by the Company in respect of any Subordinated Debt (including any payment or distribution in respect of any Subordinated Debt by reason of any other indebtedness of the Company being subordinated to the Subordinated Debt, and any distribution of cash, property, stock or obligations which are issued pursuant to any order or decree of any court, or pursuant to reorganization, dissolution or liquidation proceedings, whether or not purporting to give effect to the subordination of the Subordinated Debt to the Senior Debt), shall be paid or delivered directly to the holders of Senior Debt at the time outstanding (or their respective representatives), ratably according to the respective aggregate amounts remaining unpaid thereon, until all Senior Debt shall have been paid in full, and the holders of the Subordinated Debt at the time outstanding irrevocably authorize, empower and direct all receivers, trustees, liquidators, conservators and others having authority in the premises to effect all such payment and deliveries. (f) PAYMENTS FOR BENEFIT OF SENIOR DEBT. In the event that any holder of Subordinated Debt shall receive any payment on account of the Subordinated Debt which it is not entitled to receive under the provisions of this Section [ ], such payment shall be held by the holder of the Subordinated Debt in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Debt for application to the payment of all Senior Debt remaining unpaid to the extent necessary to pay all Senior Debt then due in full in accordance with the terms of such Senior Debt. (g) SUBROGATION. Each holder of the Subordinated Debt agrees that no payment or distribution by it directly to the holders of the Senior Debt pursuant hereto shall -2- 76 entitle such holder to any rights of subrogation in respect thereof until all Senior Debt shall have been irrevocably paid in full in accordance with the respective terms thereof. (h) OBLIGATION OF THE COMPANY UNCONDITIONAL. Nothing contained in this Section [__] or in the Subordinated Debt is intended to or shall impair, as between the Company and the holder or holders of the Subordinated Debt, the obligation of the Company, which is absolute and unconditional, to pay to the holder or holders of the Subordinated Debt the principal of and interest and premium, if any, on and all other amounts owing in respect of the Subordinated Debt as and when the same shall become due and payable in accordance with its terms, subject to the rights under this Section [__] of the holders of Senior Debt. (i) SUBORDINATION NOT AFFECTED, ETC. The terms of this Section [__], the subordination effected hereby and the rights of the holders of Senior Debt shall not be affected by (i) any amendment of or addition or supplement to any Senior Debt or any instrument or agreement relating thereto; (ii) any exercise or non-exercise of any right, power or remedy under or in respect of any Senior Debt or any instrument or agreement relating thereto; (iii) any sale, exchange, release or other transaction affecting all or any part of any property at any tune pledged or mortgaged to secure, or however securing, Senior Debt; (iv) any waiver, consent, release, indulgence, extension, renewal, modification, delay or other action, inaction or omission in respect of any Senior Debt or any instrument or agreement relating thereto; or (v) any application by any holder or holders of Senior Debt of any amount or sum (by whomsoever paid or however realized) to Senior Debt, whether or not any holder of any Subordinated Debt shall have had notice or knowledge of any of the foregoing. (j) CHANGES, WAIVERS, ETC. Neither this Section [__] nor any term hereof may be changed or waived except with the prior written consent of each holder of Senior Debt at the time outstanding and affected hereby. -3- 77 SCHEDULE 5.4 SUBSIDIARIES AND AFFILIATES This Schedule contains (except as noted herein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, its designation as a Restricted or Unrestricted Subsidiary, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and senior officers. Subsidiaries of the Company - ---------------------------
- ----------------------------------------------------------------------------------------------------------- Restricted % of Each Class of ("R") or Capital Stock Owned Name of Jurisdiction of Unrestricted by Company or Other Subsidiary Organization ("U") Subsidiary - ----------------------------------------------------------------------------------------------------------- D&O Incorporated Japan U 50.00 - ----------------------------------------------------------------------------------------------------------- J&O Incorporated Korea U 50.00 - ----------------------------------------------------------------------------------------------------------- Kokkola Chemicals Finland R 100.00 - ----------------------------------------------------------------------------------------------------------- OMG Americas, Inc. USA-Ohio R 100.00 - ----------------------------------------------------------------------------------------------------------- OMG Apex, Inc. USA-Delaware R 100.00 - ----------------------------------------------------------------------------------------------------------- OMG JETT, Inc. USA-Ohio R 100.00 - ----------------------------------------------------------------------------------------------------------- OM Group Europe GmbH Germany R 100.00 - ----------------------------------------------------------------------------------------------------------- OMG Asia Pacific Co., Ltd. Taiwan R 100.00 - ----------------------------------------------------------------------------------------------------------- SCM Metal Products Inc. USA-Delaware R 100.00 - ----------------------------------------------------------------------------------------------------------- Vasset, S.A France R 100.00 - -----------------------------------------------------------------------------------------------------------
Affiliates of the Company - ------------------------- None 78 Directors and Senior Officers of the Company - -------------------------------------------- DIRECTORS Eugene Bak Lee R. Brodeur Frank Butler Thomas R. Miklich James P. Mooney John E. Mooney Markku Toivanen SENIOR OFFICERS James P. Mooney Chairman and Chief Executive Officer Eugene Bak President and Chief Operating Officer Kari Muuraiskangas President, OMG Europe GmbH James M. Materna Chief Financial Officer Antti Aaltonen Vice President, Technology President (OMG Kokkola Chemicals Oy) Thomas E. Fleming Vice President, Chief Marketing Officer H. Burnham Tinker Vice President, Corporate Development John R. Holtzhauser Corporate Controller Michael J. Scott General Counsel and Secretary J.R. Hwang President, OMG Asia Pacific Co., Ltd. Terry Guckes, Vice President, Planning and Development David A. Handal, Vice President, Information Systems and Technology 79 SCHEDULE 5.5 FINANCIAL STATEMENTS The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on this Schedule. 1. Consolidated Financial Statements of the Company for the year ended December 31, 1996. 2. Consolidated Financial Statements of the Company for the fiscal quarter ended June 30, 1997. 80 SCHEDULE 5.10 INVESTMENTS This Schedule correctly lists all investments of the Company (other than Investments in Subsidiaries) existing on the date of this Agreement. None 81 SCHEDULE 5.12 COVERED CONTRACTS AND RELATED CONTRACTS None 82 SCHEDULE 5.14 USE OF PROCEEDS The Company will apply the proceeds of the sale of the Notes as set forth in this Schedule. The proceeds of the sale of the Notes will be used to pay down existing bank indebtedness as follows:
Repay Bank Indebtedness ................ $29,950,000 Fees and Expenses ...................... 50,000 ----------- $30,000,000 ===========
83 SCHEDULE 5.15 INDEBTEDNESS This Schedule sets forth a complete and correct list of all Funded Debt of the Company and its Subsidiaries as of October 16, 1997.
- ----------------------------------------------------------------------------------------------------------------------------------- Outstanding Principal Principal to be Amount (as of Reduced Description Item No./ September 30. With Note of Description Obligor Obligee Guarantor 1997) Proceeds Collateral - ----------------------------------------------------------------------------------------------------------------------------------- 1. $180,000,000 Revolving Company National City Bank, OMG Americas, $154,000,000 $29,950,000 None Credit Agreement ABN Amro, OMG Apex, and KeyBank and SCM Metal Mellon Bank Products - ----------------------------------------------------------------------------------------------------------------------------------- 2. $30,000,000 7.38% Company Great-West Life and OMG Americas, $ 30,000,000 -0- None Senior Notes Due 2005 Annuity Insurance OMG Apex, and Company, SCM Metal Nationwide Life Products Insurance Company, and Mutual Life Insurance Company of New York - ----------------------------------------------------------------------------------------------------------------------------------- 3. Technology Loan (KCO) KCO Government of None $ 250,000 -0- None Finland - ----------------------------------------------------------------------------------------------------------------------------------- 4 Regional Development OMG Wenango County, None $ 250,000 -0- None Loan Americas Pennsylvania - -----------------------------------------------------------------------------------------------------------------------------------
84 EXHIBIT 1 [FORM OF NOTE] OM GROUP, INC. 6.82% SENIOR NOTE DUE 2007 No. R-______ [Date] $[__________] PPN# ___________ FOR VALUE RECEIVED, the undersigned, OM GROUP, INC. (herein called the "Company "), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to [________________________________________], or registered assigns, the principal sum of [________________________________________] DOLLARS on October __, 2007, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.82% per annum from the date hereof, payable semiannually, on the ___ day of April and the ___day of October in each year, commencing with April __, 1998, until the principal hereof shall have become due and payable, the (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semi-annually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.82% or (ii) 2% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York, New York as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office in New York, New York of The Chase Manhattan Bank or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to separate Note Purchase Agreements dated October ____, 1997 (as from time to time amended, the "Note Purchase Agreements"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's 85 attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to mandatory and optional prepayments, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any application Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note is entitled to the benefits of the Guaranty Agreements, dated October __, 1997, by OMG Americas, Inc., OMG Apex, Inc. and SCM Metal Products, Inc. THIS NOTE IS MADE AND DELIVERED IN NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. OM GROUP, INC. By ------------------------------------- Title: Chief Financial Officer - 2 - 86 EXHIBIT lA [FORM OF NOTE] OM GROUP, INC. 6.99% SENIOR NOTE DUE 2009 No. R-______ [Date) $[__________] PPN# __________ FOR VALUE RECEIVED, the undersigned, OM GROUP, INC. (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to [_________________________________________________], or registered assigns, the principal sum of [_________________________________________________] DOLLARS on October __, 2009, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.99% per annum from the date hereof, payable semiannually, on the ___ day of April and the ___day of October in each year, commencing with April __, 1998, until the principal hereof shall have become due and payable, the (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semi-annually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.99% or (ii) 2% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York, New York as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office in New York, New York of The Chase Manhattan Bank or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to separate Note Purchase Agreements dated October , 1997 (as from time to time amended, the "Note Purchase Agreements"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a 87 written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to mandatory and optional prepayments, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any application Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note is entitled to the benefits of the Guaranty Agreements, dated October __, 1997, by OMG Americas, Inc. , OMG Apex, Inc. and SCM Metal Products, Inc. THIS NOTE IS MADE AND DELIVERED IN NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. OM GROUP, INC. By --------------------------------------- Title: Chief Financial Officer -2- EX-4.11 4 EXHIBIT 4.11 1 EXHIBIT 4.11 to Note Purchase Agreements FORM OF SUBSIDIARY GUARANTY --------------------------- GUARANTY AGREEMENT, dated October __, 1997 ("THIS GUARANTY AGREEMENT"), made and given by OMG Americas, Inc, an Ohio corporation (the "GUARANTOR"), in favor of NATIONWIDE LIFE INSURANCE COMPANY and GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY (collectively, the "PURCHASERS") and in favor of the holders from time to time of the Notes referred to below (such holders, together with the Purchasers, being herein sometimes referred to collectively as the "NOTEHOLDERS" and individually as a "NOTEHOLDER"); for the benefit of OM GROUP, INC. , a Delaware corporation (the "COMPANY"). R E C I T A L S: - - - - - - - - A. The Company has entered into two separate Note Purchase Agreements with the respective Purchasers, dated October __, 1997 (the "NOTE AGREEMENTS"); terms used and not otherwise defined herein having the respective meanings when used herein as are attributed thereto in the Note Agreements), providing for the issuance and sale by the Company and, subject to the terms and conditions thereof, the purchase by the Purchasers of (i) $15,000,000 of its 6.82% Senior Notes due October __, 2007, and (ii) $15,000,000 of its 6.99% Senior Notes due October __, 2009 (collectively, the "NOTES", such term to include any such Senior Note issued pursuant to the Note Agreements in substitution or exchange for any other such Senior Note; the Notes together with the Note Agreements, this Guaranty Agreement and all other related agreements and documents issued or delivered under or pursuant to the Note Agreements or this Guaranty Agreement, in each case as the same may be amended or otherwise modified and in effect from time to time, being herein sometimes referred to collectively as the "NOTE DOCUMENTS"). B. As a condition precedent to the purchase of the Notes to be purchased pursuant to the Note Agreements, the Purchasers have required, among other things, that the Guarantor guarantee all of the Company's Obligations referred to below. C. The Guarantor is a Wholly Owned Restricted Subsidiary of the Company. NOW, THEREFORE, for and in consideration of the execution and delivery by each Purchaser of the Note Agreements to which it is a party and in order to induce each Purchaser to purchase the Notes to be purchased by it under the Note Agreements, and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as follows: 1. GUARANTEE OF PAYMENT. The Guarantor hereby irrevocably and unconditionally guarantees to the Noteholders the prompt payment in full when due (whether on 2 a date fixed for prepayment, at stated maturity, by declaration, acceleration or otherwise) of the Company's Obligations. For the purposes hereof the "COMPANY'S OBLIGATIONS" means all indebtedness, obligations and liabilities of the Company under the Note Documents, now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, howsoever evidenced, held or acquired, as such indebtedness, obligations and liabilities may be modified, extended, renewed or replaced from time to time, and including without limitation, the obligation of the Company to pay the principal of and the Make-Whole Amount, if any, and interest on the Notes in accordance with the terms of the Note Documents and all other obligations from time to time owing to the Noteholders, or any of them, under the Note Documents. The guaranty of the Guarantor as set forth in this section is a guaranty of payment and not of collection. Notwithstanding any provision to the contrary contained herein or in any Note Document, the liability of the Guarantor with respect to the Company's Obligations hereunder shall not exceed the Maximum Guaranteed Amount. For purposes hereof: (a) "MAXIMUM GUARANTEED AMOUNT" shall mean, as of any date of determination thereof, the sum of (i) to the extent the proceeds of the sale pursuant to the Note Agreements of the Notes (or portions thereof) are used to make Direct Transfers to the Guarantor, the aggregate outstanding principal amount of such Notes (or such portions thereof) plus (ii) to the extent the proceeds of the sale pursuant to the Note Agreements of the Notes (or portions thereof) are not used to make a Direct Transfer to the Guarantor, the lesser of (A) the aggregate outstanding principal amount of all such Notes (or such portions thereof) as of the earlier of the date that enforcement is sought against the Guarantor hereunder or the date of the commencement of a case under the U.S. Bankruptcy Code in which the Guarantor is a debtor, or (B) 95% of the Adjusted Net Worth of the Guarantor at the time of such sale of Notes. (b) "DIRECT TRANSFER" shall mean (i) all loans, advances or capital contributions made to or for the benefit of the Guarantor with proceeds of any sale of Notes pursuant to the Note Agreements, (ii) all debt securities or other obligations of the Guarantor acquired from the Guarantor or retired by the Guarantor with proceeds of any sale of Notes pursuant to the Note Agreements, (iii) the fair market value of all property acquired with proceeds of any sale of Notes pursuant to the Note Agreements and transferred, absolutely and not as collateral, to the Guarantor, (iv) all equity securities of the Guarantor acquired from the Guarantor with proceeds of any sale of Notes pursuant to the Note Agreements and (v) the value of any quantifiable economic benefits not included in clauses (i) through (iv) above but which are included in accordance with applicable Federal and state laws governing determinations of the insolvency of debtors and which accrued to the Guarantor as a result of the use of proceeds of any sale of Notes pursuant to the Note Agreements. (c) "ADJUSTED NET WORTH" shall mean, as of any date of determination thereof, the excess of (i) the amount of the "present fair saleable value" of the assets of the Guarantor as of such date of determination, over (ii) the amount of all "liabilities, contingent or otherwise," of the Guarantor as of such date of determination, as such quoted terms are determined in accordance with applicable Federal and state laws -2- 3 governing determinations of the insolvency of debtors. In determining the Adjusted Net Worth for purposes of calculating the Maximum Guaranteed Amount, the liabilities of the Guarantor to be used in such determination pursuant to clause (ii) of the preceding sentence shall in any event include the liabilities includable in the Maximum Guaranteed Amount pursuant to clause (i) of the definition of Maximum Guaranteed Amount. 2. RELEASE OF COLLATERAL, PARTIES LIABLE, ETC. The Guarantor agrees that the whole or any part of any and all security now or hereafter held for the Company's Obligations may be exchanged, compromised, released or surrendered from time to time; that neither the Noteholders nor any of them nor any trustee or agent which shall at any time hold any such security shall have any obligation to protect, perfect, secure or insure any Liens now or hereafter held for the Company's Obligations or the properties subject thereto; that the time or place of payment of the Company's Obligations may be changed or extended, in whole or in part, to a time certain or otherwise, and may be renewed or accelerated, in whole or in part; that the Company may be granted indulgences generally; that any provisions of the Note Documents or any other documents executed in connection with this transaction may be modified, amended or waived; that any party liable for the payment of the Company's Obligations may be granted indulgences or released; and that any deposit balance for the credit of the Company or any other party liable for the payment of the Company's Obligations or liable upon any security therefor may be released, in whole or in part, at, before and/or after the stated, extended or accelerated maturity of the Company's Obligations, all without notice to or further assent by the Guarantor, who shall remain bound thereon, notwithstanding any such exchange, compromise, surrender, extension, renewal, acceleration, modification, indulgence or release. 3. WAIVER OF RIGHTS. The Guarantor expressly waives: (a) notice of acceptance of this Guaranty Agreement by the Noteholders; (b) presentment and demand for payment of any of the Company's Obligations; (c) protest and notice of dishonor or of default to the Guarantor or to any other party with respect to the Company's Obligations or with respect to any security therefor; (d) notices of any Noteholder or any trustee or agent for any Noteholder obtaining, amending, substituting for, releasing, waiving or modifying any security interests, liens or other encumbrances now or hereafter securing the Company's Obligations, or of the Noteholder or any such trustee or agent subordinating, compromising, discharging or releasing such security interests, liens or encumbrances; (e) all other notices to which the Guarantor might otherwise be entitled; (f) demand for payment under this Guaranty Agreement; and (g) any right to assert against any Noteholder, as a defense, counterclaim, set-off or cross-claim, any defense (legal or equitable), set-off, counterclaim or claim which the Guarantor may now or hereafter have against any Noteholder or the Company. 4. PRIMARY LIABILITY OF GUARANTOR; SUBROGATION; INTEREST; ACCELERATION. (a) The Guarantor agrees that this Guaranty Agreement may be enforced by the Noteholders without the necessity at any time of resorting to or exhausting any other security or collateral and without the necessity at any time of having recourse to the Company under the Note Documents or any collateral now or hereafter securing the Company's Obligations or otherwise, and the Guarantor hereby waives the right to require the Noteholders to proceed against the Company or any other Person (including any co-guarantor) or to require the Noteholders to pursue any other remedy or enforce any other right. The Guarantor further agrees that nothing contained herein shall -3- 4 prevent the Noteholders or any trustee or agent at the time empowered to act on their behalf from suing the Company with respect to its obligations under the Note Documents or foreclosing any security interest in or lien on any collateral now or hereafter securing the Company's Obligations or from exercising any other rights available to the Noteholders or any such trustee or agent under the Note Documents if neither the Company nor the Guarantor timely performs the obligations of the Company thereunder, and the exercise of any of the aforesaid rights and the completion of any foreclosure proceedings shall not constitute a discharge of the Guarantor's obligations hereunder; it being the purpose and intent of the Guarantor that the Guarantor's obligations hereunder shall be absolute, irrevocable, independent and unconditional under any and all circumstances. Neither the obligations of the Guarantor under this Guaranty Agreement nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by an impairment, modification, change, release or limitation of the liability of the Company or any other guarantor of the Company's Obligations, by reason of the Company's or any other such guarantor's bankruptcy or insolvency or by reason of the invalidity or unenforceability of all or any portion of the Company's Obligations. The Guarantor acknowledges that the term "Company's Obligations" as used herein includes any payments made by the Company or any other guarantor of the Company's Obligations to the Noteholders and subsequently recovered by the Company or a trustee for the Company pursuant to the Company's bankruptcy or insolvency and that the guaranty of the Guarantor hereunder shall be reinstated to the extent of such recovery. (b) In the event the Guarantor shall at any time pay any sums on account of any of the Company's Obligations, the Guarantor shall, to the extent of such payment, be subrogated to the rights, privileges and powers of the Noteholders in respect of such Company's Obligation, PROVIDED that, the Guarantor hereby agrees that it shall not seek to exercise any such rights of subrogation, any right of reimbursement or indemnity whatsoever or any rights or recourse to any security for any of the Company's Obligations unless and until all of the Company's Obligations shall have been indefeasibly paid in full. (c) As between the Guarantor, on the one hand, and the Noteholders, on the other hand, the Company's Obligations may be declared to be forthwith due and payable as provided in Section 12 of the Note Agreements (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 12) for all purposes of this Guaranty Agreement notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing such obligations from becoming automatically due and payable) as against the Company and, in the event of such declaration (or in the event of any such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Company) shall forthwith become due and payable by the Guarantor for purposes of this Guaranty Agreement and the obligations of the Guarantor hereunder shall be deemed to have been accelerated with the same effect as if the Notes had been accelerated in accordance with the terms thereof and of the Note Agreements. (d) The Guarantor acknowledges, consents and agrees that any interest on the Company's Obligations which accrues after the commencement of any bankruptcy, reorganization or insolvency proceeding against the Company, or, if interest on any portion of the Company's Obligations ceases to accrue by operation of law by reason of the commencement -4- 5 of any such proceeding, such interest as would have accrued on any such portion of the Company's Obligations if said proceeding had not been commenced, shall be included in the Company's Obligations, it being the intent hereof that the amount of the Company's Obligations guaranteed hereunder should be determined without regard to any rule of law or order which may relieve the Company of any portion of such Company's Obligations. 5. ATTORNEYS' FEES AND COSTS OF COLLECTION. If at any time or times hereafter the Noteholders or any trustee or agent acting on their behalf employs counsel to pursue collection, to intervene, to sue for enforcement of the terms hereof or of the Note Agreements or any other of the Note Documents, or to file a petition, complaint, answer, motion or other pleading in any suit or proceeding relating to this Guaranty Agreement or the Note Agreements or any other of the Note Documents, then in such event, to the fullest extent permitted by applicable law, all of the reasonable attorneys' fees relating thereto shall be an additional liability of the Guarantor to the Noteholders hereunder, payable on demand. 6. TERM OF GUARANTY; WARRANTIES. This Guaranty Agreement shall continue in full force and effect until the Company's Obligations are fully and indefeasibly paid, performed and discharged. This Guaranty Agreement covers the Company's Obligations whether presently outstanding or arising subsequent to the date hereof. The Guarantor warrants and represents to the Noteholders (a) that the Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, (b) that the Guarantor has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, (c) that the execution and delivery by the Guarantor of this Guaranty Agreement and the other Note Documents, if any, to which it is a party and the performance by the Guarantor of its obligations hereunder and thereunder are within the corporate power of the Guarantor, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (except for any such action or filing that has been taken and is in full force and effect) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or regulations (or other constitutional documents) of the Guarantor or of any material agreement, judgment, injunction, order, decree, or other material instrument binding upon the Guarantor or result in the creation or imposition of any Lien on any asset of the Guarantor and (d) that this Guaranty Agreement and the other Note Documents, if any, to which the Guarantor is a party constitute valid, binding and enforceable agreements of the Guarantor. 7. FURTHER REPRESENTATIONS AND WARRANTIES. The Guarantor agrees that the Noteholders will have no obligation to investigate the financial condition or affairs of the Company for the benefit of the Guarantor nor to advise the Guarantor of any fact respecting, or any change in, the financial condition or affairs of the Company which might come to the knowledge of any of the Noteholders at any time, whether or not any of the Noteholders knows or believes or has reason to know or believe that any such fact or change is unknown to the Guarantor or might (or does) materially increase the risk of the Guarantor as guarantor or might (or would) affect the willingness of the Guarantor to continue as guarantor with respect to the Company's Obligations. -5- 6 8. ADDITIONAL LIABILITY OF GUARANTOR. If the Guarantor is or becomes liable for any indebtedness owing by the Company to any of the Noteholders by endorsement or otherwise other than under this Guaranty Agreement, such liability shall not be in any manner impaired or reduced hereby but shall have all and the same force and effect it would have had if this Guaranty Agreement had not existed and the Guarantor's liability hereunder shall not be in any manner impaired or reduced thereby. 9. CUMULATIVE RIGHTS. All rights of the Noteholders hereunder or otherwise arising under any documents executed in connection with or as security for the Company's Obligations are separate and cumulative and may be pursued separately, successively or concurrently, or not pursued, without affecting or limiting any other right of any of the Noteholders and without affecting or impairing the liability of the Guarantor. 10. USURY. Notwithstanding any other provisions herein contained, no provision of this Guaranty Agreement shall require or permit the collection from the Guarantor of interest in excess of the maximum rate or amount that the Guarantor may be required or permitted to pay pursuant to applicable law. In the event any such interest is collected, it shall be applied in reduction of the Guarantor's obligations hereunder, and the remainder of such excess collected shall be returned to the Guarantor once such obligations have been fully satisfied. 11. SUCCESSORS AND ASSIGNS. This Guaranty Agreement shall be binding on and enforceable against the Guarantor and its successors and assigns; PROVIDED that, the Guarantor may not assign or transfer any of its obligations hereunder without prior written consent of the Required Holders. This Guaranty Agreement is intended for and shall inure to the benefit of the Noteholders and their respective successors and assigns. This Guaranty Agreement shall be transferable and negotiable with the same force and effect, and to the same extent, that the Company's Obligations are transferable and negotiable, it being understood and stipulated that upon assignment or transfer by any of the Noteholders of any of the Company's Obligations the legal holder or owner of the Company's Obligations (or a part thereof or interest therein thus transferred or assigned by any Noteholder) shall (except as otherwise stipulated by any such Noteholder in its assignment) have and may exercise all of the rights granted to such Noteholder under this Guaranty Agreement to the extent of that part of or interest in the Company's Obligations thus assigned or transferred to said Person. The Guarantor expressly waives notice of transfer or assignment of the Company , 5 Obligations, or any part hereof, or of the rights of any Noteholder thereunder. Failure to give notice will not affect the liabilities of the Guarantor hereunder. 12. APPLICATION OF PAYMENTS. As between the Guarantor and the Noteholders, each Noteholder may apply any payments received by it from any source against that portion of the Company's Obligations (principal, interest, Make-Whole Amount, court costs, attorneys' fees or other) in such priority and fashion as such Noteholder may deem appropriate. 13. MODIFICATIONS. Any term, covenant, agreement or condition of this Guaranty may be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing duly executed by the Guarantor and the Required Holders; PROVIDED that, without the prior written consent of -6- 7 Noteholders holding all the Notes at the time outstanding, no such amendment or waiver shall reduce the aforesaid percentage of the principal amount of the Notes referred to in this Section, the holders of which are required to consent to any such amendment or waiver. Any amendment or waiver effected in accordance with this Section shall apply equally to all Noteholders and shall be binding upon them and upon each future holder of any Note and upon the Guarantor whether or not any such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. 14. NOTICES. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telex, telecopy, graphic scanning or other telegraphic communications equipment of the sending party, as follows: (a) if to the Guarantor, to it at 3800 Terminal Tower, Cleveland, Ohio 44113-2204, Attention of Michael J. Scott (Facsimile No. (216) 781-0902), (b) if to any Purchaser, at the address set forth for such Purchaser in Schedule A to the Note Agreements, or at such other address as such Purchaser shall have designated in writing to the Guarantor; and (c) if to any other Noteholder, in the manner provided in the Note Agreements All notices and other communications given to any party hereto in accordance with the provisions of this Guaranty Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telex, telecopy, graphic scanning or other telegraphic communications equipment of the sender, or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section or at such other address or telex, telecopy or other number as shall be designated by such party in a notice to each other party complying with the terms of this Section. 15. NET PAYMENTS. All payments made by the Guarantor hereunder will be made without setoff or counterclaim. All payments by the Guarantor hereunder shall be made free and clear of and without deduction or withholding for any present or future license, registration or other fees, taxes or other amounts for or on account of levies, imposts, duties, deductions, withholdings or other charges of whatsoever nature, imposed, levied, collected, withheld or assessed by any governmental or taxing authority, excluding income and franchise taxes imposed on a Noteholder by a jurisdiction under which such Noteholder is organized or operating in connection with the Note Documents or any political subdivision thereof ("Taxes"). If the Guarantor shall be required to withhold or deduct Taxes from any sum payable hereunder, (a) the sum payable shall be increased as may be necessary so that the amount received is equal to the sum which would have been received had no withholdings or deductions been made, (b) the Guarantor shall make such necessary withholdings or deductions and (c) the Guarantor shall pay the full amount withheld or deducted to the relevant authority according to applicable law so that the Noteholders shall not be required to make any deduction or payment of Taxes. -7- 8 16. SEVERABILITY. In the event that any provision hereof shall be deemed to be invalid by reason of the operation of any law or by reason of the interpretation placed thereon by any court, this Guaranty Agreement shall be construed as not containing such provision, but only as to such jurisdictions where such law or interpretation is operative , and the invalidity of such provision shall not affect the validity of any remaining provision hereof, and any and all other provisions hereof which are otherwise lawful and valid shall remain in full force and effect. 17. GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. 18. HEADINGS. The headings in this instrument are for convenience of reference only and shall not limit or otherwise affect the meaning of any provisions hereof. 19. COUNTERPARTS. This Guaranty Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each constituting an original, but all together constituting one and the same instrument. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement to be duly executed as of the date first above written. OMG AMERICAS, INC. By ---------------------------------- Title ------------------------------- -8- EX-10.32 5 EXHIBIT 10.32 1 Exhibit 10.32 AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (the "Agreement") is made this 19th day of December, 1997, by and among OM GROUP, INC., a Delaware corporation ("OMG"), OM GROUP ACQUISITION COMPANY, INC., a Delaware corporation and a direct wholly-owned subsidiary of OMG ("OMGAC"), and AURIC CORPORATION, a Delaware corporation ("Auric"). RECITALS WHEREAS, the Board of Directors of OMG, OMGAC and Auric have approved, and deem it advisable and in the best interests of their respective companies and stockholders to consummate, a merger of OMGAC with and into Auric (the "Merger"), with Auric as the surviving corporation in the Merger, upon the terms and subject to the conditions set forth in this Agreement, pursuant to which the shares of common stock, par value $.10 per share, of Auric ("Auric Common Stock") issued and outstanding immediately prior to the Effective Time (as defined herein) other than (a) shares of Auric Common Stock owned, directly or indirectly, by Auric or any subsidiary (as defined herein) of Auric or by OMG, OMGAC or any other subsidiary of the OMG and (b) Dissenting Shares (as defined herein), will be converted into the right to receive the Merger Consideration (as defined herein); and WHEREAS, the Board of Directors of Auric has directed that this Agreement be submitted for consideration at a special meeting of the voting stockholders of Auric; NOW, THEREFORE, in consideration of their respective representations, warranties, covenants, agreements and undertakings set forth herein, the parties agree as follows: ARTICLE I THE MERGER 1.1 The Merger. Upon the terms, subject to the conditions and in reliance on the representations, warranties and covenants set forth herein, and in accordance with the Delaware General Corporation Law (the "DGCL"), at the Effective Time, as defined in Section 1.2, (a) OMGAC shall be merged with and into Auric and the separate existence and corporate organization of OMGAC shall cease; (b) Auric shall be the surviving corporation in the Merger (the "Surviving Corporation") having the name Auric Corporation and shall continue to be governed by the laws of the State of Delaware; (c) the Certificate of Incorporation of the Surviving Corporation shall be amended so as to read in its entirety as set forth on Exhibit A hereto and, as so amended, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided therein or by applicable law; and (d) the Bylaws of OMGAC as in effect immediately prior to the Effective Time shall become the Bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable law; provided, that, there shall be an amendment by virtue of the Merger to change the name of the Surviving Corporation to "Auric Corporation." 1.2 Effective Time of the Merger. Subject to the provisions of this Agreement, a certificate of merger shall be duly prepared, executed and acknowledged by the Surviving 2 Corporation in the Merger (the "Certificate of Merger") and thereafter delivered on the Closing Date (as defined herein) to the Secretary of State of Delaware (the "Secretary") for filing in accordance with the DGCL. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary, or at such other time as is permissible in accordance with the DGCL and as OMG and Auric shall agree should be specified in the Certificate of Merger (the time the Merger becomes effective being the "Effective Time"). 1.3 Effects of the Merger. The Merger shall have the effects set forth in the DGCL. 1.4 Closing. Unless this Agreement shall have been terminated and the transactions contemplated herein shall have been abandoned pursuant to Section 8.1, and subject to the satisfaction or waiver of the conditions set forth in Article 6, the closing of the Merger (the "Closing") will take place at 9:00 a.m., Eastern time, on the second business day after satisfaction of the conditions set forth in Section 6.1 (or, if the conditions set forth in Sections 6.2 and 6.3 are not satisfied or waived at that time, as soon as practicable thereafter following such satisfaction or waiver) (the "Closing Date"), at the offices of Squire, Sanders & Dempsey L.L.P., 4900 Key Tower, 127 Public Square, Cleveland, Ohio, unless another date, time or place is agreed to in writing by the parties hereto. 1.5 Directors and Officers of Surviving Corporation. The directors of OMGAC at the Effective Time shall be the directors of the Surviving Corporation. The officers of Auric at the Effective Time shall be the officers of the Surviving Corporation. Each of the officers and directors shall hold office until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in the manner provided in the Articles of Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided by law. ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF OMGAC AND AURIC; CONVERSION OF AURIC COMMON STOCK 2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any shares of Auric Common Stock (the "Auric Stockholders") or capital stock of OMGAC: (a) Capital Stock of OMGAC. Each issued and outstanding share of the common stock of OMGAC shall be converted into and become one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation (the "Surviving Corporation Common Stock"). (b) Cancellation of Treasury Stock and OMG-Owned Auric Common Stock. Each share of Auric Common Stock that is owned by Auric or by any subsidiary of Auric, and each share of Auric Common Stock that is owned by OMG, OMGAC or any other subsidiary of OMG shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor. - 2 - 3 (c) Exchange of Auric Common Stock. The issued and outstanding shares of the Auric Common Stock (other than Dissenting Shares, as defined in Section 2.1(d) and shares to be canceled in accordance with Section 2.1(b) hereof) shall be converted into the right to receive an amount equal to Eighty Million Dollars ($80,000,000), (i) less any amounts that are paid to OMG or the Stockholders' Representative (as defined herein) as provided in the Escrow Agreement (as defined herein) and (ii) plus any amounts that are paid by OMG into the Escrow Fund (as defined herein) pursuant to Article IX hereof (the "Merger Consideration"). All shares of Auric Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares (each, an "Auric Certificate") shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor upon surrender of such Auric Certificate in accordance with Section 2.2, without interest, or, as provided in Section 2.1(d), to perfect any rights of appraisal as a Dissenting Shareholder (as defined herein) pursuant to Section 262 of the DGCL. The Merger Consideration shall be distributed to the Auric Shareholders in accordance with Section 2.2(b) below. (d) Shares of Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding shares of Auric Common Stock held by a person (a "Dissenting Shareholder") who duly demands appraisal of his shares of Auric Common Stock pursuant to Section 262 of the DGCL and complies with all the provisions of the DGCL concerning the right of holders of Auric Common Stock to demand appraisal of their shares in connection with the Merger ("Dissenting Shares") shall not be converted as described in Section 2.1(c) but shall become the right to receive such cash consideration as may be determined to be due to such Dissenting Shareholder as provided in the DGCL. If, however, such Dissenting Shareholder withdraws his demand for appraisal or fails to perfect or otherwise loses his right of appraisal, in any case pursuant to the DGCL, his shares shall be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration. Auric shall give OMG (i) prompt notice of any demands for appraisal of shares received by Auric and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands. Auric shall not, without the prior written consent of OMG, make any payment with respect to, or settle, offer to settle or otherwise negotiate, any such demands. 2.2 Exchange of Auric Certificates. (a) Payment of Exchange Price. As of the Effective Time, OMG shall deliver (i) to First Union National Bank or such other bank or trust company designated by OMG (and reasonably acceptable to Auric) (the "Exchange Agent"), for the benefit of Auric Stockholders, for conversion in accordance with this Article II, an amount of cash equal to Seventy Seven Million Dollars ($77,000,000) (such amount being hereinafter referred to as the "Exchange Fund") and (ii) to First Union National Bank (the "Escrow Agent"), under an Escrow Agreement in the form attached hereto as Exhibit B (the "Escrow Agreement"), cash in the amount of Three Million Dollars ($3,000,000) (the "Escrow Fund"). (b) Exchange Procedures. As soon as reasonably practicable after the Effective Time, but in no event more than three business days thereafter, the Exchange Agent shall mail to each holder of record as of the Effective Time of an Auric Certificate or Certificates whose shares - 3 - 4 were converted pursuant to Section 2.1 hereof into the right to receive the Merger Consideration, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Auric Certificates shall pass, only upon delivery of the Auric Certificates to the Exchange Agent and shall be in such form and have such other provisions as OMG and Auric may reasonably specify) (the "Transmittal Letter") and (ii) instructions for use in effecting the surrender of the Auric Certificates in exchange for the Merger Consideration. Upon surrender of an Auric Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by OMG and OMGAC, together with such Transmittal Letter, duly executed, the holder of such Auric Certificate shall be entitled to receive in exchange therefor the Initial Exchange Price (as defined herein) and the right to receive the remainder of the Merger Consideration for each share of Auric Common Stock formerly represented by such Auric Certificate as provided in the Escrow Agreement, and the Auric Certificate so surrendered shall forthwith be canceled. For purposes hereof, "Initial Exchange Price" shall be equal to the Exchange Fund divided by the total number of shares of Auric Common Stock issued and outstanding on the Closing Date. In the event of a transfer of ownership of Auric Common Stock which is not registered in the transfer records of Auric, the Merger Consideration may be paid to a transferee if the Auric Certificate representing such Auric Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.2, each Auric Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration as contemplated by this Section 2.2. (c) No Further Ownership Rights in Auric Common Stock; Transfer Books. The Merger Consideration paid in exchange for the surrender of shares of Auric Common Stock in accordance with the terms hereof shall be deemed to have been paid and issued in full satisfaction of all rights pertaining to such shares of Auric Common Stock, subject, however, to the Surviving Corporation's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Auric on such shares of Auric Common Stock in accordance with the terms of this Agreement or prior to the date hereof and which remain unpaid at the Effective Time. As of the Effective Time, entries shall be made in the stock transfer books of Auric to reflect the cancellation of the Auric Common Stock issued and outstanding immediately prior to the Effective Time and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Auric Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Auric Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and converted as provided in this Section 2.2. (d) Termination of Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the Auric Stockholders for one year after the Effective Time shall be delivered to OMG, upon demand, and any Auric Stockholders who have not theretofore complied with this Article II shall thereafter look only to OMG for payment of their claim for the Merger Consideration. - 4 - 5 (e) No Liability. None of OMG, OMGAC or Auric shall be liable to any person for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Auric Certificate shall not have been surrendered prior to five years after the Effective Time (or immediately prior to such earlier date on which any Merger Consideration in respect of such certificate would otherwise escheat to or become the property of any Governmental Entity (as defined herein)), any such Merger Consideration in respect of such certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. ARTICLE III REPRESENTATIONS AND WARRANTIES OF AURIC Auric represents and warrants that the following are true and correct on the date of this Agreement: 3.1 Organization and Good Standing. Auric is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has full corporate power to enter into this Agreement and to consummate the transactions contemplated hereby. Auric is qualified to do business and is in good standing in each jurisdiction in which the nature of its business or the properties owned or leased by it requires such qualification, except where the failure to be so qualified and in good standing would not have a material adverse effect with respect to Auric. Each state or jurisdiction in which Auric is qualified to do business is set forth on Schedule 3.1. Schedule 3.1 also sets forth each jurisdiction in which assets of Auric are located and each jurisdiction in which Auric has employees. 3.2 Authority, Noncontravention. The execution and delivery of this Agreement by Auric and the consummation by Auric of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Auric, subject to the Auric Stockholders' Approval of this Agreement and the Merger. This Agreement has been duly executed and delivered by Auric and constitutes a valid and binding obligation of Auric, enforceable against Auric in accordance with its terms. Except as disclosed in Schedule 3.2, the execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance with the provisions of this Agreement will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, (a) the Certificate of Incorporation or Bylaws of Auric, (b) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Auric or any subsidiary of Auric or their respective properties or assets or (c) subject to the governmental filings and other matters referred to in Section 3.3, any judgment, order, decree, statute, law, ordinance, rule, regulation or arbitration award applicable to Auric or any other subsidiary of Auric or their respective properties or assets, other than, in the case of clauses (b) and (c), any such conflicts, breaches, violations, defaults, rights, losses or liens that individually or in the aggregate would not have a material adverse effect with respect to Auric or would not prevent, hinder or materially delay the ability of Auric to consummate the transactions contemplated by this Agreement. - 5 - 6 3.3 Consents and Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, nor notice to, any federal, state or local government or any court, administrative agency or commission or other governmental authority or agency, domestic or foreign (a "Governmental Entity"), is required by or with respect to Auric or any subsidiary of Auric in connection with the execution and delivery of this Agreement by Auric or the consummation by Auric of the transactions contemplated hereby, except for (a) the filing of a premerger notification and report form by Auric under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (b) the filing of the Certificate of Merger with the Secretary, and appropriate documents with the relevant authorities of other states in which Auric is qualified to do business and (c) such other consents, approvals, orders, authorizations, registrations, declarations, filings or notices as are set forth in Schedule 3.3. 3.4 Capital Structure. (a) Auric Common Stock. As of the date hereof, the authorized capital stock of Auric consists solely of 2,000,000 shares of Auric Common Stock. As of the date of this Agreement, 318,200 of Auric Common Stock were issued and outstanding and 52,500 were held by Auric as treasury shares. (b) Other Securities. Except as described in Section 3.4(a) with respect to the Auric Common Stock and options (and related agreements) to purchase 74,800 shares of Auric Common Stock (the "Auric Stock Options"), there are no debt or equity securities outstanding and no options, warrants or other rights to purchase, agreements or other obligations to issue, or other rights to convert any obligation into, any shares of capital stock of Auric. 3.5 Subsidiaries. Except as provided in Schedule 3.5, Auric has no subsidiaries either wholly or partially owned. 3.6 Vote Required. The affirmative vote of a majority of the outstanding shares of Auric Common Stock entitled to vote thereon is necessary to approve this Agreement, the Merger and the other transactions contemplated hereby. 3.7 Financial Statements and the Balance Sheet. Auric has delivered as described in Schedule 3.7 the following financial information set forth in subsections (a)-(d) below and will deliver to OMG the other following financial information (collectively, the "Financial Statements") for Auric: (a) as of the date of this Agreement, audited consolidated balance sheets of Auric and its subsidiary as of September 30, 1995 and 1996; (b) as of the date of this Agreement, a draft consolidated balance sheet of Auric and its subsidiary as of September 30, 1997 (the "Balance Sheet"); and (c) as of the date of this Agreement, the related audited consolidated statements of operations, stockholders' equity and cash flows for each of Auric's and its subsidiary's fiscal years in the two-year period ended September 30, 1996. - 6 - 7 (d) as of the date of this Agreement, draft consolidated statements of operations, stockholders' equity and cash flows of Auric and its subsidiary for the fiscal year ended September 30, 1997. (e) within ten (10) days after the date of this Agreement, audited consolidated balance sheet of Auric and its subsidiary as of September 30, 1997 which will not differ materially from the Balance Sheet. (f) within ten (10) days after the date of this Agreement, audited consolidated statements of operations, stockholders' equity and cash flows for Auric and its subsidiary for the fiscal year ended September 30, 1997 which will not differ materially from the statements provided under Section 3.7(d). The Financial Statements are or will be, as the case may be, true and correct in all material respects, in accordance with the books and records of Auric and present fairly, in all material respects, the financial position and results of operation of Auric as of the respective dates thereof and for such periods in conformity with United States generally accepted accounting principles ("GAAP") applied on a consistent basis. 3.8 Absence of Certain Liabilities and Changes. Except (a) for liabilities and obligations reflected or reserved for in the Balance Sheet, (b) for liabilities and obligations incurred in the ordinary course of business since the date of the Balance Sheet, (c) for liabilities and obligations incurred in connection with the Merger or otherwise as contemplated by this Agreement and (d) as set forth in Schedule 3.8, there are no liabilities or obligations, secured or unsecured (whether accrued, absolute, contingent or otherwise) which would be required by GAAP to be reflected or reserved against in a consolidated balance sheet of Auric or in the notes thereto and which, individually or in the aggregate, would reasonably be expected to have a material adverse effect with respect to Auric. Since the date of the Balance Sheet, Auric has been operated in the ordinary course consistent with past practice and, except as set forth on Schedule 3.8, or contemplated by Schedule 5.2, there has not been: (a) any material adverse effect with respect to Auric; (b) any material change in the accounting methods or principles of Auric; (c) any grant of any severance or termination pay by Auric to any executive officer or director of Auric or any increase in compensation or benefits payable by Auric under existing employment agreements or severance or termination pay policies to any of their employees other than (i) in the ordinary course of business consistent with past practices, (ii) increases or grants required by contracts disclosed herein or by applicable law, or (iii) increases, agreements and bonuses disclosed in Schedule 3.14; (d) any entry by Auric into any employment, bonus or deferred compensation agreement with any of its directors, officers or other employees, other than as disclosed in Schedule 3.14; - 7 - 8 (e) any entry by Auric into, or any amendment or termination of, any material contract, agreement, lease, franchise, security, instrument, permit or license between Auric and any party, except in the ordinary course of business; (f) any declaration or payment of a distribution of cash or any other asset of Auric to Auric Stockholders (i) in the nature of a dividend, (ii) in redemption or as the purchase price of any of its capital stock, or (iii) in discharge or cancellation, whether in part or in whole, of any indebtedness owing to Auric Stockholders, other than as disclosed on Schedule 3.14; or (g) any purchase commitments in excess of its normal business requirements. 3.9 Inventory. The Inventory is of a quality and quantity usable in the ordinary course of business of Auric, except for obsolete items or items below standard quality as to which a provision determined in a manner consistent with the prior practice of Auric has been made on the books of Auric in accordance with GAAP. The value of all inventory items, including finished goods, work-in-process and raw materials, has been recorded on the books of Auric at the lower of cost (determined in accordance with the accounting inventory valuation methods of Auric) or fair market value. 3.10 Receivables. Auric has delivered to OMG an accurate aging schedule of all of the accounts receivable reflected on the books of Auric as of September 30, 1997. The reserve on the Balance Sheet for bad debt is reasonable in light of the nature of the business and Auric's past experience. Any receivable due from Auric Stockholders (other than business and travel advances made in the ordinary course of business) shall be paid in full in cash on or prior to the Closing Date. 3.11 Taxes. Except as set forth on Schedule 3.11, (i) Auric has filed (or caused to be filed or had filed on its behalf) in a timely manner all material federal, state, local and foreign returns required by applicable law to be filed (each a "Return") with respect to all federal, state, local and foreign taxes and assessments (including all interest, penalties and additions to tax imposed with respect to such amounts) of Auric ("Taxes") and has paid (or the consolidated, combined or unitary group of which Auric is a member has paid on its behalf) all Taxes shown due on such Returns for which Auric may be liable, except for Taxes that are being contested in good faith by appropriate proceedings and set forth on Schedule 3.11; (ii) there is no outstanding agreement, waiver or consent providing for an extension of the statutory period of limitations applicable to the assessment of any Tax and no power of attorney granted by Auric with respect to any tax matter is currently in force; (iii) there is no action, suit, proceeding, investigation, audit or claim now pending against Auric with respect to any Tax, nor is there any assessment asserted in writing by any Tax authority; (iv) Auric has not filed any agreement or consent under Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"); (v) no property of Auric is "tax-exempt use property" within the meaning of Section 168(h) of the Code nor property that OMG will be required to treat as being owned by another person pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986; (vi) Auric has made timely payments of all material Taxes required to be deducted and withheld from the wages paid to employees; (vii) Auric has not been a party to any Tax allocation or sharing agreement; (viii) - 8 - 9 Auric has not received a written claim made by an authority in a jurisdiction where it does not file Tax Returns that it is or may be subject to taxation by that jurisdiction; (ix) Auric has not agreed to (nor is it required to make) any material adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (x) all Returns filed by Auric are true, correct, and complete in all material respects and all material Taxes owed by Auric that are due and payable prior to the Closing Date have been, or will be prior to the Closing Date, fully paid in a timely fashion; (xi) Auric has no material liability, contingent or otherwise, for Taxes not due and payable except as provided in the Balance Sheet or to the extent incurred since the date of such Balance Sheet in the ordinary course of its business; (xii) the U.S. Federal Income Tax Liabilities of Auric have been finally determined by the Internal Revenue Service and satisfied, or the time for audit has expired, for all taxable periods through September 30, 1994; (xiii) the most recent federal income tax audit of Auric by the Internal Revenue Service involved the taxable year 1994 and such audit was concluded with no adjustment; and (xiv) Auric is not currently being audited by any state taxing authority and the aggregate amount of additional taxes assessed (as a result of audit or other investigation) by state taxing authorities subsequent to January 1, 1993 (regardless of whether the taxable period at issue began before or after January 1, 1993) did not exceed $100,000. 3.12 List of Material Contracts. (a) Schedule 3.12 lists as of the date of this Agreement: (i) all commitments and agreements for the purchase or sale of any supplies or services that involve an expenditure by or payment to Auric of more than $50,000 for any one contract or series of related contracts; (ii) all personal property leases under which Auric is either lessor or lessee that involve annual payments or receipts of $50,000 or more; (iii) all agreements, mortgages, indentures and other instruments relating to indebtedness for borrowed money to which Auric is a party or by which it or its properties are bound that require annual payments by Auric of more than $50,000, (iv) all government contracts and all other agreements with customers that involve an annual payment to Auric of more than $50,000 for any one contract or related contracts, and (v) all non-competition agreements, sales representation, distributorship or consulting agreements, and non-disclosure agreements entered into by Auric. Auric has made available to OMG complete and correct copies of all items listed on Schedule 3.12 that are in writing, and the descriptions of the material terms contained in Schedule 3.12 of all items listed therein that are not in writing are accurate and correct. (b) Except as disclosed in Schedule 3.12, as of the date of this Agreement, Auric is not in default under the terms of any item listed on Schedule 3.12, except where such defaults would not have a material adverse effect with respect to Auric. (c) To the best of Auric's knowledge, as of the date of this Agreement, no other party is in default under the material terms of any of the contracts, arrangements, instruments or other agreements listed in Schedule 3.12 and each is valid and in full force and effect with respect to Auric. No party has notified Auric in writing of its intention to cease to perform any material services required to be performed by it or withhold any material payment required to be made by it thereunder. - 9 - 10 3.13 Labor Matters. (a) During the two (2) years ending on the date hereof, to the knowledge of Auric, no petition has been filed or proceedings initiated by any employee or group of employees seeking recognition of a bargaining representative for Auric. During the two (2) years ending on the date hereof, Auric has not experienced any strike or work stoppage of any kind. To the best of Auric's knowledge, there is no organizational effort currently being made or threatened to organize employees of Auric for the purpose of forming or joining any labor union. There are no controversies or disputes pending between Auric and any of its employees other than controversies and disputes with individual employees arising in the ordinary course of business which have not had and could not reasonably be foreseen to have, individually or in the aggregate, a material adverse effect. Except as set forth on Schedule 3.13, there are no unfair labor practice or other administrative or court proceedings pending, or to the best of Auric's knowledge, threatened, between Auric and its employees. (b) No present or former employee of Auric has asserted any claim of more than $50,000 against Auric under any employment agreement, or otherwise, on account of or for (i) overtime pay, other than overtime pay for the current payroll period, (ii) wages or salary for any period other than the current payroll period, (iii) vacation or time off (or pay in lieu thereof), other than that earned in respect of the previous twelve months, or (iv) any violation of any statute, ordinance or regulation relating to minimum wages or maximum hours of work. (c) No persons or parties (including but not limited to, governmental agencies of any kind) have asserted any claim arising out of any breach or violation by Auric of any statute, ordinance or regulation relating to discrimination in employment or employment practices or occupational safety and health standards (including without limitation, the Occupational Safety and Health Act, the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, or the Age Discrimination in Employment Act of 1967) except as set forth on Schedule 3.13. 3.14 Employee Benefit Plans. (a) General. Schedule 3.14 sets forth a true and complete list and brief description of each "employee pension benefit plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) and other employee benefit plans, programs and arrangements (including without limitation, those providing any stock option, stock purchase, stock appreciation right, bonus, incentive, deferred compensation, excess benefits, profit sharing, pension, thrift, savings, stock bonus, employee stock ownership, salary continuation, severance, retirement, supplemental retirement, disability, dental, vision care, hospitalization, major medical, life insurance, accident insurance, vacation, holiday and/or sick leave pay, tuition reimbursement, fringe benefits, executive perquisite or other employee benefits) now or heretofore maintained, or contributed to, or required to be contributed to, by Auric or by any ERISA Affiliate for the benefit of any officer, director or employee, current or former, active or inactive, maintained by Auric (all the foregoing being herein called "Benefit Plans"). Auric does not have any formal plan or commitment, whether legally binding or not, to create any additional plan or modify or change any existing Benefit Plan that would affect any employee - 10 - 11 or former employee or officer or director of Auric, except as required by applicable law. As used herein, "ERISA Affiliate" means any subsidiary of Auric and any trade or business (whether or not incorporated) that is part of the same controlled group, or under common control with, or part of an affiliated service group that includes, Auric within the meaning of Code Sections 414(b), (c), (m) or (o). (b) Administration. To the best of Auric's knowledge, each Benefit Plan has been administered in all material respects in accordance with its terms. All of the Benefit Plans and Auric are in material compliance in all respects with the applicable provisions of ERISA and the Code. To the best of Auric's knowledge, all material reports, returns and similar documents with respect to the Benefit Plans required to be filed with any government agency or distributed to any Benefit Plan participant have been duly and timely filed or distributed. To the best of Auric's knowledge, there are no investigations by any governmental agency, termination proceedings or other claims (except claims for benefits payable in the normal operation of the Benefit Plans), suits or proceedings against or involving any Benefit Plan or asserting any rights or claims to benefits under any Benefit Plan that could reasonably be expected to give rise to any liability to Auric or an ERISA Affiliate, nor is Auric aware of any facts that could reasonably be expected to give rise to any liability in the event of any such investigation, claim, suit or proceeding. (c) Contributions; Funding. All contributions to, and payments from, the Benefit Plans that may have been required to be made in accordance with the Benefit Plans and applicable law have been timely made. None of the Benefit Plans is subject to the minimum funding requirements of Section 302 of ERISA or Section 412 of the Code. (d) Compliance. To the best of Auric's knowledge, all the Benefit Plans, as and from the date adopted or as they may have been amended, as, when and to the extent required, comply, and at all times applicable complied, in all material respects, with the applicable provisions of the Code, ERISA, the Equal Pay Act of 1963, as amended, the Age Discrimination in Employment Act of 1967, as amended, Title VII of the Civil Rights Act of 1964, as amended, all other federal or state laws regulating employment and employee benefits, and all regulations and rulings issued by government agencies responsible for the administration or enforcement of one or more of such laws. Each Benefit Plan that is an employee pension benefit plan within the meaning of Section 3(2) of ERISA has received a determination letter from the Internal Revenue Service (the "IRS") to the effect that such Benefit Plan is currently qualified and exempt from Federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor has revocation been threatened, nor has any such Benefit Plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect its qualification or increase its cost; and all amendments required to be adopted by such determination letters have been adopted within the requisite time periods. (e) Prohibited Transactions; Reportable Events. No "prohibited transaction" (as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred which involves the assets of any Benefit Plan which could reasonably be expected to subject any employees of Auric, a trustee, administrator or other fiduciary of any trusts created under any Benefit Plan - 11 - 12 to the tax or penalty on prohibited transactions imposed by Section 4975 of the Code or the sanctions imposed under Title I of ERISA. None of the Benefit Plans has been terminated nor have there been any "reportable events" (as defined in Section 4043 of ERISA and the regulations thereunder) with respect thereto, except for reportable events with respect to which the 30-day notice period has been waived. To the best of Auric's knowledge, neither Auric nor any trustee, administrator or other fiduciary of any Benefit Plan nor any agent of any of the foregoing has engaged in any transaction or acted or failed to act in a manner which could reasonably be expected to subject Auric or any Benefit Plan to any material tax, penalty or other liability under ERISA or any other applicable law, whether by way of indemnity or otherwise. No Benefit Plan or related trust has any liability of any nature, accrued or contingent, including, without limitation, liabilities for federal, state or local taxes, other than for routine payments to be made in due course to participants, investment managers, trustees and beneficiaries. (f) PBGC. None of the Benefit Plans is subject to Title IV of ERISA, nor is Auric aware of any facts which might give rise to any liability of Auric under Title IV of ERISA and which could reasonably be anticipated to result in any claims being made against Auric by the Pension Benefit Guaranty Corporation. (g) Certain Matters. Except with respect to payments made under the ESOP or as disclosed in Schedule 3.14, the execution and performance of the transactions contemplated by this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Benefit Plan that will or may result in any payment (whether of severance pay or otherwise), acceleration, vesting or increase in benefits with respect to any employee, former employee, officer or director of Auric. Except with respect to payments made under the ESOP or as disclosed in Schedule 3.14, no payment which will be or may be made by Auric to any employee, former employee, officer or director or agent thereof will or may be characterized as an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code. Except with respect to payments made under the ESOP or as disclosed in Schedule 3.14, no payments of any kind will become due in connection with the execution and performance of the transactions contemplated in this Agreement (either alone or upon the occurrence of any additional or subsequent events) under any Benefit Plan. (h) Post-Retirement Benefits. Except as disclosed in Schedule 3.14, no Benefit Plan provides benefits, including without limitation, death, disability, or medical benefits (whether or not insured), with respect to current or former employees of Auric beyond their retirement or other termination of service other than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on the books of Auric or (iv) benefits the full cost of which is, and which will continue to be, borne solely by the current or former employee (or his beneficiary). (i) COBRA. Each Benefit Plan that is a "group health plan" (within the meaning of Section 5000(b)(1) of the Code) maintained by Auric as of the first day of each group health plan's first plan year beginning on or after July 1, 1986, has been administered in compliance with the continuation coverage requirements contained in the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and as provided under ERISA Sections 601-609 and - 12 - 13 under former Section 162(k) and current Section 4980B(f) of the Code and any regulations promulgated or proposed thereunder. (j) Multiemployer Plans. At no time has Auric or any ERISA Affiliate been required to contribute to, or incurred any withdrawal liability (within the meaning of Section 4201 of ERISA) to any Benefit Plan which is a multiemployer plan as defined in ERISA Section 3(37) (a "Multiemployer Plan"). (k) ESOP. With respect to the ESOP, neither Auric nor any ERISA Affiliate has incurred, and neither is reasonably expected to incur, any liability (i) under ERISA or the Code, (ii) to any participant or beneficiary of the ESOP, or (iii) to any fiduciary of the ESOP for indemnification or otherwise, arising out of or pertaining to the ESOP's sale of its shares of Auric Common Stock to OMG. 3.15 Litigation; Compliance with Laws. (a) Except as disclosed in Schedule 3.15, there is no judicial or administrative action, proceeding or, to the best of Auric's knowledge, investigation pending or, to the best of Auric's knowledge, judicial or administrative action, proceeding or investigation threatened, that could reasonably be expected to (i) have a material adverse effect with respect to Auric or (ii) impair Auric's ability to perform its obligations under this Agreement. Except as disclosed in Schedule 3.15, Auric is not subject to any outstanding order, injunction or decree which, if adversely determined insofar as can be reasonably foreseen by Auric, either individually or in the aggregate, would have such effect. (b) Auric is not in violation of any applicable law, regulation, ordinance or any other applicable requirement of any Governmental Entity or court, which violations in the aggregate would have a material adverse effect with respect to Auric. As of the date of this Agreement no written notice has been received by Auric alleging any such violations, except as set forth on Schedule 3.15. 3.16 Real Property. (a) Schedule 3.16(a) sets forth all of the real property used by Auric and owned in fee by Auric (the fee property being hereinafter referred to as the "Owned Property" and, together with all other real property used by Auric, the "Property"). As of the Closing Date, the Property is all of the real property used by Auric, and is adequate for the uses to which it is being put and sufficient for the conduct of Auric's business and operations as presently conducted in all material respects. Auric has made available to OMG copies of any title insurance policies or surveys in its possession relating to the Owned Property. Auric has, or as of the Closing will have, good and marketable title to each parcel of Owned Property free and clear of all liens, security interests, equities, encumbrances and claims of every kind ("Liens"), other than Permitted Liens (as hereinafter defined). - 13 - 14 (b) Except as disclosed in Schedule 3.16(b), Auric is not a party to any real property leases. Auric is not in default under the material terms of any of the real property leases set forth in Schedule 3.16(b). (c) Auric has not received any notice of violation of any ordinance, law or regulation of any Governmental Entity resulting from the current uses of, or the buildings or improvements on, the Property. No proceedings are pending as of the date hereof or, to the best of Auric's knowledge, threatened for condemnation of all or any part of the Property. 3.17 Tangible Personal Property. All of the fixtures, machinery and equipment reflected in the Balance Sheet (the "Tangible Personal Property") are in existence (except for dispositions made since the date of the Balance Sheet in the ordinary course of business). Schedule 3.17(a) contains a listing as of September 30, 1997 of each category of the Tangible Personal Property (other than items having a value of $5,000 or less). Substantially all of the Tangible Personal Property is located at the Owned Property. Except as set forth on Schedule 3.17(b), Auric has good title to, or holds by valid and existing lease, all of the Tangible Personal Property, free and clear of all Liens, other than Permitted Liens. The Tangible Personal Property is, to the best of Auric's knowledge, adequate for the uses to which it is being put and sufficient for the conduct of Auric's business and operations as presently conducted. 3.18 Proprietary Rights. (a) Schedule 3.18(a) sets forth a list of all inventions which are the subject of issued letters patent or an application therefor and all trade and service marks which have been registered or for which an application for registration is pending, in each case which are owned and used or held for use by Auric (each a "Proprietary Right"), specifying as to each, as applicable: (i) the nature of such Proprietary Right; (ii) the owner of such Proprietary Right; (iii) the jurisdictions by or in which such Proprietary Right has been issued or registered or in which an application for such issuance or registration has been filed, including the respective registration or application numbers, if available; and (iv) material licenses, sublicenses and other agreements to which Auric is a party and pursuant to which any person is authorized to use such Proprietary Right. (b) Except as set forth on Schedule 3.18(b), (i) Auric is not a defendant in any claim, suit, action or proceeding which involves a claim of infringement of any Proprietary Rights, and (ii) to Auric's knowledge, there are no existing infringements by any other person of any Proprietary Right. Auric has such rights to use all Proprietary Rights as are necessary to permit Auric to conduct operations as currently conducted, except where the failure to have such rights would not have a material adverse effect with respect to Auric. To Auric's knowledge, the conduct of the business of Auric, as currently conducted, does not infringe on any proprietary right of any third party. Except as disclosed on Schedule 3.18(b), to Auric's knowledge, no Proprietary Right is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by Auric or restricting the licensing thereof by Auric to any person. With the exception of those matters disclosed on Schedule 3.18(b), Auric has not entered into any special agreement to indemnify any other person against any charge of infringement of any patent, trademark, service mark or copyright of Auric. - 14 - 15 3.19 Environmental Matters. (a) Except as set forth in Schedule 3.19: (i) Auric is in compliance with all applicable Environmental Laws including, but not limited to, the possession of all permits and other governmental authorizations required under applicable Environmental Laws, where the failure to comply with such Environmental Laws would be reasonably likely to have a Material Adverse Effect on Auric; (ii) There is no pending or, to the knowledge of Auric, threatened claim, lawsuit or administrative proceeding against Auric under any Environmental Law, which would be reasonably likely to have a Material Adverse Effect on Auric. Auric has not received written notice from any person, including a Governmental Entity, alleging that Auric is in violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law, which violation or liability is unresolved and would be reasonably likely to have a Material Adverse Effect on Auric; and (iii) There have been no Releases, spills or discharges of Hazardous Materials on or underneath any of the Properties that would be reasonably likely to have a Material Adverse Effect on Auric. (b) The following terms shall have the indicated meaning: "Environmental Laws" means all federal, state, local and foreign laws and regulations relating to pollution or protection of human health or the environment, including without limitation, laws relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, disposal, transport or handling of Hazardous Materials and all laws and regulations with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Materials. "Hazardous Materials" means all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or defined as such by, or regulated as such under, any Environmental Law. "Release" means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater and surface or subsurface strata) or into or out of any property, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or property. "Remediation Standard" means a numerical standard that defines the concentrations of Hazardous Substances that may be permitted to remain in any environmental media after an investigation, remediation or containment of a release of Hazardous Substances. - 15 - 16 3.20 Permits and Licenses. Set forth in Schedule 3.20(i) is a list of all material permits, licenses, franchises or other authorizations held by Auric. Except as set forth on Schedule 3.20(ii), Auric has all permits, licenses, franchises and other authorizations necessary for the conduct of the business and operations as currently conducted, except those the failure of which to have would not, individually or in the aggregate have a material adverse effect with respect to Auric. To Auric's knowledge, all such permits, licenses, franchises and authorizations are valid and in full force and effect and Auric is in compliance with the terms and conditions of such permits except where the failure to so comply would not have a material adverse effect with respect to Auric. 3.21 Insurance. Set forth in Schedule 3.21 is a list of all insurance policies pursuant to which Auric is insured as of the date of this Agreement. 3.22 Suppliers and Customers. No supplier or customer which accounted for more than five percent (5%) of the sales or purchases of Auric since September 30, 1996 has terminated or, to the best of Auric's knowledge, threatened to terminate, its relationship with Auric. To the best of Auric's knowledge as of the date hereof, there will not be any adverse effect on the relationship of Auric with any of its suppliers or customers solely due to Auric Stockholders ceasing to beneficially own the capital stock of Auric. 3.23 Experience Matters. Set forth in Schedule 3.23 is a reasonably detailed description of the history of the experience of Auric during the two (2) years ending on the date hereof with respect to (i) product liability claims and product warranty claims exceeding $10,000, and (ii) all workers' compensation claims. Schedule 3.23 also contains a reasonably detailed description, as of the date of this Agreement, of all product warranty, product liability and workers' compensation claims currently pending. 3.24 Brokers' or Finders' Fees. Except for Berenson, Minella & Company and Houlihan, Lokey, Howard & Zukin, no agent, broker, investment banker, financial advisor or other firm or person is entitled to any brokers' fees, finders' fees, agents' commissions or other similar forms of compensation in connection with this Agreement or the transactions contemplated hereby. 3.25 Disclosure. Neither this Agreement (including the Exhibits and Schedules hereto) nor any certificate by Auric under this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF OMG AND OMGAC OMG represents and warrants that the following are true and correct on the date of this Agreement: 4.1 Organization and Good Standing. Each of OMG and OMGAC is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware - 16 - 17 and has full corporate power and authority to enter into this Agreement and consummate the transactions contemplated hereby. 4.2 Authority; Noncontravention. The execution and delivery of this Agreement by OMG and OMGAC and the consummation by OMG and OMGAC of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of OMG and OMGAC. This Agreement has been duly executed and delivered by and constitutes a valid and binding obligation of each of OMG and OMGAC, enforceable against such party in accordance with its terms. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, (a) the certificate of incorporation or bylaws of OMG or OMGAC, (b) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to OMG, OMGAC or any other subsidiary of OMG or their respective properties or assets or (c) subject to the governmental filings and other matters referred to in Section 4.3, any judgment, order, decree, statute, law, ordinance, rule, regulation or arbitration award applicable to OMG, OMGAC or any other subsidiary of OMG or their respective properties or assets, other than, in the case of clauses (b) and (c), any such conflicts, breaches, violations, defaults, rights, losses or liens that individually or in the aggregate would not have a material adverse effect with respect to OMG or would not prevent, hinder or materially delay the ability of OMG to consummate the transactions contemplated by this Agreement. 4.3 Consents and Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Entity is required by or with respect to OMG, OMGAC or any other subsidiary of OMG in connection with the execution and delivery of this Agreement by OMG or OMGAC or the consummation by OMG or OMGAC, as the case may be, of any of the transactions contemplated by this Agreement, except for (a) the filing of a premerger notification and report form under the HSR Act and (b) the filing of the Certificate of Merger with the Secretary. 4.4 Sufficient Funds. OMG has sufficient funds available (through existing credit arrangements or otherwise) to provide the Merger Consideration for all of the outstanding shares of Auric Common Stock and to pay all of its fees and expenses related to the transactions contemplated by this Agreement. 4.5 Brokers' or Finders' Fees. Except for the engagement of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), OMG has not dealt with any broker or finder or incurred any liability for brokers' fees, finders' fees, agents' commissions or other similar forms of compensation in connection with this Agreement or the transactions contemplated hereby. OMG shall be solely responsible for any fees and expenses owing DLJ. 4.6 OMGAC's Operations. OMGAC was formed solely for the purpose of engaging in the transactions contemplated hereby and has not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated hereby. - 17 - 18 4.7 Investigation by OMG. OMG has conducted its own independent review and analysis of the business, operations, assets, liabilities, results of operations, financial condition, technology and prospects of Auric and any subsidiary of Auric and acknowledges that OMG has been provided access to the personnel, properties, premises and records of Auric and any subsidiary of Auric for such purpose and, in entering into this Agreement, OMG has relied solely upon its own investigation and analysis and the representations and warranties contained herein. ARTICLE V FURTHER AGREEMENTS OF THE PARTIES 5.1 Access to Information. Upon reasonable notice, Auric shall give to OMG and its counsel, accountants and other representatives reasonable access, during normal business hours throughout the period prior to the Closing, to the property, books, commitments, agreements, records, files and personnel of Auric, and Auric shall furnish to OMG during that period all copies of documents and information concerning the business, properties, financial condition, operations and personnel of Auric as OMG may reasonably request subject to applicable law. OMG shall hold, and shall cause its counsel, accountants and other agents and representatives to hold, all such information and documents in accordance with, and subject to the terms of, the confidentiality agreement previously executed by OMG with respect to this transaction. 5.2 Conduct of the Business Pending the Closing. Until the Closing or the termination of this Agreement, except as otherwise set forth in Schedule 5.2 or contemplated by this Agreement, Auric shall comply with the provisions set forth below: (a) Auric shall operate the business in the ordinary course; (b) Auric shall not grant any general increase in the rates of salaries or compensation of its employees or any specific increase to any employee except such as are in accordance with regularly scheduled periodic increases; (c) Except as provided for under the existing Benefit Plans, Auric shall not (i) grant or agree to grant any bonuses to any employee, or (ii) provide for any new pension, retirement or other employment benefits to any of its employees or any increase in any existing benefits; (d) Auric shall not amend its Certificate of Incorporation or Bylaws or enter into any merger or consolidation agreement; (e) Auric shall use commercially reasonable efforts to maintain and preserve in all material respects its business, and to maintain its existing relationships with customers, suppliers, employees and other business associates; (f) Other than in the ordinary course of business, Auric shall not sell, assign, voluntarily encumber, grant a security interest in or license with respect to, or dispose of, any of its material assets or properties tangible or intangible in excess of $100,000, or incur any material liabilities; - 18 - 19 (g) Auric shall maintain in full force and effect all insurance currently maintained by Auric; and (h) No Benefit Plan, nor any trust established thereunder, shall be amended or terminated by formal action of Auric after the date copies thereof are disclosed, and no Benefit Plan or trust relating thereto shall be amended or terminated by formal action of Auric prior to the Effective Date, except as an amendment may be necessary to effect the transactions contemplated by this Agreement so long as any such amendment does not adversely affect Auric's interests in the Benefit Plan being amended, or as may be adopted as a condition to the issuance of a favorable determination letter by the IRS, or as otherwise may be required to comply with the requirements of ERISA and the Code. 5.3 No Solicitation. (a) Auric and any subsidiary of Auric will not, and will use their best efforts to cause their officers, directors, employees and investment bankers, attorneys or other agents retained by or acting on behalf of Auric or any subsidiary of Auric not to, (i) initiate, solicit or encourage, directly or indirectly, any inquiries or the making of any proposal that constitutes or is reasonably likely to lead to any Acquisition Proposal (as defined herein), (ii) except as permitted below, engage in negotiations or discussions with, or furnish any information or data to any third party relating to an Acquisition Proposal, or (iii) except as permitted below, enter into any agreement with respect to any Acquisition Proposal or approve any Acquisition Proposal. Notwithstanding anything to the contrary contained in this Section 5.3 or in any other provision of this Agreement, Auric and its Board of Directors (i) may participate in discussions or negotiations (including, as a part thereof, making any counterproposal) with or furnish information to any third party making an unsolicited Acquisition Proposal (a "Potential Acquiror") or approve an unsolicited Acquisition Proposal if Auric's Board of Directors is advised by its financial advisor that such Potential Acquiror has the financial wherewithal to be reasonably capable of consummating such an Acquisition Proposal, and Auric's Board of Directors determines in good faith, based upon written advice of its outside legal counsel, that the failure to participate in such discussions or negotiations or to furnish such information or approve an Acquisition Proposal would violate the Board's fiduciary duties under applicable law, and (ii) shall be permitted to (X) take and disclose to the Auric Stockholders a position with respect to any tender or exchange offer by a third party, or amend or withdraw such position or (Y) make disclosure to the Auric Stockholders, in the case of clause (X) or clause (Y) if Auric's Board of Directors determines in good faith, based upon advice of its outside legal counsel, that the failure to take such action would violate such Board's fiduciary duties under, or otherwise violate, applicable law. Auric agrees that any non-public information furnished to a Potential Acquiror will be pursuant to a confidentiality agreement substantially similar to the confidentiality provisions of the confidentiality agreement entered into between Auric and OMG. In the event that Auric shall determine to provide any information as described above, or shall receive any Acquisition Proposal, it shall promptly inform OMG in writing as to the fact that information is to be provided and shall furnish to OMG the identity of the recipient of such information and the Potential Acquiror and the terms of such Acquisition Proposal, except to the extent that Auric's Board of Directors determines in good faith, based upon written advice of its outside legal counsel, that any such action described in this sentence would violate such - 19 - 20 Board's fiduciary duties under, or otherwise violate, applicable law. Auric will keep OMG reasonably informed of the status (including amendments or proposed amendments) of any such Acquisition Proposal except to the extent that Auric's Board of Directors determines in good faith, based upon advice of its outside legal counsel, that any such action would violate such Board's fiduciary duties under, or otherwise violate, applicable law. (b) Auric's Board of Directors shall not (i) withdraw or modify or propose to withdraw or modify, in any manner adverse to OMG, the approval or recommendation of such Board of this Agreement or the Merger or (ii) approve or recommend, or propose to approve or recommend, any Acquisition Proposal unless such Board determines in good faith, based upon written advice of its outside legal counsel, that the failure to take such action would violate such Board's fiduciary duties under applicable law. (c) For purposes of this Agreement, "Acquisition Proposal" shall mean any bona fide proposal, whether in writing or otherwise, made by a third party to acquire beneficial ownership (as defined under Rule 13(d) of the Securities Exchange Act of 1934, as amended) of all or a material portion of the assets of, or any material equity interest in, Auric or any subsidiary of Auric pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, sale of assets, tender offer or exchange offer or similar transaction involving Auric or any subsidiary of Auric including, without limitation, any single or multi-step transaction or series of related transactions which is structured to permit such third party to acquire beneficial ownership of any material portion of the assets of, or any material portion of the equity interest in, Auric or any subsidiary of Auric (other than the transactions contemplated by this Agreement). 5.4 Approval of Auric Stockholders. As soon as reasonably practicable, Auric shall: (a) take all steps necessary duly to call, give notice of, convene and hold a special meeting of Auric Stockholders (the "Auric Special Meeting") (i) for the purpose of adopting this Agreement (the "Auric Stockholders' Approval") and (ii) for such other purposes as may be necessary or desirable; (b) distribute to Auric Stockholders a proxy statement or other document required in accordance with applicable federal and state law and with its Certificate of Incorporation and Bylaws to obtain approval of this Agreement and the Merger; (c) recommend, through its Board of Directors, to the Auric Stockholders the adoption of this Agreement and such other matters as may be submitted to such stockholders in connection with this Agreement; provided that Auric may withdraw or modify or propose to withdraw or modify, in a manner adverse to OMG, such approval or recommendation of its Board of Directors in accordance with Section 5.3 herein; and (d) cooperate and consult with OMG with respect to each of the foregoing matters. 5.5 Employment of Employees Following Closing. On the Closing Date, OMG agrees that the Surviving Corporation will continue to employ the employees of Auric. - 20 - 21 5.6 ESOP Participants. Auric and the trustees of the ESOP (the "Trustee") shall take all actions necessary in accordance with applicable law and the terms of the ESOP to provide the Participants (as such term is defined in the ESOP) of the ESOP with information regarding the Merger and the transactions contemplated hereby at least seven days prior to the date of the Auric Special Meeting for the Auric Stockholders' Approval. Representatives of OMG shall be entitled to review and comment on any materials to be provided to the Participants, and shall be entitled to provide information to the Participants regarding the Merger. 5.7 Environmental Matters. (a) At OMG's sole cost and expense, OMG may, on or before the date 20 days after the date hereof, perform or have performed an environmental assessment of the Property at a time mutually convenient to Auric and OMG; and (b) After the Closing, OMG shall be solely responsible and liable for the Property's compliance with all Environmental Laws; subject only, however, to the obligations of Auric expressly set forth in Section 9.2(a)(ii). 5.8 Real Property. At or prior to the Closing, Auric shall enter into a purchase agreement, substantially in the form of Exhibit C hereto, providing for the purchase by Auric of the Real Property presently leased to Auric by Mr. Maurice Bick. 5.9 Regulatory Approvals. The parties hereto shall use their best efforts to file as soon as practicable all notifications, filings and other documents required to obtain all governmental authorizations, approvals, consents or waivers, including, without limitation, under the HSR Act, and to respond as soon as practicable to any inquiries received from the Federal Trade Commission, the Antitrust Division of the Department of Justice, and any other Governmental Entity for additional information or documentation and to respond as promptly as practicable to all inquiries and requests received from any Governmental Entity in connection therewith. The parties hereto will not take any action that will have the effect of delaying, impairing or impeding the receipt of any required approvals and will use their best efforts to secure such approvals as promptly as possible. 5.10 Other Action. Subject to the terms and conditions of this Agreement, each of the parties shall use its best efforts to cause the fulfillment at the earliest practicable date but, in any event, prior to the Closing Date, of all of the conditions to their respective obligations to consummate the transactions under this Agreement. 5.11 Notices. Each party shall promptly notify the other party in writing of, and furnish to such party any information that such party may reasonably request with respect to, (a) the occurrence or nonoccurrence of any event or the existence of any state of facts that would likely, or with the lapse of time would likely, cause (i) any representation or warranty contained herein to be untrue or inaccurate or (ii) any covenant, condition or agreement contained herein not to be complied with or satisfied and (b) any failure of Auric or OMG, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.11 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. - 21 - 22 5.12 Publicity. OMG and Auric shall consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release concerning the transactions contemplated by this Agreement and will not issue a press release prior to such consultation. 5.13 Supplement to Disclosures. For purposes of determining the accuracy of the representations and warranties of Auric contained in Article III and the fulfillment of the conditions precedent set forth in Section 6.1, the Schedules delivered by Auric shall be deemed to include only that information contained therein on the date of this Agreement and as the same may be amended or supplemented by Auric, which Auric shall have the right to do at any time prior to the Closing Date; provided, however, that any amendment or supplement shall not be deemed to cure a breach of a representation or warranty of Auric unless permitted by OMG and, in the event that OMG closes the transactions contemplated by this Agreement, OMG shall have no right to assert a breach of a representation or warranty with respect to such amended or supplemented representation or warranty. 5.14 Preservation of Records. OMG agrees, at its own expense, to (a) preserve and keep the records of Auric for a period of seven (7) years from the Closing, or for any longer periods as may be required by any government agency or ongoing litigation, and (b) make such records available to the other as may be reasonably required by the other. In the event either party wishes to destroy such records after the time specified above, it shall first give sixty (60) days' prior written notice to the other and the other shall have the right at its option and expense, upon prior written notice given to the other within that sixty (60) day period, to take possession of the records. 5.15 Stockholders' Representative. OMG and Auric agree that from and after the Closing (i) all communications, notices and deliveries by OMG to the Stockholders' Representative with respect to any and all matters pertaining to this Agreement and the Escrow Agreement shall be deemed to be sufficient communications with, notices or deliveries to Auric, and OMG shall not be required to communicate with, give notices or make any deliveries to, Auric if it has communicated with, given notices or made delivery to, the Stockholders' Representative and (ii) OMG, its officers, directors, agents, counsel and assigns shall be fully protected in relying upon any communications, notices or deliveries to them by the Stockholders' Representative on behalf of Auric and the Auric Stockholders, and shall be entitled to rely upon any act or acts performed, or undertaken or omitted to be taken by Stockholders' Representative on behalf of Auric and the Auric Stockholders. 5.16 Stock Options and Purchase Obligations. OMG agrees that immediately prior to the Closing, Auric may loan to the two employees of Auric, who hold options to purchase or who have rights to purchase, an aggregate of 20,000 and 24,800 shares of Auric Common Stock, respectively, the amount of $920,000 and $1,140,800, respectively, to exercise their rights to purchase such shares. Auric agrees that such loans will be evidenced by promissory notes with a maturity date of no later than seven (7) days after the Closing Date and that the Exchange Agent may be instructed by OMG to withhold the amount of such loans from any payments of Merger Consideration to be paid to such persons for their Auric Common Stock received upon exercise. - 22 - 23 5.17 ISRA Compliance. (a) As a condition precedent to consummating the Merger that is the subject of this Agreement, Auric shall (i) at its sole expense, obtain from the New Jersey Department of Environmental Protection ("NJDEP") and execute a Remediation Agreement ("RA") pursuant to sections 13:1K-11.5 and 13:1K-9(e) of the Industrial Site Recovery Act; NJSA 13:1K-6 et seq. ("ISRA"), the regulations promulgated thereunder and any amending or successor legislation and regulations, (ii) identify the Surviving Corporation as the "responsible person" under the RA and, as such, shall conduct any remediation or other activity required by NJDEP in connection with the Newark facility and its ISRA obligations triggered by this Merger transaction, and (iii) obtain and post or execute prior to the Closing Date, at the lowest cost reasonably possible, and thereafter maintain in full force and effect, any remediation trust fund, environmental insurance policy, line of credit, self-guarantee or other remediation funding source required by the NJDEP, or pursuant to ISRA, until such remediation funding source is released by the NJDEP. The Surviving Corporation shall pay any and all remediation funding source surcharges. Within thirty (30) days of receiving notice that any such remediation funding source is not satisfactory to the NJDEP (or within such shorter time as may be specified by the NJDEP or as may be necessary to avoid the imposition of a penalty), the Surviving Corporation shall take all actions necessary to cure or correct any deficiency. (b) Subsequent to the consummation of the Merger, the Surviving Corporation, as the "responsible person" under the RA, shall conduct any remediation or other activity required by NJDEP in connection with its ISRA obligations triggered by this Merger transaction. (c) All costs associated with Auric's post-closing ISRA obligations including, but not limited to, counsel fees, investigative costs, monitoring costs, laboratory costs, consultants' fees, any New Jersey Pollutant Discharge Elimination System permit or Memorandum of Agreement requirements, any remedial, removal, or restoration work required or performed by federal, state or local government agencies or a political subdivision thereof, or performed by any non-governmental entity or person because of the presence, suspected presence, release or suspected release of a hazardous substance in soil, surface water or ground water at the Newark facility, shall be subject to the environmental cost sharing agreement established under Section 9.2 of this Agreement. (d) If for any reason the Closing does not occur, OMG shall have no obligations to NJDEP, and Auric will take all actions that are necessary to terminate any obligation of OMG to any Governmental Authority under this Agreement, provided that any such actions will not affect any remedies that might otherwise be available to the parties. 5.18 ESOP Matters. (a) Auric may, in its sole discretion, amend the ESOP prior to the Closing Date, provided that such amendment shall not result in failure of the ESOP to qualify under Section 401(a) of the Internal Revenue Code of 1986. Auric shall furnish OMG with copies of such amendments. - 23 - 24 (b) Auric shall, prior to the Closing Date, terminate the ESOP effective as of the Closing Date. The effect of termination shall be vesting of all participant accounts as of the Closing Date and distribution of participant ESOP account balances as soon as practicable following the Closing Date. (c) The Surviving Corporation shall not amend the ESOP after the Closing Date except with respect to remedial amendments required by the Internal Revenue Service as a condition for determination by the Internal Revenue Service that the ESOP has at all times been a qualified plan under Section 401(a) of the Internal Revenue Code. (d) The Surviving Corporation shall, promptly after the Closing Date, apply to the Internal Revenue Service for a determination that the ESOP is a qualified plan under Section 401(a) of the Internal Revenue Code as of termination of the ESOP. The Surviving Corporation shall make any remedial amendments required by the Internal Revenue Service as a condition of such determination. (e) The Surviving Corporation shall, within sixty (60) days after the receipt of a favorable determination letter from the Internal Revenue Service, cause the ESOP to distribute participant ESOP account balances to ESOP participants and beneficiaries or the trustee of an Eligible Retirement Account designated by such ESOP participants or beneficiaries. (f) The Surviving Corporation shall, within sixty (60) days following receipt by the ESOP of any Merger Consideration in accordance with the terms of the Escrow Agreement, cause the ESOP to allocate such Merger Consideration to participant ESOP account balances in proportion to such balances as of the Closing Date and distribute such participant ESOP account balances to ESOP participants and beneficiaries or the trustee of an Individual Retirement Account designated by such ESOP participants or beneficiaries. 5.19 Indemnification and Insurance. OMG agrees that all rights to indemnification for acts or omissions occurring prior to the Effective Time of the Merger now existing in favor of the current directors or officers of Auric and its subsidiaries (collectively, the "Indemnified Parties") as provided in their respective charters or by-laws or, with respect to Auric, by the General Corporation Law of the State of Delaware shall survive the Merger and shall continue in full force and effect for a period of not less than six (6) years from the Closing Date to the fullest extent permitted thereby. For a period of six (6) years from and after the Closing Date, OMG shall use reasonable efforts to obtain and maintain standard director's and officer's insurance for the directors and executive officers of Auric or to obtain "tail insurance" for such directors and officers in an amount of no less than $2,000,000. Nothing in the foregoing shall obligate OMG with respect to indemnification for acts or omissions occurring after the Effective Time. 5.20 Notwithstanding anything to the contrary herein, Auric and OMG agree that OMG shall not be entitled to indemnification from Auric for: (i) any increase in the cost of cleanup or correcting a noncompliance with law subject to indemnity by Auric due to an act or omission after the Closing Date by a person other than Auric; (ii) any capital improvements and repairs and modifications to capital improvements associated with the property or the facilities of the - 24 - 25 Surviving Corporation; (iii) except for any indemnity obligations under Section 9.2, matters arising out of agreements or consent orders with any Governmental Entity entered into by Auric prior to the Closing Date; and (iv) any costs that are incurred by Auric in performing its indemnity obligations under Section 9.2 due to any change with respect to the Property or the Surviving Corporation resulting or arising from the closure or sale of a facility or business, the construction of new structures or equipment, a modification to existing structures or equipment, excavation or movement of soil not required by Environmental Law, or a change in use of the facilities from manufacturing to any other use. ARTICLE VI CONDITIONS OF CLOSING 6.1 Conditions Precedent to Obligations of OMG and OMGAC. The obligations of OMG and OMGAC to effect the Merger shall be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by OMG): (a) All representations and warranties of Auric contained in this Agreement shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date with the same effect as though made on and as of the Closing Date; (b) Auric shall have performed and complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Auric at or prior to the Closing Date; (c) OMG shall have been furnished with the documents referred to in Section 7.1; (d) There shall have been no material adverse change with respect to Auric, except for changes generally affecting the industry in which Auric is a member; (e) The holders of no more than five percent (5%) of the outstanding shares of Auric Common Stock entitled to vote on the Merger shall, at the Effective Time, have perfected their dissenters' rights under Delaware law; (f) Before Closing, OMG shall receive at Auric's expense a survey of the Owned Property prepared after the date hereof by a registered land surveyor, which survey will not show any encroachment of improvements on or from the property or other matters that would have a material adverse effect on the use of such property; (g) Before Closing, OMG shall receive, at Auric's expense, the title commitments relating to Auric's title to the Property from a title company reasonably satisfactory to OMG; and (h) The Trustee shall have complied with all provisions of the governing documents of the ESOP and applicable law necessary for the consummation of the transactions contemplated hereby. - 25 - 26 6.2 Conditions Precedent to Obligations of Auric. The obligation of Auric to effect the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions (any or all of which may be waived by Auric): (a) All representations and warranties of OMG and OMGAC contained in this Agreement shall be true and correct in all material respects with the same effect as though made on and as of the Closing Date; (b) Each of OMG and OMGAC shall have performed and complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by OMG or OMGAC, as the case may be, at or prior to the Closing Date; and (c) Auric shall have been furnished with the documents referred to in Section 7.2. (d) Auric shall have received an opinion of Berenson & Minella & Company to the effect that the Merger Consideration to be received in the Merger by the Auric Stockholders, other than the ESOP, officers and directors of Auric or controlling stockholders of Auric, is fair to such holders from a financial point of view. 6.3 Conditions Precedent to the Conditions of Both Parties. The respective obligations of each party to effect the Merger shall be further subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (a) The Trustee shall have received an opinion of Houlihan, Lokey, Howard & Zukin, dated as of the Closing Date, to the effect that, as of such date the amount paid by OMG for the shares of Auric Common Stock owned by the ESOP, is not less than the value of such shares and the transactions contemplated hereby are fair to the ESOP from a financial point of view (the "ESOP Fairness Opinion"), and the Trustee shall have made the determination, as required by applicable law, that the Merger is prudent and in the best interest of the ESOP Participants and their beneficiaries. (b) Any waiting period applicable to the Merger under the HSR Act shall have expired or been terminated; (c) OMG and Auric shall have received evidence, in form and substance reasonably satisfactory to each of them, that such licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Entities and other third parties as are necessary in connection with the transactions contemplated hereby have been obtained, except such licenses, permits, consents, approvals, authorizations, qualifications and orders which are not, individually or in the aggregate, material to OMG or Auric or the failure of which to have been received would not (as compared to the situation in which such license, permit, consent, approval, authorization, qualification or order had been obtained) materially dilute the aggregate benefit to OMG of the Merger; - 26 - 27 (d) This Agreement shall have been approved and adopted by the affirmative vote of a majority of the votes that the Auric Stockholders are entitled to cast at the Auric Special Meeting; and (e) No statute, rule, regulation, order, decree or injunction shall have been enacted, promulgated or issued by any Governmental Entity or court which prohibits the consummation of the Merger. ARTICLE VII DOCUMENTS TO BE DELIVERED AT THE CLOSING 7.1 Documents to be Delivered by Auric. At the Closing, Auric shall deliver, or cause to be delivered, to OMG the following: (a) a copy of resolutions of the board of directors of Auric authorizing the execution, delivery and performance of this Agreement by Auric and a certificate of the secretary or assistant secretary of Auric, dated the Closing Date, that such resolutions were duly adopted and are in full force and effect; (b) a certificate, dated the Closing Date, executed by the chief executive officer or the chief financial officer of Auric certifying to the fulfillment of the conditions specified in Sections 6.1; (c) a favorable opinion of Auric's counsel, subject to customary qualifications and limitations, as to the matters set forth on Annex A hereto; and (d) a Noncompetition Agreement substantially in the form of Exhibit D hereto executed by Maurice Bick. 7.2 Documents to be Delivered by OMG. At the Closing, OMG shall deliver to Auric the following: (a) payment and evidence of the wire transfer referred to in Section 2.2(a); (b) a copy of the resolutions of the board of directors of OMG authorizing the execution, delivery and performance of this Agreement by OMG, and a certificate of its secretary or assistant secretary, dated the Closing Date, that such resolutions were duly adopted and are in full force and effect; (c) a certificate, dated the Closing Date, executed by the chief executive officer or the chief financial officer of OMG certifying to the fulfillment of the conditions specified in Section 6.2; and (d) a favorable opinion of OMG's counsel, subject to customary qualifications and limitations, as to the matters set forth on Annex B hereto. - 27 - 28 ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination. This Agreement may be terminated and abandoned at any time prior to the Effective Time of the Merger, whether before or after approval of the Merger by the Auric Stockholders: (a) by mutual written agreement executed by Auric and OMG; (b) by OMG, if any of the conditions specified in Section 6.1 shall not have been satisfied or waived in writing by OMG on or before March 31, 1998; (c) by Auric, if any of the conditions specified in Section 6.2 shall not have been satisfied or waived in writing by Auric on or before March 31, 1998; (d) by either party, if any of the conditions specified in Section 6.3 shall not have been satisfied on or before March 31, 1998; (e) by Auric or OMG if the Closing shall not have occurred by March 31, 1998; or (f) by Auric, if Auric exercises its right pursuant to Section 5.3(b). 8.2 Effect of Termination. In the event of termination of this Agreement by either Auric or OMG as provided in Section 8.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of OMG, OMGAC or Auric, other than pursuant to the provisions of this Section, Section 5.12 and Section 10.1. Nothing contained in this Section 8.2 shall relieve any party from liability for any willful breach of the representations, warranties, covenants or agreements set forth in this Agreement. 8.3 Amendment. This Agreement may be amended by the parties at any time before or after the Auric Stockholders' Approval; provided, however, that after such approval, there shall be made no amendment that by law requires further approval of the Auric Stockholders without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. ARTICLE IX SURVIVAL AND INDEMNIFICATION 9.1 Survival and Remedies. Notwithstanding any investigations made by OMG or Auric, the representations, warranties and covenants of Auric and OMG set forth in this Agreement shall survive the Closing until the first anniversary of the Closing Date, except that the environmental indemnity provided for in Section 9.2(a)(iii) and (v) which shall survive until the third anniversary of the Closing Date. Each party to this Agreement shall have as the sole and exclusive remedy a claim for indemnity under this Article IX and shall be precluded from asserting against another party any other rights resulting from the breach of any representation, warranty or covenant made by the other party to this Agreement. - 28 - 29 9.2 Auric's Indemnification. (a) Subject to the terms, conditions and limitations set forth in this Section 9.2, Auric agrees to indemnify and hold OMG harmless from and after the date of this Agreement against and in respect of any losses, liabilities, damages, deficiencies, attorney's fees or related expenses not reimbursed to OMG by other third parties (collectively, the "Losses"), resulting from: (i) claims relating to any misrepresentation or breach of a representation or warranty made by Auric or nonfulfillment of any covenant on the part of Auric under this Agreement; (ii) claims relating to any products sold by Auric prior to the Closing Date, including but not limited to claims based on tort liability, product liability, warranty, negligence or strict liability in excess of the amount reserved therefor on the Balance Sheet or the books of Auric as of the Closing Date but only to the extent such reserves were calculated in accordance with GAAP and consistent with past practice; (iii) claims relating to waste material shipped or sold by Auric prior to the Closing Date; (iv) claims for Taxes due from Auric with respect to the conduct of the business and operations of Auric prior to the Closing Date in excess of the amount reserved therefor on the Balance Sheet or the books of Auric as of the Closing Date but only to the extent such reserves were calculated in accordance with GAAP and consistent with past practice; (v) (1) claims resulting from cleanup of Hazardous Materials Released, disposed of or discharged on or prior to the Closing Date on or beneath the Property owned or operated by Auric on or prior to the Closing Date; (2) all liabilities arising from the failure of Auric prior to the Closing Date to be in compliance with any Environmental Laws in effect as of and enforceable as of the Closing Date; and (3) all requirements imposed by ISRA under Section 5.17 hereof. (b) Notwithstanding the foregoing, Auric shall not be obligated to indemnify OMG for any Losses with respect to any claims pursuant to Section 9.2(a)(i), (ii) and (iv) unless and until the amount of all such Losses shall exceed $250,000 in the aggregate, and then only to the extent of such excess. OMG shall have no right to make any claim with respect to Section 9.2(a)(i), (ii) and (iv) unless written notice thereof is given to Auric within one year from the Closing Date. Such notice shall state the basis of the claim, including the Section or Sections of this Agreement alleged to have been breached and, to the extent feasible, the amount or estimated amount of the claim. (c) Notwithstanding all other provisions hereof, Auric shall be obligated to indemnify OMG with respect to Losses pursuant to Section 9.2(a)(iii) and (v) which exceed $150,000 per year and then only to the extent of one-half (50%) of the amount of such excess up to the extent of the Escrow Funds then held by the Escrow Agent; provided, however, that Auric will be obligated for Losses only to the extent that: - 29 - 30 (i) cleanup of the Hazardous Materials is required by a Governmental Entity under an applicable Environmental Law that is in effect as of and is enforceable as of the Closing Date or is required by an applicable Environmental Law that is in effect as of and is enforceable as of the Closing Date; (ii) the Remediation Standards that must be met in order to satisfy the requirements of the applicable Environmental Law or Governmental Entity are the least stringent Remediation Standards that would be applicable given the use of the property as of the day before the Closing Date; (iii) such cleanup is for substances that were designated as Hazardous Materials and would have been subject to cleanup under an applicable Environmental Law had such cleanup been initiated on or before the Closing Date; and (iv) such cleanup is conducted using the most cost effective methods for investigation, remediation and/or containment consistent with applicable Environmental Law or the requirements of a Governmental Entity. To the extent that the Losses incurred in connection with a cleanup covered by Section 9.2(a)(iii) and (v) are in excess of the Losses that would be incurred for a cleanup meeting the conditions set forth in this subsection, Auric shall have no obligation to indemnify OMG for such excess Losses. Indemnification for Losses shall be available under Section 9.2(a)(iii) and (v) only with respect to those specific claims for which OMG has provided written notice to Auric by the third (3) anniversary of the Closing Date. Such notice must include, based on reasonably available evidence, the following: (i) location; (ii) the extent of contamination and the impacted media, if known; (iii) a copy of any notices filed with or received from any Governmental Entity or other person, or, if no such notice has been filed or received, the basis upon which the claimant seeks indemnification; and (iv) whether the cleanup was or will be consistent with the conditions set forth in this Section 9.2(c). If, before the third anniversary of the Closing, any claim shall have been made in accordance with Section 9.2(a)(iii) and (v), such claim shall remain a basis for indemnity until such claim is finally resolved or disposed of, even if beyond the third anniversary of Closing. (d) The Escrow Funds held pursuant to the Escrow Agreement shall be the sole and exclusive source for payment indemnification by Auric of OMG under this Agreement and shall provide that OMG's claims for indemnification hereunder may be offset against the amounts then remaining to be paid to the Auric Stockholders under the Escrow Agreement. (e) OMG shall promptly notify Auric and the Stockholders' Representative in writing (with copy to the designated counsel, if any) of the amount and nature of any claim for indemnification under this Agreement. In the event of the assertion against OMG by any third party of any liability or claim with respect to which OMG is entitled to indemnification hereunder, each of Auric and the Stockholders' Representative shall have the right to compromise or defend with monies from Escrow Funds as provided therein any such asserted - 30 - 31 liability (and OMG shall cooperate with respect to any such compromise or defense); provided, however, that Auric shall indemnify OMG against any Loss resulting from Auric's failure to pay any such liability up to the remaining amount in the Escrow Fund as may finally be determined. Upon payment of indemnification, OMG will assign to Auric all of its rights against any applicable account debtor or other responsible party to the extent of the indemnification payment and shall thereafter, at the request of Auric, provide such reasonable assistance as is requested by Auric in connection with the collection of such assigned third-party claim which, if collected, shall be paid into the Escrow Fund. (f) If any claim arising under Section 9.2(a)(iii) and (v) concerns a Hazardous Substance or Condition involving contamination that occurred both before and after the Closing Date, a court or other entity or individual having jurisdiction over such claim shall allocate the cost of the remediation between OMG and Auric in proportion to each party's contribution to the contamination to the extent such contribution can be determined and otherwise in proportion to the period of time each party has owned or had an interest in the Property. 9.3 OMG's Indemnification. (a) OMG hereby agrees to indemnify and hold Auric and the Auric Stockholders harmless at all times from and after the Closing Date against and in respect of any Losses resulting from any misrepresentation or breach of a representation, warranty made by OMG or non-fulfillment of any covenant on the part of OMG under this Agreement. Auric and the Stockholders' Representative shall have no right to make any claim with respect to Section 9.3(a) unless within one year from the Closing Date, written notice thereof is given to OMG. Such notice shall state the basis of the claim, including the Section or Sections of this Agreement alleged to have been breached and, to the extent feasible, the amount or estimated amount of the claim. (b) Auric or the Stockholders' Representative shall promptly notify OMG in writing of the amount and nature of any claim for indemnification under this Agreement. In the event of the assertion against Auric by any third party of any liability or claim with respect to which Auric is entitled to indemnification hereunder, OMG and its legal representatives shall have the right to compromise or defend any such asserted liability; provided, however, that OMG shall indemnify Auric against any loss resulting from OMG's failure to pay any such liability as may finally be determined by payment of such amount into the Escrow Fund. ARTICLE X MISCELLANEOUS 10.1 Costs and Expenses. Each party hereto shall bear its own costs and expenses, including attorneys' fees, in connection with this Agreement and the transactions contemplated hereby except as specifically provided in this Agreement or the Escrow Agreement. 10.2 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed to be properly given when delivered personally, telecopied (which is confirmed) or - 31 - 32 sent by certified or registered mail, postage prepaid, properly addressed to the parties entitled to such notice at the following addresses (or at such other address for a party as shall be specified by like notice): (a) If to OMG or OMGAC, to: OM Group, Inc. 3800 Terminal Tower Cleveland, Ohio 44113 Attention: General Counsel with a copy to: Squire, Sanders & Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, Ohio 44114-1304 Attention: Carolyn J. Buller, Esq. (b) If to Auric, to: Auric Corporation 470 Frelinghuysen Avenue Newark, New Jersey 07114 Attention: Daniel Davitt, Jr. Chief Financial Officer with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Milton G. Strom, Esq. Telecopy: (212) 735-2000 - 32 - 33 10.3 Definitions. For purposes of this Agreement: (a) "material adverse change" or "material adverse effect" means, when used in connection with Auric or OMG, any change or effect that either individually or in the aggregate with all other such changes or effects is materially adverse to the business, assets, properties, condition (financial or otherwise) or results of operations of such party and its subsidiaries taken as a whole; provided, however, that a decline in general economic conditions affecting Auric or OMG shall not be deemed to be a "material adverse change" or to have a "material adverse effect" with respect to either such party or its subsidiaries; (b) "person" means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity; (c) "Permitted Liens" shall mean (i) liens for current taxes, general assessments and other governmental charges not yet due and payable; (ii) (1) those matters affecting title disclosed in the title reports, title policies and surveys as to the Property delivered by Auric to OMG as of the date of this Agreement; (2) easements, including utility easements, and (3) changes in facts affecting the Property since the last survey of or title report for such Property which, in each case referred to in clauses 1-3, do not and will not, individually or in the aggregate, materially interfere with the use of the property or assets subject thereto or affected thereby as presently used, otherwise materially detract from the value of the property or assets encumbered thereby; (iii) present mechanics', carriers', workmen's, repairmen's and similar liens not to exceed in the aggregate $10,000; (iv) liens reflected or reserved against on the Balance Sheet; and (v) any purchase money security interest; (d) "Stockholders' Representative" shall mean Maurice Bick or, if he is unable or unwilling to act Alan Ruffini, or if he is unwilling or unable to act Daniel Davitt, Jr., who shall act on behalf of Auric and the Auric Stockholders as provided herein and in the Escrow Agreement. (e) a "subsidiary" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interest of which is owned directly or indirectly by such first person); and (f) "knowledge" means the actual knowledge of the officers of Auric, Sylvestor Fong, the Managing Director of Fidelity Chemical Products (Malaysia) Sdn. Bhd. and Peter Downing and Leonard Wood of Auric. 10.4 Schedules and Exhibits. The Schedules and Exhibits attached to this Agreement are made a part of this Agreement. 10.5 Representations as to Compliance with Law. Whenever a representation or warranty is made herein with respect to compliance with any law, that representation means the applicable subject matter is in compliance with applicable statutes, regulations, case law and - 33 - 34 ordinances as in existence on the date hereof and on the Closing Date and does not extend to any amendments, interpretations or revisions of such laws adopted subsequent to such dates. 10.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No party shall assign any of its rights or obligations hereunder without the prior written consent of the other parties. 10.7 Entire Agreement. This Agreement, including the Schedules and Exhibits hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all previous negotiations, commitments and writings. 10.8 Waiver, Discharge, Etc. This Agreement may not be released, discharged or modified except by an instrument in writing signed on behalf of each of the parties hereto by their duly authorized officers and representatives. The failure of either party to enforce any provision of this Agreement shall not be a waiver of any other provision or subsequent breach of the same or any other obligation hereunder. 10.9 Governing Law. This Agreement shall be construed and the rights of the parties hereunder shall be governed by the laws of the State of Delaware, without regard to its principles regarding conflict of law. 10.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as of the date first set forth above. OM GROUP, INC. By /s/ James P. Mooney -------------------------------- Name James P. Mooney ------------------------------ Title Chairman and CEO ----------------------------- OM GROUP ACQUISITION COMPANY, INC. By /s/ James P. Mooney -------------------------------- Name James P. Mooney ------------------------------ Title President ----------------------------- AURIC CORPORATION By /s/ Marice Bick -------------------------------- Name Maurice Bick ------------------------------ Title President ----------------------------- - 34 - 35 EXHIBIT A CERTIFICATE OF INCORPORATION OF Auric Corporation FIRST: The name of the Corporation is Auric Corporation (hereinafter the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "DGCL"). FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 1,000 shares of Common Stock, each having a par value of one penny ($.01). FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: (1) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. (2) The directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the Corporation. (3) The number of directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws so provide. - 35 - 36 (4) No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. (5) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided; however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted. SIXTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the DGCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. SEVENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the DGCL, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this ______ day of December 1997. ______________________________ Deborah M. Reusch Sole Incorporator EX-10.33 6 EXHIBIT 10.33 1 Exhibit 10.33 JOINT VENTURE AGREEMENT ----------------------- BETWEEN OMG B.V. GROUPE GEORGE FORREST S.A. AND LA GENERALE DES CARRIERES ET DES MINES * * * 2 2 THE PRESENT AGREEMENT IS ESTABLISHED IN ITS ENTIRETY BY ALL THE ELEMENTS HEREINAFTER SPECIFIED AND AS REFERRED TO IN THE RESPECTIVE ARTICLES I. DEFINITIONS II. SPECIAL PROVISIONS 1. Formation of a Joint Venture 2. Representations, Warranties, Title to Assets 3. Capital Contributions and Financing of the Project 4. Management 5. Preliminary Activities 6. Related Agreements 7. Liabilities and Commitments of the Parties 8. Term and Termination 9. Withdrawal Option 10. Buffer Stock 11. Additional Guarantees 12. Developments III. GENERAL PROVISIONS 1. Hierarchical Order of the Agreements 2. Amendments 3. Restrictions on Transfers 4. Arbitration and Applicable Laws 5. Confidentiality 6. Force Majeure 7. Notices 8. No Waiver 9. Severability and Headings 10. Sovereign Immunity 11. Appendices 12. Further Engagements 13. General Clauses 14. Authorizations and Entering into Force 3 3 The Present Agreement is concluded between: 1. OMG B.V. a company organized and existing under the laws of the Netherlands, having its registered office at ROTTERDAM, being a 100 per cent controlled subsidiary of OM Group Inc., a company organized and existing under the laws of the state of DELAWARE (USA) and having its registered office at 3800 Terminal Tower, CLEVELAND 44113 OHIO (USA), which shall be together with its subsidiary jointly and severally responsible for the obligations of the subsidiary, OMG B.V. hereinafter referred to as OMG ; 2. GROUPE GEORGE FORREST S.A., a company organized and existing under the laws of Luxembourg and having its registered office at 25 rue de la Chapelle, Luxembourg, hereinafter referred to as GGF ; and 3. LA GENERALE DES CARRIERES ET DES MINES, a corporation organized and existing under the laws of the Democratic Republic of Congo and having its registered office at boulevard Kamanyola, P.O.Box 450, LUBUMBASHI, DEMOCRATIC REPUBLIC OF CONGO, hereinafter referred to as GECAMINES, or GCM. Whereas the Parties have concluded a Frame Agreement signed in February 1996 where they have agreed on the general outlines of the establishment of a Joint Venture to partially or totally process the slag in the site of LUBUMBASHI; Whereas OMG, GGF and GECAMINES have initiated studies to determine the economical and technical feasibility of a Cobalt Slag Processing Operation in LUBUMBASHI, DEMOCRATIC REPUBLIC OF CONGO ; Whereas the Parties intend to invest in the Processing Plant if the feasibility proves to be positive ; 4 4 Whereas for the purpose of carrying out the activities of the Project, the Parties wish to form : (a) a Joint Venture Company under the laws of JERSEY in the form of a private limited liability company or in any other country and/or in such other form as agreed by the parties (the Joint Venture, hereinafter referred to as J.V.) ; (b) a Slag Processing Company in the form of a Private Company with Limited Responsibility (SPRL) existing under the laws of the DEMOCRATIC REPUBLIC OF CONGO, the shares of which shall be primarily owned by the J.V. (hereinafter referred to as Slag Processing Company of Lubumbashi or Processing Company or S.T.L.) ; Whereas the Parties wish to formalize their Agreement as to the formation and operation of a J.V. as well as to carry out activities such as feasibility studies, building of the Plant, Processing of Slag, Purchase of Slag, Sales of Processed Materials, transportation as well as management related to the project ; NOW THEREFORE in consideration of the premises and of the Contracts and Agreements contained in this Agreement, the Parties hereby agree as follows : 5 5 I. DEFINITIONS The terms defined hereinafter shall for all purposes of this Agreement and related Contracts have the meanings hereinafter specified; unless otherwise specified : AGREEMENT means this document signed by the Parties and its appendices forming an integral part of the present Agreement as well as its possible amendments. BUYER means OMG KOKKOLA CHEMICALS Oy (KCOY, a subsidiary of the OMG Group; buying Cobalt Alloy in the Long Term Cobalt Alloy Sales Agreement. PURCHASER means the J.V. purchasing Slag in the Long Term Slag Sales Agreement. COBALT BEARING ALLOY or TREATED MATERIAL means the main end product of the Processing Company (sometimes also called "Cobalt Alloy") containing cobalt and copper. YEAR means calendar year beginning on 1st of January and ending on 31st of December. UMPIRE means a person appointed by mutual agreement of the J.V. and the Buyer or GECAMINES in accordance with the Long Term Slag Sales Agreement or Long Term Cobalt Alloy Sales Agreement. CIF means "cost, insurance and freight" as defined in INCOTERMS, 1990 edition. TOLLING AGREEMENT means the Agreement concluded between the J.V. and the Processing Company for the purpose of processing Slag into Cobalt bearing Alloy. LONG TERM COBALT ALLOY SALES AGREEMENT means the Agreement whereby the J.V. undertakes to sell Cobalt Alloy to the Buyer and the latter undertakes to buy Cobalt Alloy from the J.V. LONG TERM SLAG SALES AGREEMENT means the Agreement whereby GECAMINES undertakes to sell Slag to the J.V. and the latter undertakes to buy Slag from GECAMINES. DATE OF DELIVERY means the date on which the J.V. takes and becomes the owner of the Site Slag according to the terms of the ex-site delivery clause. 6 6 DDU means "delivery duty unpaid" as defined in INCOTERMS, 1990 edition EXW means "ex works delivery" clause as defined in INCOTERMS, 1990 edition. SUPPLIER means the GENERALE DES CARRIERES ET DES MINES supplying Slag in the Long Term Slag Sales Agreement. J.V. means a private limited liability company having its registered office in JERSEY BUSINESS DAY means a day which is not a Saturday, a Sunday or a public holiday in Finland, The Netherlands or the Democratic Republic of Congo. KCO means OMG KOKKOLA CHEMICALS Oy, a subsidiary of the OMG Group located in KOKKOLA, REPUBLIC OF FINLAND and established under the laws of the REPUBLIC OF FINLAND. LMB means the LONDON METAL BULLETIN. LME means the LONDON METAL EXCHANGE. SUPPLY LOT means a part of each delivered supply of Cobalt Alloy containing approximately 100 tons of Cobalt Alloy as divided by the BUYER in KOKKOLA for weighing, sampling, analysis and moisture content determination. EXPEDITION LOT means the tonnage of one container of Cobalt Alloy dispatch from the Processing Plant. USED LOTS means the Lot or Lots of Cobalt Alloy taken into usage by the BUYER for a period of one month. MONTH means calendar month. PARTIES means the Parties to this Agreement. QUOTATIONAL PERIOD means the Period defined in Article 5 of the Long Term Slag Sales Agreement or in Article 6.2 in the Long Term Cobalt Alloy Sales Agreement. WEIGHTS AND MEASURES 1 (metric) ton = 2,204.6 pounds avoirdupois 1 dmt or ts = 1 dry metric ton 1 wmt or th = 1 wet metric ton 7 7 TAKEN INTO USAGE means the taking of the Cobalt Alloy either directly from the ordinary commercial raw material Stock or alternatively from the Buffer Stock as a complement of the KOKKOLA Processing Plant. PROJECT means the conception and building of a Processing Plant in LUBUMBASHI for the purpose of exploiting the Slag Site of LUBUMBASHI as well as the proper operation of the Processing Plant, the trading operations including related operations and the distribution of the profits. PROCESSED SLAG means the Slag resulting from the operations in the Processing Plant SLAG means cobalt bearing slag located in the Site in THE DEMOCRATIC REPUBLIC OF CONGO and to be used as feeding stock in the Processing plant. SITE or SLAG BITE means the area in the Democratic Republic of Congo where the Slag is located and available to be delivered to the J.V. pursuant to this Agreement (called Terril de LUBUMBASHI, originating from the residues of the WATER JACKET ovens of GECAMINES and namely including the zones I, J, Kl, K2 and TAS G-L having an average cobalt content of as described in further detail in appendix 1 of the Frame Agreement attached as Appendix 1 to this Agreement) . PROCESSED SLAG SITE means the area in the Democratic Republic of Congo where the processed slag will be stocked. PROCESSING COMPANY means the Company to be set up by the J.V. in the Democratic Republic of Congo in the form of a SPRL for the purposes of operating the Processing Plant. COMMERCIAL STOCK means the ordinary stock of Cobalt Alloy enabling the regular supply of OMG-KCO plant taking into account the periodicity of maritime arrivals. BUFFER STOCK means the Cobalt Alloy Stock to be established at OMG in KOKKOLA, FINLAND in accordance with article 10 of the J.V. Agreement and to be kept separate from the Ordinary Commercial Cobalt Alloy Stock of OMG KOKKOLA Chemicals Oy. 8 8 USD means the lawful currency of the UNITED STATES OF AMERICA. PROCESSING PLANT means the Plant to be located in LUBUMBASHI in the DEMOCRATIC REPUBLIC OF CONGO. The Plant shall be operated by the Processing Company for the purpose of processing Slag into Cobalt bearing Alloy. SELLER means the J.V. selling Cobalt Alloy in the Long Term Cobalt Alloy Sales Agreement. 9 9 II. SPECIAL PROVISIONS ------------------ 1. FORMATION OF THE JOINT VENTURE - ----------------------------------- 1.1. The Parties hereby agree to promptly establish a Joint Venture Company in the form of a private limited liability company to be named GROUPEMENT DU TRAITEMENT DU TERRIL DE LUBUMBASHI (GTL) or such other name as agreed by the Parties. The By-laws of the J.V. shall be prepared and signed by the Parties in such time as unanimously agreed by them. 1.2 ,The primary goals of the J.V. are : i) to establish a Processing Company, a subsidiary to the J.V., to be registered under the laws of the DEMOCRATIC REPUBLIC OF CONGO and to be named Societe de Traitement du Terril de LUBUMBASHI (S.T.L.) . ii) to conclude and ensure the best possible follow-up of Agreements such as : - The Long Term Slag Sales Agreement - The Long Term Cobalt Alloy Sales Agreement - The Tolling Agreement (related to the processing of the Slag by the Processing Company) iii) to conclude the Agreement of the Parties concerning the Capital contributions, the loans and other financing of the Project as well as optimizing and distributing the profits. iv) to organize the management and follow-up of the Project . 2. REPRESENTATIONS, WARRANTIES, TITLE TO ASSETS - ------------------------------------------------- 2.1. Capacity of the Parties Each of the Parties represents and warrants as follows : a) that it is a legal entity duly incorporated in its country of constitution, 10 10 b) that it has the corporate capacity to enter into and perform this Agreement, that all corporate and other actions required to authorize the party to enter into and perform this Agreement have been taken ; c) that the Party shall not breach any other agreement or contract by entering into or performing this Agreement ; that this Agreement is valid and binding upon in accordance with its terms. 3. CAPITAL CONTRIBUTIONS AND FINANCING OF THE PROJECT - ------------------------------------------------------- 3.1. The pre-feasibility study undertaken by OMG has estimated that the total investment of the Project will be at about . The total amount shall be decided by the Parties after the completion of the feasibility studies. The total capital to be considered below shall therefore be in the order of (or such other figure as determined by the Parties after the completion of the feasibility study), possibly further increased to obtain the working capital necessary to Start the operations. To that effect, the J.V. shall issue ordinary shares in one or more calls for Parties to subscribe, such as described in article 3.2. below and the Parties shall undertake to subscribe such issued ordinary shares as described below in this article. i) OMG undertakes to subscribe 51 per cent of any issued ordinary shares of the J.V. ii) GGF undertakes to subscribe 29 per cent of any issued ordinary shares of the J.V. Company. 11 11 iii) GCM undertakes initially to subscribe one ordinary share of the J.V.Company. 3.2. The financing as described above shall take place in several separate installments and in such a manner as decided by the Parties or by the Board of Directors. The Parties shall contribute to any capital increase in proportion to their respective capital contribution obligations as mentioned in Article 3.1. above or in any other manner as agreed by the Parties. The preliminary expenses made by the Parties for the Project may be used by them as a capital contribution, such as specified in Article 5 below. If any Party (the defaulting party) were unable to participate in any of the basic capital contributions, duly decided by the Parties or the Board of Directors of the J.V. within the limits of the overall funding obligations of the Parties, the other Parties shall have the option to increase their respective share in the capital of the J.V in proportion to their shareholdings. 12 12 3.3. The Parties agree that apart from the obligation to provide with the capital contributions mentioned in article 3.1. above, the Project is intended to be self-financing to the maximum extent possible. To the extent the revenues of the J.V. are insufficient to meet with all the obligations (including operation expenses and financial charges), the Parties shall then seek to obtain additional financing from an outside financing source to be primarily secured by the proceeds from the sales of the Treated Materials to KCO or by parent guarantees to be provided by the Parties in proportion to their respective contributions to the J.V. 3.4. Any additional capital increase or a parent loan, which go beyond the initial capital can only be requested if so decided by the General Meeting or the Board in accordance with the Articles of the J.V. In the event that a Party (or several Parties) is not able or willing to participate in any additional capital contribution, this shall not prevent the other Parties (or other Party) to increase their capital contributions and accordingly increase their capital share in the J.V. Failure by any Party to participate in a capital contribution increasing the capital beyond the total amount of capital as defined in art. 3.1. above, cannot be regarded as a default of the failing Party or Parties. 3.5. All the net revenues of the J.V., after payment of all operation costs and expenses, financial costs, taxes if any and contributions to any applicable reserve funds as may be required by the law, shall be paid out as distributions by the J.V. to the Parties in proportion to their capital participation. 13 13 4. MANAGEMENT - --------------- 4.1. After the signing of this Agreement at the latest, the Parties shall establish a temporary Management Committee composed of 6 members and their respective alternates. Each Party shall nominate two representatives thereto. A Project Manager shall be appointed by OMG to supervise the implementation and technical execution of the project until the building of the Processing Plant has been completed. 4.2. The Project shall be administrated by this temporary Management Committee until the J.V. has been formally established and its Board of Directors has been elected and nominated. OMG shall nominate three representatives and 3 alternates to the Board of Directors, whereas GGF shall nominate 2 representatives and 2 alternates and GCM shall nominate 1 representative and 1 alternate. The Chairman of the Board shall be elected among the representative members of OMG. Two Vice-Presidents shall be elected. The first Vice-President position shall be devolved to the representative of GECAMINES and the second one shall be devolved to one of the GGF representatives. 4.3. The quorum of the Board of Directors is constituted by the presence of at least four directors. The decisions of the Board of Directors shall require the affirmative vote of at least four directors. 4.4. The quorum of the General Meeting is constituted upon the presence of representatives of the Parties possessing at least 66 per cent of the capital of the J.V. All decisions of the General Meeting shall require the affirmative vote of representatives of the Parties possessing at least 66 per cent of the shares in the J.V. save the decisions which are taken based on the special procedure envisaged in art 4.5. below where the affirmative vote of 50 per cent of the shares shall be sufficient. 14 14 In any case the following matters In the General Meeting shall require the affirmative vote of the representatives of the Parties possessing at least 66 per cent of the Capital of the J.V. a) the approval of the annual budget ; b) the increase of the J.V. capital ; c) An outside financing in excess of 5 percent of the amount of the capital; d) winding-up or liquidation of the J.V. Partnership ; e) the final decision to commence the investment, construction and processing operations as envisaged in Article 5.4. below ; f) all decisions in relation to the matters listed above shall also be subject to the specific majorities when they relate to the Processing Company and/or to the instructions to be given by the J.V. to the Board of Directors of the Processing Company. g) revision or amendment of any of the Agreements listed in Article 6. 4.5. The Parties agree that the management of the J.V. shall vest in the Board which may exercise all powers of and do all acts and things on behalf of the J.V., save such as are required by the local law to be exercised or done by the J.V. in the General Meeting. Nevertheless, in the event that the Board of Directors is unable to take a decision in a matter which is outside of the day to day management of the J.V. and which indecision may threaten to damage the development of the Project or the security of the manufacturing of the Slag or the deliveries of Treated Material, such matters shall be taken to the General Meeting, which shall have the exclusive right to decide upon those matters with an exceptional majority of 50 per cent. Before the date of such General Meeting, the Parties will use their best endeavors to decrease the discrepancies between their points of view. 4.6. The J.V. shall reimburse the Parties the travel and out of pocket expenses incurred by the Board of Directors or their representatives to attend the Board meetings. 15 15 4.7. All programs and budgets shall be established on a calendar year basis, unless otherwise mutually agreed, 4.8. STL shall be managed by a Managing Board that shall appoint and elect the General Director. OMG shall nominate 3 representatives to the Managing Board, whereas GGF shall nominate 2 representatives and GCM shall nominate 1 representative. The Chairman of the Board shall be elected among the GGF representatives. Two Vice-Presidents shall be designated and nominated. The first position shall be devolved to the GECAMINES representative and the second position shall be devolved to one of the OMG representatives. 5. PRELIMINARY ACTIVITIES - --------------------------- 5.1. Before deciding on the commercial exploitation of the Slag deposit, such further investigations and studies (referred to as preliminary activities) are necessary to determine the feasibility of the investment, the construction and processing activities. 5.2. The costs and expenses incurred by the Parties prior to the setting up of the J.V. and approved by the Board of Directors (and by an independent auditor, if necessary) shall be considered as a contribution against the obligation of the Parties to provide with the capital contribution of the J.V. pursuant to Article 3.1. of this Agreement. 5.3. The technical and administrative services needed to carry out the preliminary activities shall as far as possible be rendered by the Parties or their affiliated companies on such terms and conditions considered reasonable and acceptable by the Board of Directors. 5.4. Upon completion of the preliminary activities and after the analysis of the cobalt contents of the Slag deposit in accordance with Article 3 of the Frame Agreement, the Parties shall take their final decision as to whether they begin to invest, construct and initiate the Processing operations. 16 16 That decision shall be taken no later than six months after the signing of this Agreement, provided OMG and/or GGF have not made use of the right to withdraw. 6. RELATED AGREEMENTS - ----------------------- 6.1. Slag Supply A Long Term Slag Sales Agreement shall be concluded between GCM on the one hand, and the J.V. on the other hand, whereby the J.V. shall have the exclusive right to purchase the Slag located on the well known site of LUBUMBASHI on terms and conditions as set out in the Frame Agreement and in further details in the Long Term Slag Sales Agreement attached as Appendix 2 to this Agreement. To ensure uninterrupted and unhindered continuity of Slag deliveries to the J.V. and to the Processing Company in accordance with the terms of the Frame Agreement and of the Long Term Slag Sales Agreement, GCM agrees as detailed in the above mentioned agreements, to accept that a Cobalt Alloy Buffer Stock be created by the J.V. in KOKKOLA FINLAND with a six month supply of KCO. The J.V. shall enter in the accounts and manage the fluctuations of that stock. 6.2. Cobalt Alloy Sales OMG undertakes that KCO shall undertake to purchase from the J.V. all or part of the Cobalt Alloy produced in the Processing Plant in accordance with the terms and conditions set up in the Long Term Cobalt Alloy Sales Agreement attached as Appendix 3 to this Agreement. 6.3. Management of STL The Board of Directors of the J.V. shall determine the by-laws of STL as well as the possible Management Agreement determining the management rules of STL in more detail. 17 17 6.4. Construction of the Processing Plant GGF's affiliates, the SPRL Entreprises Generales MALTA FORREST (EGMF) for earth moving and civil works, and NEW BARON & LEVEQUE INTERNATIONAL S.A. (NBLI) for site supervision, building, commissioning as well as certain engineering activities related to steel structure, piping, electricity and instrumentation and certain procurement and follow-up activities, shall be designated as nominated subcontractors. These companies shall provide the J.V. with a cost plus fee bid. On the basis of that bid, the Board of Directors of the J.V. shall decide either to award the Contract to the EGMF and NBLI or to call for tenders to third parties. In the latter case the companies EGMF and NBLI shall have the right of first refusal. All the principles, terms and conditions for the above mentioned subcontracts are described separately in the Construction Agreement. 6.5. Transportation Services The J.V. shall appoint GEORGE FORREST INTERNATIONAL S.A. to organize : 1. the handling of the Slag and Processed Slag if required after completion of the feasibility study. 2. the transportation of Cobalt-bearing Alloy from the Processing Plant to the port of KOKKOLA in Finland, unloading excluded but the supervision and related transport insurance included. That company shall submit a bid to the J.V. On the basis of that bid, the Board of Directors of the J.V. shall decide either to appoint the company or to call for bids from third parties. In such case GFI S.A. shall have the right of first refusal. 18 18 6.6. Tolling Agreement The Processing Company, STL, shall enter into a Tolling Agreement with the J.V. whereby the J.V. shall grant STL the right to process all of the Slag acquired by the J.V. from GCM on terms and conditions as set out in the Tolling Agreement attached as Appendix 4 to this Agreement. 7. LIABILITIES AND COMMITMENTS OF THE PARTIES - ----------------------------------------------- 7.1. The Parties' liability for the J.V.'s debts and liabilities are limited to the capital invested in the J.V.. The J.V. shall be the owner of its assets and shall be the obligor in respect to its liabilities. The Parties shall not be liable for the debts or liabilities of the J.V., except to the extent any such debts or liabilities shall have been expressly guaranteed by such Party. 7.2. In order to protect the environment in LUBUMBASHI and subject to the limitations set out above the Parties undertake to construct, operate and maintain their Processing Plant in the Democratic Republic of CONGO in an orderly way and corresponding to the rules for protecting the environment applicable in the European Union. 8. TERM AND TERMINATION - ------------------------- 8.1. This Agreement shall remain in full force and effect for as long as : - the J.V. shall hold any rights, - the assets of the J.V. are not disposed of, - a final settlement after liquidating the J.V. has not been made. 8.2. The Parties may at any time terminate this Agreement by mutual agreement in writing. In the case of termination by mutual agreement, the Parties shall agree as to the terms of the dissolution/liquidation of the J.V. 19 19 8.3. The non-defaulting Parties of the J.V. shall be entitled to vote for the exclusion of a defaulting Party, if the exclusion is voted unanimously by the members representing the non-defaulting Parties after having heard the explanations from the defaulting Party in one of the following cases : - that Party would materially infringe one of the provisions of this Agreement or related agreements and would not have remedied such breach as required in Article 13.1 of the general provisions ; - that Party would be in default of its obligation related to investment needs as defined in Article 3, providing the terms of Article 13.1. of the General Provisions have been first made use of. The non-defaulting Parties may, acting together, either choose to terminate this Agreement or to acquire all the shares of the defaulting Party and the defaulting party has the obligation to sell all its shares at a price defined in article 8.5. below, deducting the possible damages. 8.4. In addition to the terms and conditions of Article 8.3., the non-affected Parties shall be entitled to vote for the exclusion of any Party affected by the occurrence of the following cases : i) any Party becoming insolvent or having a temporary receiver appointed of its assets or an execution of distress or warrant of distress levied upon its assets, or if they have a consequence on the execution of this Agreement. ii) an order being made or a resolution being passed for winding-up or liquidation of any Party except that where any such event is only for the purposes of acquisition or amalgamation with another and the relevant company emerging is and agrees to be bound by the terms of this Agreement, providing an endorsement be made and that such an event shall not endanger the completion of operations to the satisfaction of the non-affected Parties. iii) the shares of the social capital of a Party have been acquired to an extent exceeding 26 percent of the social capital of that Party by a competitor of any of the other Parties. 20 20 8.5. In the event of the exclusion of any Party due to Article 8.3 or 8.4 of the Special Provisions or to Article 13.1 of the General Provisions, as well as in the event of a voluntary withdrawal, the remaining Parties shall be entitled (but not obligated) to purchase all the shares, (but not less than all the shares) of the excluded or withdrawing Party. That purchase shall be in proportion to the shares already held, unless otherwise agreed by the non-defaulting Parties. The purchase price shall be set at the book value. The book value shall be calculated on the capital of the J.V. including the equity capital, retained earnings and reserves less any and all long and short term liabilities. In case any of the Parties would not agree upon the book value, the Parties shall appoint an independent internationally accepted auditing firm to make such a valuation. Such a valuation shall be binding to all Parties. Should the Parties not agree upon the auditing firm, the valuation shall be decided in an arbitration pursuant to Article 4 of the General Provisions of the Agreement. 9. WITHDRAWAL OPTION - ---------------------- It is absolutely essential for the Parties that the results from the preliminary activities will give sufficient evidence that : i) the cobalt content of the Slag as to quantity and quality will be to the satisfaction of the Parties as defined in Articles 2 of the Long Term Slag Sales Agreement in the Appendix 2 hereto. ii) the commercial exploitation is viable to the satisfaction of the Parties, in accordance to the feasibility studies, construction and investment calculations related to the processing as well as the other activity plans to be completed in accordance with Article 5.1 above. 21 21 The Parties shall have a period of consideration of 6 months starting on the date of entering into force of this Agreement. Should the conditions defined in sub-articles i) and ii) not be fulfilled within the said period to the satisfaction of any of the Parties, that Party shall have the right to withdraw from this Agreement without any liability to pay any compensation or reimbursement of costs to other Parties or any reimbursement of its own expenses. 10. BUFFER STOCK - ----------------- The Long Term Slag and Cobalt Alloy Sales Agreements set out that the J.V. shall constitute and maintain a Cobalt Alloy Buffer Stock in KOKKOLA, FINLAND containing the equivalent of 6 months of delivery to KCO. The J.V. shall arrange for the accounts and manage the fluctuations of the Buffer Stock. 11. ADDITIONAL GUARANTEES - -------------------------- GECAMINES undertakes : (i) to guarantee for the J.V. an unhindered access right to the Site, either by not alienating to a third party or assigning to the J.V. the ownership of the strip of land through which access to the Site is made and such as mutually agreed, as well as the exclusive rights to the Slag. (ii) to support the obtaining of guarantees from the Government of the Democratic Republic of Congo such as a guaranty for a favorable fiscal treatment, guarantees concerning the expatriation of the profits, the non-expatriation of the Plant and a guarantee that in the case GECAMINES would be privatized, all its obligations resulting from this Agreement, would remain in force. (iii) to support the obtaining of other authorizations, permissions, fiscal exemptions, export licenses, etc. on behalf of the Processing Company and/or the J.V. 22 22 (iv) to give all the necessary assistance to insure a continuous supply of electricity and water to the Plant. 12. DEVELOPMENTS - ----------------- Given the possible developments in the processing technology in the coming years and during the validity period of this Agreement, the Parties shall examine the possibility to improve the quality of the production with the view to increase its value added. 23 23 III. GENERAL PROVISIONS - ----------------------- 1. HIERARCHICAL ORDER OF THE AGREEMENTS - ----------------------------------------- This Agreement is part of the Agreements concluded between the Parties. The aim of these Agreements is to set up the terms and conditions of the purchase of the Slag located at the Site, the setting up of the J.V. and of the Processing Company and selling the Cobalt-bearing Alloy to KCO for further processing. These Agreements are : (i) JOINT VENTURE AGREEMENT (ii) LONG TERM SLAG SALES AGREEMENT (iii) LONG TERM COBALT ALLOY SALES AGREEMENT (iv) TOLLING AGREEMENT Although each Agreement mentioned above can be interpreted independently and according to its own terms, it is to be noted that it is part of a larger contractual arrangement and that it has to be interpreted in light of the other Agreement. In the event of a conflict, the Agreements listed above shall be interpreted in the above order so that a prior Agreement shall always supersede a later one. 2. AMENDMENTS - --------------- Any amendments or additions to this Agreement shall be valid only if made in writing and signed by duly authorized representatives of the Parties hereto. Should an amendment or modification to this Agreement have an effect to the other Agreements, the Parties undertake to change or modify these other Agreements in order to avoid any conflicts between this Agreement and the other Agreements. 24 24 3. RESTRICTIONS ON TRANSFERS - ------------------------------ 3.1. A Party shall not have the right to sell, assign, transfer, pledge or otherwise dispose of the shares it holds in the J.V. unless priorily consented in writing by all the other Parties. 3.2. The provisions of Article 3.1. shall not be applicable in the case of a transfer, sale or assignment of the shares by a Party to its affiliate company provided that the transfer, sale or assignment is total and is imposed by legitimate reorganization needs of the Party concerned. For the purposes of this Agreement, an affiliate company shall mean any company or entity which is a subsidiary or a parent of the transferor Party or which directly or indirectly controls or is controlled by the transferor Party. 3.3. Any transfer described or permitted in accordance with Articles 3.1 and 3.2 shall be subject to the transferee giving its written undertaking to be bound by all the terms, conditions and undertakings of this Agreement and the relating Agreements. 3.4. Any transfer other than in accordance with Article 3.1. and 3.2. shall not be possible without the prior written consent of all Parties. 4. ARBITRATION AND APPLICABLE LAWS - ------------------------------------ In the event the Parties are unable to settle a dispute in connection with this Agreement out of court, they agree the dispute shall be submitted to the French section of the tribunals of Brussels which shall give a verdict pursuant to the Belgian laws. 25 25 5. CONFIDENTIALITY - -------------------- 5.1. Unless otherwise provided in this Article, all reports, records, data or any other information of any kind whatsoever developed or acquired by any Party in connection with the activities of the J.V. and/or the Processing Company in the DEMOCRATIC REPUBLIC OF CONGO controlled by the J.V., shall be treated as confidential and no Party shall reveal or otherwise disclose such confidential information to third parties without the prior consent of the other Parties. The above restrictions shall not apply to the disclosure of confidential information to any affiliate companies or any private or public financing institutions, any contractors or subcontractors, employees or consultants of the Parties or of the J.V. or the Processing Company or to any third party to which a Party envisage the transfer, the sale, assignment, encumbrance or other disposition of all of its participation in the J.V. in accordance to the terms of the Article 3 above. However, this shall only be applicable provided the confidential information shall only be disclosed to third parties having a legitimate need for this information and the persons or company to whom such disclosure is made shall first undertake in writing to protect the confidential nature of such information, to the same extent as the Parties are obligated under this Article. In addition, the above restrictions shall not apply to any Government or governmental Department or Agency which has the right to require the disclosure of such confidential information. These restrictions shall also not apply to such confidential information which comes into the Public Domain, except the fault from any Party. This confidentiality obligation shall survive for a period of 5 years commencing at the termination/dissolution of this Agreement. The above mentioned restrictions are not valid for information retained by GECAMINES related to the Site. 26 26 6. FORCE MAJEURE - ------------------ 6.1. The obligations of any Party shall be suspended to the extent that the performance of its obligations is prevented or delayed, in whole or in part by: accidental act, bad weather, floods, slides, mine disasters or major accidents, cave-ins, strikes, lock-out, labor disputes, labor shortage, demonstrations, riots, sabotage, laws, rules or regulations of agency or governmental bodies or any other event beyond such Party's reasonable control. The obligations shall also be suspended in the event of governmental actions or inactions, restraints of governmental or other competent authorities, inability to obtain or unavoidable delay in obtaining necessary materials, facilities and equipment in the open market, suspension or refusal of access to the deposit Slag Site, interruption or unavoidable delay in communication or transportation, or any other cause, whether similar or not to those specifically listed, which shall be beyond the reasonable control of the Party. 6.2. In the event of such occurrences, the Party affected shall give written notice to the other Parties as soon as possible after the occurrence of the event causing the delay or prevention, setting out full particulars and estimating the duration of the delay or prevention. The Party affected shall use all possible diligence to remedy the situation causing the delay as quickly as possible. The requirement that any such delay shall be remedied with all possible diligence shall not require a Party to settle strikes, lock out or other labor conflicts contrary to its wishes and this type of difficulty shall be handled within the discretion of the Party concerned. In the event the situation of force majeure would remain enforce for more than 6 months, the Parties shall meet to analyze the situation en envisage the termination of this Agreement. 27 27 7. NOTICES - ------------ 7.1. All notices required under this Agreement shall be in writing and directed to the respective Parties at the following addresses : If to OMG : OMG EUROPE GMBH Mr Kari MUURAISKANGAS Morsenbraicherweg 200 D - 40470 DUSSELDORF GERMANY Tel : 00.49.211.96.18.80 Fax : 00.49.211.61.46.29 If to GGF : c/o G.F.I. S.A. Managing Director Parc Industriel B - 4400 IVOZ-RAMET BELGIUM Tel : 00.32.4.338.91.79 Fax : 00.32.4.338.91.86 If to GECAMINES : Mr General Director Boulevard du Souverain 30 1000 BRUSSELS BELGIUM Tel : 00.32.2.676.89.98 Fax : 00.32.2.676.80.41 Fax Technical Direction : 00.32.2.676.80.48 Any notice shall be deemed to have been given to any Party if personally delivered to a designated officer of the Party to whom the notice is addressed, or if sent by registered mail, postage prepaid, with return receipt, and properly addressed as set forth herein, or if sent by fax or telex to an authorized representative with evidence of transmission receipt. The notice shall be effective as of the moment of personal delivery, or in the case of mailing, as of the date shown on the return receipt, or in the case of fax or telex, as of the date faxed or telexed. Any Party may, at any time, change the address to which notices or communications shall be given by written notice to the other Parties. 28 28 8. NO WAIVER - --------------- The failure of a Party at any time to require the performance of any provision of this Agreement shall not affect its right to execute that provision and a waiver by such Party upon a breach thereof shall not be interpreted as a waiver by such Party of any later non execution of such provision or as a waiver by such Party of any other provision of this Agreement. 9. SEVERABILITY AND HEADINGS - ------------------------------ 9.1. If any provision of this Agreement or its related Appendices should be null and void, such a nullity shall not invalidate all the other provisions in this Agreement or related Appendices. The Parties of this Agreement shall endeavor to negotiate so as to replace any null and void provision as well as any other affected provision. 9.2. The headings in this Agreement are considered for convenience only and shall not have any effect or limit in interpreting the provisions of this Agreement. 10. SOVEREIGN IMMUNITY - -------------------------- To the extent that a Party may be entitled to claim in any jurisdiction in which legal proceedings may at any time be commenced with respect to this Agreement, for itself or its activities, properties or assets any immunity either : - from jurisdiction of any court or arbitration - from attachment prior to judgment, from execution of a judgment or set-off - from any other legal process, and to the extent where such immunity could be granted by that jurisdiction, 29 LONG TERM SLAG SALES AGREEMENT BETWEEN: GECAMINES AND: J. V. GROUPEMENT POUR LE TRAITEMENT DU TERRIL DE LUBUMBASHI 30 2 THE PRESENT AGREEMENT IS ESTABLISHED IN ITS ENTIRETY BY ALL THE ELEMENTS HEREINAFTER SPECIFIED AND AS REFERRED TO IN THE RESPECTIVE ARTICLES I DEFINITIONS II SPECIAL PROVISIONS 1 SCOPE 2 QUALITY AND QUANTITY 3 DELIVERY AND TITLE 4 PRICING 5 QUOTATIONAL PERIOD 6 BUFFER STOCK 7 PAYMENT 8 INVOICING CURRENCY AND PAYMENT PROCEDURES 9 WEIGHING, SAMPLING AND ANALYZING 10 TERM AND TERMINATION OF THE AGREEMENT 11 TAXES AND OTHER CHARGES AND FEES 12 HARDSHIP 13 LIABILITIES 14 COVENANTS III GENERAL DISPOSALS 1 HIERARCHICAL ORDER OF THE AGREEMENTS 2 AMENDMENTS 3 RESTRICTIONS ON TRANSFERS 4 ARBITRATION AND APPLICABLE LAWS 5 CONFIDENTIALITY 6 FORCE MAJEURE 7 NOTICES 8 NO WAIVER 9 SEVERABILITY AND HEADINGS 10 SOVEREIGN IMMUNITY 11 APPENDICES 12 FURTHER ENGAGEMENTS 13 GENERAL CLAUSES 14 ENTERING INTO FORCE 31 3 The Present Agreement is concluded between: LA GENERALE DES CARRIERES ET DES MINES, a public company organized and existing under the laws of the Democratic Republic of Congo, having its registered office at Boulevard Kamanyola, B.P. 450, Lubumbashi (Democratic Republic of Congo) (hereinafter referred to as the SUPPLIER or GECAMINES, or GCM) on the one hand; AND J. V. GROUPEMENT POUR LE TRAITEMENT DU TERRIL DE LUBUMBASHI, having its registered office at JERSEY, (hereinafter referred to as the PURCHASER or GTL) on the other hand; WHEREAS the SUPPLIER is the owner of Slag produced in its water-jacket ovens in Lubumbashi, the Democratic Republic of Congo, and containing among others cobalt; WHEREAS the PURCHASER intends to form a subsidiary company (hereinafter referred to as the Processing Company) in the Democratic Republic of Congo to establish a Plant in Lubumbashi for the main purpose of processing all or part of the Slag existing in the Site. The enriched product obtained after processing is hereafter referred to as Cobalt Alloy; WHEREAS the SUPPLIER, in its position as the owner of the Slag on the Site, is willing to sell the Slag on a long term basis as and when this Agreement shall become effective and according to the terms and conditions set out hereafter; WHEREAS the Parties estimated in May 1995 that the total quantity of Slag located in the Site was approximately to correspond to the specifications of the Frame Agreement signed on the 14th of February 1996 and therefore suitable for processing; NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS: 32 4 I. DEFINITIONS The terms defined hereinafter shall for all purposes of this Agreement and related Contracts have the meanings hereinafter specified, unless otherwise specified: AGREEMENT means this document signed by the Parties and its appendices forming an integral part of the present Agreement as well as its possible amendments. BUYER means OMG KOKKOLA CHEMICALS Oy (KCO), a subsidiary of the OMG Group, buying Cobalt Alloy in the Long Term Cobalt Alloy Sales Agreement. PURCHASER means the J.V. purchasing Slag in the Long Term Slag Sales Agreement. COBALT BEARING ALLOY or TREATED MATERIAL means the main end product of the Processing Company (sometimes also called "Cobalt Alloy") containing cobalt and copper. YEAR means calendar year beginning on 1st of January and ending on 31st of December. UMPIRE means a person appointed by mutual agreement of the J.V. and the Buyer or GECAMINES in accordance with the Long Term Slag Sales Agreement or Long Term Cobalt Alloy Sales Agreement. CIF means "cost, insurance and freight" as defined in INCOTERMS, 1990 edition. TOLLING AGREEMENT means the Agreement concluded between the J.V. and the Processing Company for the purpose of processing Slag into Cobalt bearing Alloy. LONG TERM COBALT ALLOY SALES AGREEMENT means the Agreement whereby the J.V. undertakes to sell Cobalt Alloy to the Buyer and the latter undertakes to buy Cobalt Alloy from the J.V. LONG TERM SLAG SALES AGREEMENT means the Agreement whereby GECAMINES undertakes to sell Slag to the J.V. and the latter undertakes to buy Slag from GECAMINES. 33 5 DATE OF DELIVERY means the date on which the J.V. takes and becomes the owner of the Site Slag according to the terms of the ex-site delivery clause. DDU means "delivery duty unpaid" as defined in INCOTERMS, 1990 edition EXW means "ex works delivery" clause as defined in INCOTERMS, 1990 edition. SUPPLIER means the GENERALE DES CARRIERES ET DES MINES supplying Slag in the Long Term Slag Sales Agreement. J.V. means a private limited liability company having its registered office in JERSEY. BUSINESS DAY means a day which is not a Saturday, a Sunday or a public holiday in Finland, The Netherlands or the Democratic Republic of Congo. KCO means OMG KOKKOLA CHEMICALS Oy, a subsidiary of the OMG Group located in KOKKOLA, REPUBLIC OF FINLAND and established under the laws of the REPUBLIC OF FINLAND. LMB means the LONDON METAL BULLETIN. LME means the LONDON METAL EXCHANGE. SUPPLY LOT means a part of each delivered supply of Cobalt Alloy containing approximately 100 tons of Cobalt Alloy as divided by the BUYER in KOKKOLA for weighing, sampling, analysis and moisture content determination. EXPEDITION LOT means the tonnage of one container of Cobalt Alloy dispatch from the Processing Plant. USED LOTS means the Lot or Lots of Cobalt Alloy taken into usage by the BUYER for a period of one month. MONTH means calendar month. PARTIES means the Parties to this Agreement. 34 6 QUOTATIONAL PERIOD means the Period defined in Article 5 of the Long Term Slag Sales Agreement or in Article 6.2 in the Long Term Cobalt Alloy Sales Agreement. WEIGHTS AND MEASURES 1 (metric) ton = 2,204.6 pounds avoirdupois 1 dmt or ts = 1 dry metric ton 1 wmt or th = 1 wet metric ton TAKEN INTO USAGE means the taking of the Cobalt Alloy either directly from the ordinary commercial raw material Stock or alternatively from the Buffer Stock as a complement of the KOKKOLA Processing Plant. PROJECT means the conception and building of a Processing Plant in LUBUMBASHI for the purpose of exploiting the Slag Site of LUBUMBASHI as well as the proper operation of the Processing Plant, the trading operations including related operations and the distribution of the profits. PROCESSED SLAG means the Slag resulting from the operations in the Processing Plant SLAG means cobalt bearing slag located in the Site in THE DEMOCRATIC REPUBLIC OF CONGO and to be used as feeding stock in the Processing plant. SITE or SLAG SITE means the area in the Democratic Republic of Congo where the Slag is located and available to be delivered to the J.V. pursuant to this Agreement (called Terril de LUBUMBASHI, originating from the residues of the WATER JACKET ovens of GECAMINES and namely including the zones I, J, K1, K2 and TAS G-L having an average cobalt content as described in further detail in appendix 1 of the Frame Agreement attached as Appendix 1 to this Agreement). PROCESSED SLAG SITE means the area in the Democratic Republic of Congo where the processed slag will be stocked. PROCESSING COMPANY means the Company to be set up by the J.V. in the Democratic Republic of Congo in the form of a SPRL for the purposes of operating the processing plant. COMMERCIAL STOCK means the ordinary stock of Cobalt Alloy enabling the regular supply of OMG-KCO plant taking into account the periodicity of maritime arrivals. 35 7 BUFFER STOCK means the Cobalt Alloy Stock to be established at OMG in KOKKOLA, FINLAND in accordance with article 10 of the J.V. Agreement and to be kept separate from the Ordinary Commercial Cobalt Alloy Stock of OMG KOKKOLA Chemicals Oy. USD means the lawful currency of the UNITED STATES OF AMERICA. PROCESSING PLANT means the Plant to be located in LUBUMBASHI in the DEMOCRATIC REPUBLIC OF CONGO. The Plant shall be operated by the Processing Company for the purpose of processing Slag into Cobalt bearing Alloy. SELLER means the J.V. selling Cobalt Alloy in the Long Term Cobalt Alloy Sales Agreement. 36 8 II. SPECIAL PROVISIONS ---------------------- 1. SCOPE ----- The Parties agree that, according to this Agreement, the Slag located in the Site corresponding to the specifications set out in article 2 hereafter shall be reserved and intended to the usage of the PURCHASER and of the Processing Company, in accordance with the terms and conditions set out in this Agreement. Hence, subject to the terms and conditions of this Agreement: (i) the SUPPLIER undertakes to sell the Slag available in the Site and corresponding to the quantities and specifications set out in Article 2 hereafter to the PURCHASER. (ii) the PURCHASER undertakes to buy the Slag available in the Site and corresponding to the quantities and specifications set out in Article 2 hereafter from the SUPPLIER. The SUPPLIER agrees not to sell the Slag available in the Site and corresponding to the quantities and specifications set out in Article 2 below, to any other buyer than the PURCHASER during the validity period of this Agreement and except with prior written consent of the PURCHASER. In support of the right to take the Slag in the Site, the SUPPLIER hereby irrevocably and unconditionally guarantees to the PURCHASER and the Processing Company a free and unhindered access to the Site during the validity period of this Agreement. In order to safeguard the effectiveness of this access, the SUPPLIER agrees either not to alienate to a third party or to transfer to the J.V. the use of the strip of land through which access to the Site is made and such as mutually agreed. 37 9 2. QUALITY AND QUANTITY -------------------- 2.1. The Slag shall be delivered EXW the Site. 2.2. Information on the quality and quantity of the Slag is based at this stage on information given by the SUPPLIER. This Agreement covers the tonnages of the Slag in stock zones I, J, K1, K2 and TAS-GL (a map of the stock zones is attached as Appendix 1 forming an integral part of this Agreement): This represents at least of Slag having the following average analysis (and is attached as Appendix 2 and forming an integral part of this Agreement): The quantity of Slag mentioned in Appendix 2 should be sufficient for the production of Cobalt Alloy containing 5,000 tons off Cobalt per year for a period of 15 years. 2.3. Should the total tonnage of slag corresponding to the minimal specifications be higher than the total quantities indicated above, the PURCHASER shall have the right of first refusal to buy the excess of the Slag at terms and conditions to be set out. In case GECAMINES wants to utilize other part of the stock than what is defined in Article 2.2, the PURCHASER shall have the right of pre-emption to use it within 3 months after the written notice addressed by GECAMINES to the PURCHASER. The purchase conditions on all or part of that part of the stock shall be negotiated in the event the pre-emption right is used. 38 10 2.4. The SUPPLIER has delivered a preliminary map indicating the cobalt contents of the different zones of the Site. Such map is only preliminary, and shall not have any value of evidence with regard to the cobalt content of the Slag in the different zones of the Site. The PURCHASER shall have the right to take samples in order to analyze the cobalt content of the Slag. Should an essential part of the Slag have a cobalt content below the allowed average content, and the J.V. find that the project is not economically viable, according to the feasibility studies, the J.V. shall have the right at its full and independent discretion, to terminate this Agreement by means of a written notice delivered to the SUPPLIER at the latest 6 months after entering into force of this Agreement. 2.5. The SUPPLIER undertakes to sell to the PURCHASER the quantity of Slag needed to produce the Cobalt Alloy as determined annually by the PURCHASER. That annual production shall be realized according to the agreed processing conditions and shall not be superior to 5,000 tons of cobalt contained in the Cobalt Alloy without the approval of the SUPPLIER. Nevertheless, the Slag sale shall not be less than what is needed to produce 4,000 tons of cobalt contained in the Cobalt Alloy. 2.6. The PURCHASER shall, either on its own initiative or at the request of GECAMINES or KCO, organize at least once a year a meeting of these 3 parties in order to analyze the market conditions and coordinate the commercial policies. 2.7. The PURCHASER shall include in the Long Term Cobalt Alloy Sales Agreement to be signed with KCO that: - - KCO shall not receive more than 5,000 tons of cobalt per year, with a minimum guaranteed supply of 4,000 tons of cobalt contained in the Cobalt Alloy, according to this Agreement. - -In case the PURCHASER, after the building up of the Buffer Stock containing the quantity exceeding 4,000 tons shall be offered at the KCO market conditions, that shall have the right of first refusal. 39 11 2.8. The annual quantity of 5,000 tons of Cobalt mentioned above does not include the quantity comprised in the Buffer Stock and can possibly be revised after negotiation among the Parties, depending among others on the Processing capacities in the Democratic Republic of Congo and/or in Finland as well as on the Cobalt market situation. 3. DELIVERY AND TITLES ------------------- The quantities specified in Article 2 above shall be delivered EXW Site. All risk of loss, damage and destruction with regard to each delivery of Slag shall pass from the SUPPLIER to the PURCHASER along with its title as and when the delivered Slag has been loaded at the Site by the Processing Company. 4. PRICING ------- 4.1. Payable metals The PURCHASER shall pay to the SUPPLIER only for the Cobalt and Copper contained in the Slag excluding all other materials. The Cobalt and Copper prices shall be determined separately. The Slag payment shall be based on the weighing and analyzing of the Slag carried out at the processing plant according to a procedure to be determined by the Parties according to Article 9. Zinc and lead in form of oxides as well as processed Slag shall be returned free of charge to GECAMINES that shall become the owner of them and shall remove them at its own expense as quickly as possible. 40 12 4.2. Price references The base price for Cobalt applicable for this Agreement The base price for copper is 4.3. Basis price formula The price to be paid for the Cobalt contents in the Slag shall be as follows, where P is the prevailing Cobalt price: The price formulas under (i) and (ii) above are the minimum. The Parties agree to meet within six months after the beginning of the processing for a possible review of the price formulas, taking into account the following elements: total investment expenditure, financing costs, electricity costs, tax treatment, yield of the processing and quality of the Cobalt Alloy. The Parties agree that as and when OMG GGF have been fully reimbursed and repaid the capital invested in the Project including the interests accrued and the financial charges, the above pricing formula be modified, replacing 41 13 4.4. Price for copper 5. QUOTATIONAL PERIOD ------------------ The Quotational Period for Cobalt and Copper is the month following the delivery month of Cobalt Alloy at Kokkola, Finland. 6. BUFFER STOCK ------------ 6.1. Establishment and Quantity To safeguard that KCO shall get an uninterrupted and sufficient feedstock of Cobalt Alloy to the KOKKOLA Plants, GECAMINES allows the PURCHASER to build up a Buffer Stock of Cobalt Alloy in KOKKOLA besides the Commercial Stock to back up for any supply interruption. Therefore GFCAMINES agrees to sell to the J.V. and the J.V. agrees to purchase the quantity of Slag necessary for building up the Buffer Stock. The total cobalt quantity contained in the Buffer Stock shall be 2,500 tons. The monthly amount of Cobalt Alloy exceeding the monthly agreed tonnage taken into usage by KCO shall be used for building up the Buffer Stock until the quantity of 2,500 tons of Cobalt contents has been reached. In the event that the cobalt content in the Buffer Stock decreases during the term of this Agreement, either as a result of an interruption of deliveries or insufficient deliveries, the excess quantity above the agreed monthly supply shall be used for rebuilding the Buffer Stock until the minimum cobalt content of 2,500 tons has been reached again. 42 14 Nevertheless, the Parties agree that the total amount of Cobalt contained in the Buffer Stock, i.e. 2.500 tons, be reduced by 400 tons per year from the year 2006 so that the quantity of Cobalt be reduced to 2.100 tons at the end of the year 2006, and so on, provided, however, that the J.V. has entirely reimbursed and repaid OMG and GGF in form of dividends or other distributions the total value of the investment in the Project including all interest and financial charges. In case not, the reduction of the Buffer Stock shall be postponed accordingly. In the event of an interruption of supplies during the reduction periods hereinabove referred and as a result the level of the Buffer Stock falls short of the above formula, then the annual reduction shall be postponed until the minimum level of the Buffer Stock has first been met as follows: End 2006 : 2.100 tons of Cobalt End 2007 : 1.700 tons of Cobalt End 2008 : 1.300 tons of Cobalt End 2009 : 900 tons of Cobalt End 2010 : 500 tons of Cobalt End 2011 : 100 tons of Cobalt End 2012 : Liquidation of the Buffer Stock. As regard to any other situation than those mentioned hereinabove, the Parties will meet to find a joint understanding. 6.2. Management of the Buffer Stock KCO shall be responsible towards the J.V. for the management and the risks of the Buffer Stock, and shall bear all costs linked to it. KCO shall permit the SUPPLIER and the PURCHASER to check all records containing the necessary information as to the status and consumption of the Buffer Stock. The transfer of title related to the Cobalt Alloy of the Buffer Stock shall pass from the J.V. to KCO as taken into usage. 43 15 6.3. Payment for the Slag taken out for building-up of the Buffer Stock The regulations as set out in this article are not prejudicing the above article 6.1, al. 6 and following. The PURCHASER shall pay for the Slag only after KCO has taken Cobalt Alloy into usage. The payments shall be made as set out in Art. 6.2 of the Long Term Cobalt Alloy Sales Agreement. KCO shall always have the right, and at its full discretion, to prepay the Slag corresponding to the cobalt tonnage of the Buffer Stock. 7. PAYMENT ------- The payments by the PURCHASER to the SUPPLIER for the Cobalt and Copper in the Slag are based on the delivery of the Slag to the PURCHASER. The payments by the PURCHASER shall be made within thirty calendar days from end of each Quotational Period. 44 16 8. INVOICING CURRENCY AND PAYMENT PROCEDURES ----------------------------------------- 8.1 USD All bills and payments shall be in USD. 8.2 Method of payment Payments by the PURCHASER to the SUPPLIER shall be made by bank transfer to the SUPPLIER'S account. 9. WEIGHING, SAMPLING AND ANALYZING The PURCHASER and the SUPPLIER shall confer and, before dispatch of the first consignment, shall adopt and record mutually acceptable methods of weighing, sampling and analyzing. Such methods shall be accurate and reliable. They shall be appropriate and, based on internationally recognized industrial standards provide efficient and practical ways of determining accurate weights, obtaining representative samples, and producing accurate analyses of Slag supplies. 10. TERM AND TERMINATION OF THE AGREEMENT ------------------------------------- 10.1. This Agreement shall remain in force for a period of 20 years after its effective entering into force. 10.2. The Parties may at any time terminate this Agreement by mutual agreement in writing. In the case of termination by mutual agreement, the Parties shall agree as to the terms of the dissolution. 45 17 10.3. It is expressly agreed between the Parties that should any of the following events take place, this Agreement shall not terminate nor the rights of the PURCHASER to purchase the Slag as stipulated in this Agreement: (i) Should GECAMINES go into bankruptcy, (ii) Should GECAMINES become insolvent, (iii)Should GECAMINES have a receiver appointed of its assets, (iv) Should an order being made or a resolution being passed for winding-up or liquidate GECAMINES, (v) Should any other similar event take place as regard to GECAMINES. 10.4. If deemed necessary by the PURCHASER that the SUPPLIER shall take some special measures to guarantee that the Slag (or what is left from it) can be used on a continuous basis by the Processing Company, the Parties shall meet to envisage the necessary safeguard measures. These possible measures shall prior to their execution be submitted to the agreement of the Parties in order to comply with the terms and conditions of this Agreement and the related agreements. 10.5. This Agreement may also be terminated with no damages by the J.V. if: (i) the samples clearly indicate that the cobalt contents falls short of or (ii) it is clear that the Plant cannot operate in a profitable way on a long term basis; or (iii) the taxation system in The Democratic Republic of Congo as applicable to the Processing Company and the Plant abruptly changes in a manner prejudicing the economic performance of the Processing Company and the profitability of the Plant. Such a termination shall be effectuated by a written notice from the PURCHASER to the SUPPLIER indicating the date of such termination. 46 18 11. TAXES AND OTHER CHARGES AND FEES -------------------------------- Any taxes, State fees or other charges on the Slag shall be for the account of the SUPPLIER, with the exception of the C.C.A. The PURCHASER shall for the benefit of the Project and of the Processing Company and the Plant apply for and take benefit of all possible tax reliefs under tax and investment laws of the Democratic Republic of Congo such as, but not limited to, tax incentives, lower tax rates, relief of export and import duties and C.C.A. as well as exemption from withholding taxes for interest and dividend payments. In case of any adversary changes in the tax regime with respect to the Cobalt Alloy and/or with the operation of the Plant or the Processing Company, the Parties agree to meet. 12. HARDSHIP -------- If at any moment unanticipated events by the Parties will fundamentally alter the balance of this Agreement, resulting in an excessive burden to one of the parties in fulfilling its contractual obligations vis-a-vis the other Party, this aggrieved Party may proceed as follows: - - The aggrieved party may request a review of this Agreement within a reasonable delay after it has got the knowledge of the said change in circumstances and its effects on the economy of this Agreement. - - The request shall mention the reasons causing such review. - - The Parties shall Confer within thirty calendar days of receipt of the notice in view to revise this Agreement on an equitable basis to avoid the excessive burdens for any of the Parties. A request to review does not have any suspension effects as to the execution of this Agreement. 47 19 13. LIABILITIES ----------- In the event of a breach to this Agreement, each Party shall be liable for all direct damage as well as cost, charges and expenses caused through that breach, which shall be compensated in full. However, any loss or damage which is an indirect or consequential result of the nonfulfillment of obligations under or in connection with this Agreement are excluded unless resulting from a willful or intentional act from the defaulting Party. All direct damages and claims can only be set off or deducted from the agreed price if and when the disagreement has been finally settled or solved otherwise. 14. COVENANTS --------- The SUPPLIER shall covenant: (i) to guarantee an unhindered access right to the Site either by not alienating to a third party or by transferring to the J.V. the use of the strip of land through which access to Site is made as mutually agreed, as well as the exclusive rights to use the Slag. (ii) to support the obtaining from the Government of the Democratic Republic of Congo of a favorable tax treatment. (iii)to provide its full support in order to obtain all other necessary approvals, permissions, tax exemptions and export licenses, etc. for the Processing Company and/or the PURCHASER; 48 20 III. GENERAL DISPOSALS ----------------- 1. HIERARCHICAL ORDER OF THE AGREEMENTS ------------------------------------ This Agreement is part of a number of Agreements concluded between the Parties. The aim of these Agreements is to set up the terms and conditions of the purchase of the Slag located at the Site, the setting up of the J.V. and of the Processing Company and selling the Cobalt bearing Alloy to KCO for further processing. These Agreements are: (i) Joint Venture Agreement (ii) Long Term Slag Sales Agreement (iii) Long Term Cobalt Alloy Sales Agreement (iv) Tolling Agreement. Although each Agreement mentioned above can be interpreted independently and according to its terms, it is to be noted that it is part of a larger contractual arrangement and that it has to be interpreted in light of the other Agreements. In the event of a conflict, the Agreements listed above shall be interpreted in the above order so that a prior Agreement shall always supersede a later one. 2. AMENDMENTS ---------- Any amendments and additions to this Agreement shall be valid only if made in writing and signed by duly authorized representatives of the Parties hereto. 49 21 Should an amendment or modification to this Agreement have an effect on the other Agreements, the Parties undertake to change or modify these other Agreements in order to avoid any conflicts between the various Agreements. 3. RESTRICTIONS ON TRANSFERS ------------------------- 3.1. A Party shall not have the right to sell, assign, transfer, mortgage, pledge, charge or otherwise deal with the rights and obligations it holds in this Agreement. 3.2. The provisions of Article 3.1 shall not be applicable in case of a transfer, sale or assignment of participation by a Party to an affiliate company provided that the transfer, sale or assignment is total and imposed by legitimate reorganisation needs of the Party concerned. For the purposes of this Agreement, an affiliate company shall mean any company or entity which is a subsidiary or a parent of the transferor Party or which directly or indirectly controls or is controlled by the transferor Party. 3.3. Any transfer beyond the terms and conditions of Article 3.1. and 3.2 shall not be possible without the prior written consent by all the Parties. 3.4. Any transfer described or permitted in accordance with Articles 3.1 and 3.2 shall be subject to the transferee giving its written undertaking to be bound by all the terms, conditions and undertakings of this Agreement and the relating Agreements. 50 22 4. ARBITRATION AND APPLICABLE LAWS ------------------------------- In the event the Parties are unable to settle a dispute in connection with this Agreement out of court, they agree the dispute shall be submitted to the French section of the tribunals of Brussels which shall give a verdict pursuant to the Belgian laws. 5. CONFIDENTIALITY --------------- 5.1. Unless otherwise provided in this Article, all reports, records, data or any other information of any kind whatsoever developed or acquired by any Party in connection with the activities of the J.V. and/or the Processing Company in the Democratic Republic of Congo controlled by the J.V., shall be treated as confidential and no Party shall reveal or otherwise disclose such confidential information to third parties without the prior consent of the other Parties. The above restrictions shall not apply to the disclosure of confidential information to any affiliate companies or any private or public financing institutions, any contractors or subcontractors, employees or consultants of the Parties or of the J.V. or the Processing Company or to any third party to which a Party envisage the transfer, the sale, assignment, encumbrance or other disposition of all of its participation in the J.V. in accordance to the terms of the Article 3 above. However, this shall only be applicable provided the confidential information shall only be disclosed to third parties having a legitimate need for this information and the persons or company to whom such disclosure is made shall first undertake in writing to protect the confidential nature of such information, to the same extent as the Parties are obligated under this Article. In addition, the above restrictions shall not apply to any Government or governmental Department or Agency which has the right to require disclosure of such confidential information. These restrictions shall also not apply to such confidential information which comes into the Public Domain, except the fault from any Party. 51 23 This confidentiality obligation shall survive for a period of 5 years commencing at the termination/dissolution of this Agreement. The above mentioned restrictions are not valid for information retained by GECAMINES related to the Site. 6. FORCE MAJEURE ------------- 6.1. The obligations of any Party shall be suspended to the extent that the performance of its obligations is prevented or delayed, in whole or in part by: - accidental act, bad weather, floods, slides, mine disasters or major accidents, cave-ins, strikes, lock-out, labor disputes, labor shortage, demonstrations, riots, sabotage, laws, rules or regulations of agency or governmental bodies. The obligations shall also be suspended in the event of governmental actions or inactions, restraints of governmental or other competent authorities, inability to obtain or unavoidable delay in obtaining necessary materials, facilities and equipment in the open market, suspension or refusal of access to the deposit slag Site, interruption or unavoidable delay in communication or transportation, or any other cause, whether similar or not to those specifically listed, which shall be beyond the reasonable control of the Party. 6.2. In the event of such occurrences, the Party affected shall give written notice to the other Parties as soon as possible after the occurrence of the event causing the delay or prevention, setting out full particulars and estimating the duration of the delay or prevention. The Party affected shall use all possible diligence to remedy the situation causing the delay as quickly as possible. The requirement that any such delay shall be remedied with all possible diligence shall not require a Party to settle strikes, lock out or other labor conflicts contrary to its wishes and this type of difficulty shall be handled within the discretion of the Party concerned. 52 24 In the event the situation of force majeure would remain enforce for more than 6 months, the Parties shall meet to analyze the situation en envisage the termination of this Agreement. 7. NOTICES ------- 7.1. All notices required under this Agreement shall be in writing and directed to the respective Parties at the following addresses: If to GECAMINES: Mr Umba Kyamitala General Director Boulevard du Souverain 30 B-1000 BRUSSELS BELGIUM Tel. 00.32-2-676 89 98 Fax. 00.32-2-676 80 41 Fax Technical Direction: 00.32-2-676 80 48 If to J.V.: Any notice shall be deemed to have been given to any Party if personally delivered to a designated officer of the Party to whom the notice is addressed, or if sent by registered mail, postage prepaid, with return receipt, and properly addressed as set forth herein, or if sent by fax or telex to an authorized representative with evidence of transmission receipt. The notice shall be effective as of the moment of personal delivery, or in the case of mailing, as of the date shown on the return receipt, or in the case of fax or telex, as of the date faxed or telexed. 53 TOLLING AGREEMENT between GROUPEMENT POUR LE TRAITEMENT DU TERRIL DE LUBUMBASHI and SOCIETE DE TRAITEMENT DU TERRIL DE LUBUMBASHI 54 2 TEE PRESENT AGREEMENT IS ESTABLISHED IN ITS ENTIRETY BY ALL THE ELEMENTS HEREINAFTER SPECIFIED AND AS REFERRED TO IN THE RESPECTIVE ARTICLES I. DEFINITIONS II. SPECIAL PROVISIONS 1. Appointment 2. Conditions Precedent 3. Period of Agreement 4. Processing and Quality Control 5. Basis of Operations 6. Liability 7. Price and Payment 8. Legal Requirements 9. Representations, Warranties and Covenants 10. Breach III. GENERAL PROVISIONS 1. Hierarchical Order of the Agreements 2. Amendment 3. Restrictions on Transfers 4. Arbitration and Applicable Laws 5. Confidentiality 6. Force Majeure 7. Notices 8. No Waiver 9. Severability and Headings 10. Sovereign Immunity 11. Further Engagements 12. General Clauses 13. Entering into Force 55 3 This Agreement is concluded between GROUPEMENT POUR LE TRAITEMENT DU TFRRIL DE LUBUMBASHI (hereinafter referred to as GTL) organized and existing under the laws of JERSEY, having its registered office in Jersey; and SOCIETE DE TRAITEMENT DU TERRIL DE LUBUMBASHI (hereinafter referred to as STL S.P.R.L.) _a Private Company with Limited Responsibility organized and existing under the laws of the Democratic Republic of Congo, having its registered office at Lubumbashi. WITNESSETH THAT Whereas OM GROUP Inc., GROUPE GEORGE FORREST S.A. and La GENERALE DES CARRIERES ET DES MINES have established the J.V. which again established STL for the purpose of building and operating plant mentioned hereinafter; Whereas STL shall operate a Processing Plant in the Democratic Republic of Congo for the purpose of processing Slag into Cobalt Alloy; Whereas GECAMINES has concluded a Long Term Slag Sales Agreement with the J.V.; Whereas the J.V. has concluded a Long Term Cobalt Alloy Sales Agreement with OMG KOKKOLA CHEMICALS OY , whereby the J.V. shall sell agreed quantities of Cobalt Alloy on a long term basis to OMG KOKKOLA CHEMICALS OY; Whereas GTL wishes to enter into a Tolling Agreement with STL and appoint STL to process the Slag on its behalf in the Democratic Republic of Congo and STL has agreed to accept such appointment; Now therefore in consideration of the premises and of the covenants and agreements contained in this Agreement, the Parties hereby agree as follows: 56 4 I. DEFINITIONS The terms defined hereinafter shall for all purposes of this Agreement and related Contracts have the meanings hereinafter specified, unless otherwise specified: AGREEMENT means this document signed by the Parties and its appendices forming an integral part of the present Agreement as well as its possible amendments. BUYER means OMG KOKKOLA CHEMICALS Oy (KCO), a subsidiary of the OMG Group, buying Cobalt Alloy in the Long Term Cobalt Alloy Sales Agreement. PURCHASER means the J.V. purchasing Slag in the Long Term Slag Sales Agreement. COBALT BEARING ALLOY or TREATED MATERIAL means the main end product of the Processing Company (sometimes also called "Cobalt Alloy") containing cobalt and copper. YEAR means calendar year beginning on 1st of January and ending on 31st of December. UMPIRE means a person appointed by mutual agreement of the J.V. and the Buyer or GECAMINES in accordance with the Long Term Slag Sales Agreement or Long Term Cobalt Alloy Sales Agreement. CIF means "cost, insurance and freight" as defined in INCOTERMS, 1990 edition. TOLLING AGREEMENT means the Agreement concluded between the J.V. and the Processing Company for the purpose of processing Slag into Cobalt bearing Alloy. LONG TERM COBALT ALLOY SALES AGREEMENT means the Agreement whereby the J.V. undertakes to sell Cobalt Alloy to the Buyer and the latter undertakes to buy Cobalt Alloy from the J.V. LONG TERM SLAG SALES AGREEMENT means the Agreement whereby GECAMINES undertakes to sell Slag to the J.V. and the latter undertakes to buy Slag from GECAMINES. DATE OF DELIVERY means the date on which the J.V. takes and becomes the owner of the Site Slag according to the terms of the ex-site delivery clause. DDU means "delivery duty unpaid" as defined in INCOTERMS, 1990 edition 57 5 EXW means "ex works delivery" clause as defined in INCOTERMS, 1990 edition. SUPPLIER means the GENERALE DES CARRIERES ET DES MINES supplying Slag in the Long Term Slag Sales Agreement. J.V. means a private limited liability company having its registered office in JERSEY. BUSINESS DAY means a day which is not a Saturday, a Sunday or a public holiday in Finland, The Netherlands or the Democratic Republic of Congo. KCO means OMG KOKKOLA CHEMICALS Oy, a subsidiary of the OMG Group located in KOKKOLA, REPUBLIC OF FINLAND and established under the laws of the REPUBLIC OF FINLAND. LMB means the LONDON METAL BULLETIN. LME means the LONDON METAL EXCHANGE. SUPPLY LOT means a part of each delivered supply of Cobalt Alloy containing approximately 100 tons of Cobalt Alloy as divided by the BUYER in KOKKOLA for weighing, sampling, analysis and moisture content determination. EXPEDITION LOT means the tonnage of one container of Cobalt Alloy dispatch from the Processing Plant. USED LOTS means the Lot or Lots of Cobalt Alloy taken into usage by the BUYER for a period of one month. MONTH means calendar month. PARTIES means the Parties to this Agreement. QUOTATIONAL PERIOD means the Period defined in Article S of the Long Term Slag Sales Agreement or in Article 6.2 in the Long Term Cobalt Alloy Sales Agreement. WEIGHTS AND MEASURES 1 (metric) ton = 2,204.6 pounds avoirdupois 1 dmt or ts = 1 dry metric ton 1 wmt or th = 1 wet metric ton TAKEN INTO USAGE means the taking of the Cobalt Alloy either directly from the ordinary commercial raw material Stock or alternatively from the Buffer Stock as a complement of the KOKKOLA Processing Plant. 58 6 PROJECT means the conception and building of a Processing Plant in LUBUMBASHI for the purpose of exploiting the Slag Site of LUBUMBASHI as well as the proper operation of the Processing Plant, the trading operations including related operations and the distribution of the profits. PROCESSED SLAG means the Slag resulting from the operations in the Processing Plant SLAG means cobalt bearing slag located in the Site in THE DEMOCRATIC REPUBLIC OF CONGO and to be used as feeding stock in the Processing plant. SITE or SLAG SITE means the area in the Democratic Republic of Congo where the Slag is located and available to be delivered to the J.V. pursuant to this Agreement (called Terril de LUBUMBASHI, originating from the residues of the WATER JACKET ovens of GECAMINES and namely including the zones I , J, K1, K2 and TAS G-L having an average cobalt content as described in further detail in appendix 1 of the Frame Agreement attached as Appendix 1 to this Agreement). PROCESSED SLAG SITE means the area in the Democratic Republic of Congo where the processed slag will be stocked. PROCESSING COMPANY means the Company to be set up by the J.V. in the Democratic Republic of Congo in the form of a SPRL for the purposes of operating the Processing Plant. COMMERCIAL STOCK means the ordinary stock of Cobalt Alloy enabling the regular supply of OMG-KCO plant taking into account the periodicity of maritime arrivals. BUFFER STOCK means the Cobalt Alloy Stock to be established at OMG in KOKKOLA, FINLAND in accordance with article 10 of the J.V. Agreement and to be kept separate from the Ordinary Commercial Cobalt Alloy Stock of OMG KOKKOLA Chemicals Oy. USD means the lawful currency of the UNITED STATES OF AMERICA. PROCESSING PLANT means the Plant to be located in LUBUMBASHI in the DEMOCRATIC REPUBLIC OF CONGO. The Plant shall be operated by the Processing Company for the purpose of processing Slag into Cobalt bearing Alloy. SELLER means the J.V. selling Cobalt Alloy in the Long Term Cobalt Alloy Sales Agreement. 59 7 II. SPECIAL PROVISIONS - -------------------------- 1. Appointment - -------------- GTL hereby grants tQ STL the right to process all of the Slag to be purchased by GTL from time to time from GECAMINES and STL accepts such appointment. STL undertakes to exclusively process the Slag for GTL and shall not process the slag for any third party without the consent of GTL. GTL shall not unreasonably withhold such an agreement. STL, in performing its functions and activities under this Agreement, shall be considered as an independent contractor and not an agent of GTL. STL shall not be entitled to represent or hold itself out as representing the J.V. 2. Conditions Precedent - ----------------------- This Agreement is subject to the fulfillment of the following conditions precedent; (i) that any governmental approvals which may be required for or prior to the implementation of this Agreement, are duly obtained; (ii) that the Long Term Slag Supply Agreement has been duly signed and concluded between GTL and GECAMINES; (iii) that the Long Term Cobalt Alloy Sales Agreement has been duly signed and concluded between GTL and KCO. 3. Period of Agreement - ---------------------- This Agreement shall be in force for a period of 20 years and shall take effect commencing at its conclusion. 60 8 4. Processing and Quality Control - --------------------------------- The Slag to be processed by STL will be available EXW Site according to the instructions given GTL. The Slag shall meet following specifications: The Cobalt Alloy to be produced shall meet following specifications: GTL shall be entitled through their employees, representatives or other appointees to have access to and to inspect the Plant of STL for the purposes of checking that the Cobalt Alloy meet the above mentioned specifications. Should the Cobalt Alloy fail to meet the required specifications with the result, that the transportation of the Treated Material to KOKKOLA, FINLAND is not economically feasible, then all costs, direct or indirect, relating to such failure shall be borne by STL. 5. BASIS OF OPERATION - --------------------- Ownership to the Slag and to the Cobalt Alloy shall at all times remain with GTL. Zinc and lead in form of oxides as well as Processed Slag shall be returned free of charge to GECAMINES who shall become their owner. GECAMINES shall remove them at its own expense as quickly as possible. STL shall take care of the transportation of the Slag from the Site to the Plant as well as the transportation of the Processed Slag from the Plant to the place designated by GTL. STL shall bear all risks linked to the Slag when loaded for the transportation at the Site. The risk linked to the Cobalt Alloy shall pass from STL to GTL at its delivery to GTL, packed in bags (or otherwise if SOM agreed), EXW the Plant. 61 9 6. Liability - ------------ STL shall be responsible for all damage resulting from a failure or omission Occurring during operations for which it is responsible. STL shall indemnify the J.V. and KCO against all requests for indemnification or other requests from third parties. In order to protect the environment and subject to the limitatioris set out above, the Parties undertake to build, operate and maintain the Processing Plant in the Democratic Republic of Congo in an orderly way and corresponding to the rules for protecting the environment applicable in the European Union. 7. Price and Payment - -------------------- 8. Legal Requirements - --------------------- STL shall obtain and maintain in force all permits and consents required in the Democratic Republic of Congo in connection with the Processing of Slag and its transportation to the Plant. Such authorizations shall remain valid as long as the above mentioned services are performed by STL, which shall at all times operate in conformity with the authorizations, licenses, permits and national legislation of the Democratic Republic of Congo. 62 10 9. Representations, Warranties and Covenants - --------------------------------------------- STL will arrange for and obtain and maintain in force all permits and consents required or to be obtained in connection with the processing and transportation of the Slag and/or the exportation of the Cobalt Alloy as contemplated in this Agreement in the Democratic Republic of Congo. STL will possess the business, professional and technical expertise to handle, process and safely and lawfully dispose of the Slag and Cobalt Alloy and process waste respectively in the Democratic Republic of Congo. STL will maintain the equipment, the Plant and human resources required to perform its obligations under this Agreement. STL is duly licensed and authorized by all relevant authorities in the Democratic Republic of Congo to handle Slag, Treated Material and process waste. STL shall, at all times while services hereunder are being performed, continue to remain so licensed and authorized, and STL shall at all times operate in conformity with the requirements of all applicable permits, licenses, authorizations and national legislation of the Democratic Republic of Congo. 10. Breach - ---------- Should either Party fail to observe any of the provisions or perform any of the terms or conditions of this Agreement, or be placed under judicial management or be wound up, whether compulsorily or voluntarily, and/or fail to remedy such breach or failure within a period of 90 days of notice to it, then without prejudice to any other rights which might thereupon be available to it, the other Party shall have the right to proceed against the defaulting Party for the recovery of incurred damages. 63 11 III. GENERAL PROVISIONS 1. Hierarchical Order of the Agreements - --------------------------------------- This Agreement is part of the Agreements concluded between the Parties and other parties. The aim of these Agreements is to set up the terms and conditions of the purchase of the Slag located at the Site, the setting up of the J.V. and of the Processing Company and selling the Cobalt-bearing Alloy to KCO for further processing. These Agreements are: (i) JOINT VENTURE AGREEMENT (ii) LONG TERM SLAG SALES AGREEMENT (iii) LONG TERM COBALT ALLOY SALES AGREEMENT (iv) TOLLING AGREEMENT Although each Agreement mentioned above shall be interpreted independently and according to its own terms, it is to be noted that it is part of a larger contractual arrangement and each Agreement shall be interpreted in light of the other Agreements. In case of a conflict this Agreement and the listed Agreements shall be interpreted in the above order so that a prior Agreement shall always supersede a later one. 2. Amendments - ------------- Any amendments or additions to this Agreement shall be valid only if made in writing and signed by duly authorized representatives of the Parties hereto. Should an amendment or modification to this Agreement have an effect to the other Agreements, the Parties undertake to change or modify these other Agreements in order to avoid any conflicts between this Agreement and the other Agreements. 64 12 3. Restrictions on Transfers - ---------------------------- A Party shall not have the right to sell, assign, transfer, mortgage, pledge, charge or otherwise deal with its rights and obligations as defined in this Agreement. 4. Arbitration and Applicable Laws - ---------------------------------- In the event the Parties are unable to settle a dispute in connection with this Agreement out of court, they agree upon that the dispute shall be submitted to the French section of the tribunals of Brussels which shall give a verdict pursuant to the Belgian laws. 5. Confidentiality - ------------------ 5.1. Unless otherwise provided in this Article, all reports, records, data or any other information of any kind whatsoever developed or acquired by any Party in connection with the activities of the J.V. and/or the Processing Company in the Democratic Republic of Congo controlled by the J.V. shall be treated as confidential and no Party shall reveal or otherwise disclose such confidential information to third parties without the prior written consent of the other Parties. The above restrictions shall not apply to the disclosure of confidential information to any affiliate companies or any private or public financing institutions, any contractors or subcontractors, employees or consultants of the Parties or of the J.V. or the Processing Company or to any third party to which a Party envisage the transfer, the sale, assignment, encumbrance or other disposition of all of its participation in the J.V. in accordance with the terms of Article 3 above. However, this shall only be applicable provided that the confidential information shall only be disclosed to third parties having a legitimate need for this information and the persons or company to whom such disclosure is made shall first undertake in writing to protect the confidential nature of such information, to the same extent as the Parties are obligated under this Article. In addition, the above restrictions shall not apply to any Government or Governmental Department or Agency which has the right to require the disclosure of such confidential information. 65 13 These restrictions shall also not apply to such confidential information which comes into the Public Domain, except the fault from any Party. This confidentiality obligation shall survive for a period of 5 years commencing at the termination/dissolution of this Agreement. The above mentioned restrictions are not valid for information retained by GECAMINES related to the Site. 6. Force Majeure - ---------------- 6.1. The obligations of any Party shall be suspended to the extent that the performance of its obligations is prevented or delayed, in whole or in part by: accidental act, bad weather, floods, slides, mine disasters or major accidents, cave-ins, strikes, lockout, labor, disputes, labor shortage, demonstrations, riots, sabotage, laws, rules or regulations of agency or governmental bodies. The obligations shall also be suspended in the event of governmental actions or inactions, restraints of governmental or other competent authorities, inability to obtain or unavoidable delay in obtaining necessary materials, facilities and equipment in the open market, suspension or refusal of access to the deposit slag site, interruption or unavoidable delay in communication or transportation, or any other cause, whether similar or not to those specifically listed, which shall be beyond the reasonable control of the Party. 6.2. In the event of such occurrences, the Party affected shall give written notice to the other Parties as soon as possible after the occurrence of the event causing the delay or prevention, setting out full particulars and estimating the duration of the delay or prevention. The Party affected shall use all possible diligence to remedy the situation causing the delay as quickly as possible. The requirement that any such delay shall be remedied with all possible diligence shall not require a Party to settle strikes, lock out or other labor conflicts contrary to its wishes and this type of difficulty shall be handled within the discretion of the Party concerned. In the event the situation of force majeure would remain enforce for more than 6 months, the Parties shall meet to analyze the situation en envisage the termination of this Agreement. 66 14 7. Notices - ---------- All notices required under this Agreement shall be in writing and directed to the respective Parties at the following addresses: - If to GTL - If to STL Any notice shall be deemed to have been given to any Party if personally delivered to a designated officer of the Party to whom the notice is addressed, or if sent by registered mail, postage prepaid, with return receipt, and properly addressed as set forth herein, or if sent by fax or telex to the above mentioned address with evidence of transmission receipt. The notice shall be effective as of the moment of personal delivery, or in the case of mailing, as of the date shown on the return receipt, or in the case of fax or telex, as of the date faxed or telexed. Any Party may, at any time, change the address to which notices or communications shall be given by written notice to the other Parties. 8. No Waiver - ------------ The failure of a Party at any time to require the performance of any provision of this Agreement shall not affect its right to execute that provision and a waiver by such Party upon a breach thereof shall not be interpreted as a waiver by such Party of any later non execution of such provision or as a waiver by such Party of any other provision of this Agreement. 67 15 9. Severability and Headings - ---------------------------- 9.1. If any provision of this Agreement or its related Appendices should be null and void, such a nullity shall not invalidate all the other provisions in this Agreement or related Appendices. The Parties of this Agreement shall endeavor to negotiate so as to replace any null and void provision as well as any other affected provision. 9.2. The headings in this Agreement are considered for convenience only and shall not have any effect or limit in interpreting the provisions of this Agreement. 10. Sovereign Immunity - ---------------------- To the extent that a Party may be entitled to claim in any jurisdiction in which legal proceedings may at any time be commenced with respect to this Agreement, for itself or its activities, properties or assets any immunity either: - from jurisdiction of any court or arbitration from attachment prior to judgment, from execution of a judgment or set-off, - from any other legal process, and to the extent where such immunity could be granted by that jurisdiction, the Parties hereby irrevocably agree not to claim and hereby waive such immunity in respect of suit, jurisdiction of any court, attachment prior to judgment, set-off, execution of a judgment and from other legal process, as well as any immunity whatsoever. 11. Further Engagements - ----------------------- 11.1. The Parties respectively agree to execute and deliver such further instruments, papers and documents and to take the necessary measures that may reasonably be necessary or as may reasonably be requested for the purpose of carrying out the provisions of this Agreement. 11.2. This Agreement shall be binding upon to the benefit of the Parties hereto and their respective duly authorized representatives, providing they have agreed to be bound. 68 16 12. General Clauses - ------------------- 12.1. Any Party shall be entitled to terminate this Agreement in the event of a material breach of any provision by any other Party. However, the termination can only occur in the event it has not been remedied within thirty days from the date of a written notice to the defaulting Party or Parties. A material breach shall be considered one which endangers the successful completion of operations and the general equilibrium of this Agreement. 12.2. The responsibilities and liabilities of the Parties according to this Agreement shall survive after the expiry or termination. The expiry or termination of the Agreement or liabilities arising under this Agreement shall not affect the Parties obligations expressly stated in this Agreement to survive, or expressly contemplated in the event of such expiry or termination. 13. Entering into Force - ----------------------- This Agreement shall become effective when it has been signed by the duly authorized representatives of the Parties and provided that the Joint Venture Agreement has become effective. IN WITNESS WHEREOF the Parties have signed this Agreement written in French, along with an English translation, the French text being the authentic text, in 2 original copies, one for each party, by their duly authorized representatives. Signed at ... on the .. day of .... 1997 69 LONG TERM COBALT ALLOY SALES AGREEMENT -------------------------------------- BETWEEN - ------- THE J.V. GROUPEMENT POUR LE TRAITEMENT DU TERRIL DE LUBUMBASHI AND - --- OMG KOKKOLA CHEMICALS OY * * * 70 2 THE PRESENT AGREEMENT IS ESTABLISHED IN ITS ENTIRETY BY ALL THE ELEMENTS HEREINAFTER SPECIFIED AND AS REFERRED TO IN THE RESPECTIVE ARTICLES I. DEFINITIONS II. SPECIAL PROVISIONS 1. Scope and Quantity 2. Specifications of the Cobalt Alloy 3. Duration 4. Buffer Stock 5. Delivery and Title 6. Payment 7. Weighing, Sampling and Analysis 8. Invoicing Currencies and Payment Procedures 9. Hardship 10. Liabilities III. GENERAL DISPOSALS 1. Hierarchical Order of the Agreements 2. Amendment 3. Restrictions on Transfers 4. Arbitration and Applicable Laws 5. Confidentiality 6. Force Majeure 7. Notices 8. No Waiver 9. Severability and Headings 10. Sovereign Immunity 11. Further Engagements 12. General Clauses 13. Entering into Force 71 3 The Present Agreement is concluded between: SELLER: J.V. "GROUPEMENT POUR LE TRAITEMENT DU TERRIL DE LUBUMBASHI", having its registered office in Jersey on the one hand; and BUYER: OMG KOKKOLA CHEMICALS OY, having its registered office at P.O. Box 286, FIN-67101 KOKKOLA, Finland (hereinafter referred to as the BUYER or KCO) on the other hand. Whereas the SELLER intends to invest in a Plant to be located in Lubumbashi, the Democratic Republic of Congo, for the exclusive purpose of processing Slag presently available in the Site in the Democratic Republic of Congo to be processed into Cobalt Alloy which will be sold to the BUYER, and Whereas the Parties wish to enter into this Agreement whereby the SELLER undertakes to sell Cobalt Alloy, and the BUYER undertakes to buy Cobalt Alloy according to the terms and conditions herein set forth. THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS: 72 4 I. DEFINITIONS The terms defined hereinafter shall for all purposes of this Agreement and related Contracts have the meanings hereinafter specified, unless otherwise specified: AGREEMENT means this document signed by the Parties and its appendices forming an integral part of the present Agreement as well as its possible amendments. BUYER means OMG KOKKOLA CHEMICALS Oy (KCO) , a subsidiary of the OMG Group, buying Cobalt Alloy in the Long Term Cobalt Alloy Sales Agreement. PURCHASER means the J.V. purchasing Slag in the Long Term Slag Sales Agreement. COBALT BEARING ALLOY or TREATED MATERIAL means the main end product of the Processing Company (sometimes also called "Cobalt Alloy") containing cobalt and copper. YEAR means calendar year beginning on 1st of January and ending on 31st of December. UMPIRE means a person appointed by mutual agreement of the J.V. and the Buyer or GECAMINES in accordance with the Long Term Slag Sales Agreement or Long Term Cobalt Alloy Sales Agreement . CIF means "cost, insurance and freight" as defined in INCOTERMS, 1990 edition. TOLLING AGREEMENT means the Agreement concluded between the J.V. and the Processing Company for the purpose of processing Slag into Cobalt bearing Alloy. LONG TERM COBALT ALLOY SALES AGREEMENT means the Agreement whereby the J.V. undertakes to sell Cobalt Alloy to the Buyer and the latter undertakes to buy Cobalt Alloy from the J.V. LONG TERM SLAG SALES AGREEMENT means the Agreement whereby GECAMINES undertakes to sell Slag to the J.V. and the latter undertakes to buy Slag from GECAMINES. DATE OF DELIVERY means the date on which the J.V. takes and becomes the owner of the Site Slag according to the terms of the ex-site delivery clause. 73 5 DDU means "delivery duty unpaid" as defined in INCOTERMS, 1990 edition EXW means "ex works delivery" clause as defined in INCOTERMS, 1990 edition. SUPPLIER means the GENERALE DES CARRIERES ET DES MINES supplying Slag in the Long Term Slag Sales Agreement. J.V. means a private limited liability company having its registered office in JERSEY. BUSINESS DAY means a day which is not a Saturday, a Sunday or a public holiday in Finland, The Netherlands or the Democratic Republic of Congo. KCO means OMG KOKKOLA CHEMICALS Oy, a subsidiary of the OMG Group located in KOKKOLA, REPUBLIC OF FINLAND and established under the laws of the REPUBLIC OF FINLAND. LMB means the LONDON METAL BULLETIN. LME means the LONDON METAL EXCHANGE. SUPPLY LOT means a part of each delivered supply of Cobalt Alloy containing approximately 100 tons of Cobalt Alloy as divided by the BUYER in KOKKOLA for weighing, sampling, analysis and moisture content determination. EXPEDITION LOT means the tonnage of one container of Cobalt Alloy dispatch from the Processing Plant. USED LOTS means the Lot or Lots of Cobalt Alloy taken into usage by the BUYER for a period of one month. MONTH means calendar month. PARTIES means the Parties to this Agreement. QUOTATIONAL PERIOD means the Period defined in Article 5 of the Long Term Slag Sales Agreement or in Article 6.2 in the Long Term Cobalt Alloy Sales Agreement. 74 6 WEIGHTS AND MEASURES 1 (metric) ton = 2,204.6 pounds avoirdupois 1 dmt or ts = 1 dry metric ton 1 wmt or th = 1 wet metric ton TAKEN INTO USAGE means the taking of the Cobalt Alloy either directly from the ordinary commercial raw material Stock or alternatively from the Buffer Stock as a complement of the KOKKOLA Processing Plant. PROJECT means the conception and building of a Processing Plant in LUBUMBASHI for the purpose of exploiting the Slag Site of LUBUMBASHI as well as the proper operation of the Processing Plant, the trading operations including related operations and the distribution of the profits. PROCESSED SLAG means the Slag resulting from the operations in the Processing Plant SLAG means cobalt bearing slag located in the Site in THE DEMOCRATIC REPUBLIC OF CONGO and to be used as feeding stock in the Processing plant. SITE or SLAG SITE means the area in the Democratic Republic of Congo where the Slag is located and available to be delivered to the J.V. pursuant to this Agreement (called Terril de LUBUMBASHI, originating from the residues of the WATER JACKET ovens of GECAMINES and namely including the zones I, J, K1, K2 and TAS G-L having an average cobalt content of as described in further detail in appendix 1 of the Frame Agreement attached as Appendix 1 to this Agreement). PROCESSED SLAG SITE means the area in the Democratic Republic of Congo where the processed slag will be stocked. PROCESSING COMPANY means the Company to be set up by the J.V. in the Democratic Republic of Congo in the form of a SPRL for the purposes of operating the Processing Plant. COMMERCIAL STOCK means the ordinary stock of Cobalt Alloy enabling the regular supply of OMG-KCO plant taking into account the periodicity of maritime arrivals. BUFFER STOCK means the Cobalt Alloy Stock to be established at OMG in KOKKOLA, FINLAND in accordance with article 10 of the J.V. Agreement and to be kept separate from the Ordinary Commercial Cobalt Alloy Stock of OMG KOKKOLA Chemicals Oy. 75 7 USD means the lawful currency of the UNITED STATES OF AMERICA. PROCESSING PLANT means the Plant to be located in LUBUMBASHI in the DEMOCRATIC REPUBLIC OF CONGO. The Plant shall be operated by the Processing Company for the purpose of processing Slag into Cobalt bearing Alloy. SELLER means the J.V. selling Cobalt Alloy in the Long Term Cobalt Alloy Sales Agreement. 76 8 II. SPECIAL PROVISIONS ------------------ 1. SCOPE AND QUANTITY - ------------------------ The SELLER undertakes to sell and deliver to the BUYER and the BUYER undertakes to buy from the SELLER a minimum annual of 4,000 tons of cobalt and a maximum annual 5,000 tons of Cobalt contained for the exclusive usage of the Buyer. The annual quantity of 5,000 tons of Cobalt mentioned above does not include the quantity contained in the Buffer Stock and could possibly be reviewed after negotiation between the Parties, depending among others on the Slag availability, the processing capacity in the Democratic Republic of Congo and/or in Finland as well as on the Cobalt market situation. The annual quantity to be delivered shall be agreed by the Parties in the annual plans to be concluded and agreed three months prior to the beginning of each year. In case the SELLER produces through the Processing Company more than 4,000 tons per year, after the building up of the Buffer Stock, the quantity exceeding 4,000 tons shall be offered in priority to the BUYER at market conditions, and the latter shall have the right of first refusal. The J.V. can only sell to other users that tonnage of Cobalt which exceeds 4,000 tons. 2. SPECIFICATIONS OF THE COBALT ALLOY - ------------------------------------------ The Cobalt Alloy to be delivered to KOKKOLA, Finland shall have the following specifications on a dry basis: 77 9 3. DURATION - ---------------- This Agreement is concluded for a period of 20 years. This Agreement shall automatically be prolonged in so far that at the end of the year 2016 there is still Slag with an average Cobalt content and capable of being provided on economic viable terms and provided that the Long Term slag Sales Agreement shall be prolonged for an equivalent period of time. This Agreement shall automatically be terminated: (i) in case there shall no more be Slag available corresponding to the minimal required quantities and qualities, (ii) in case of liquidation of the J.V. with no successor, (iii) in case the BUYER disappears with no successor. Should any of the above mentioned event take place, no damages or interests shall be paid whatsoever. 4. BUFFER STOCK - -------------------- 4.1. Establishment and quantity -------------------------- To guarantee to the SELLER and BUYER an uninterrupted and sufficient feedstock of Cobalt Alloy to the KOKKOLA Plants, GECAMINES allows the SELLER and the BUYER to build up a Buffer Stock of Cobalt Alloy in KOKKOLA, in addition to the commercial stock to alleviate the problem caused by possible disturbances in the deliveries. For that reason GECAMINES undertakes to sell to the J.V. and the J.V. undertakes to buy from GECAMINES the quantity of Slag necessary for building up the Buffer Stock. The Cobalt contained in the Buffer Stock shall be 2,500 tons. The monthly amount of cobalt contained in the Cobalt Alloy exceeding the agreed monthly tonnage taken into usage by KCO shall be used for building up the Buffer Stock until the 2,500 tons of Cobalt contained in the Cobalt Alloy have been reached. 78 10 In the event that the cobalt content in the Buffer Stock decreases during the validity period of this Agreement, because of interruption or slowing down of the deliveries, the excess quantity above the agreed monthly supply shall be used for rebuilding the Buffer Stock until the cobalt content of 2,500 tons has been reached again. If during the reduction period hereinabove referred there will be disturbances in the deliveries and as a result the Buffer Stock level falls short of the above formula, then the annual reductions shall be postponed until the minimum level of the Buffer Stock has first been met. End 2006 : 2.100 tons of cobalt End 2007 : 1.700 tons of cobalt End 2008 : 1.300 tons of cobalt End 2009 : 900 tons of cobalt End 2010 : 500 tons of cobalt End 2011 : 100 tons of cobalt End 2012 : Liquidation of the Buffer Stock. With regard to any situation other than what is regulated hereinabove, the Parties will meet to find a joint understanding. 4.2. Management of the Cobalt Alloy Buffer Stock ------------------------------------------- KCO shall be responsible towards the J.V. for the management of the Buffer Stock, the risks, and shall bear all costs linked to it. KCO shall permit GECAMINES and the SELLER to check all records containing the necessary information as to the status and consumption of the Buffer Stock. The transfer of title related to the Cobalt Alloy of the Buffer Stock shall pass from the J.V. to KCO as taken into usage. 79 11 4.3. Payment for the Slag taken out for building up of the Buffer Stock ------------------------------------------------------------------ KCO shall pay for the Cobalt Alloy delivered to build up the Buffer Stock as follows: (i) KCO shall pay the J.V. for the tolling and transportation costs from the Democratic Republic of Congo to KOKKOLA at the end of the month following the delivery at KOKKOLA. These costs shall be agreed upon in the annual budget. (ii) The balance of the Cobalt and Copper price contained in the Alloy shall be payable as and when taken into usage from the Buffer Stock. KCO is aware that the J.V. shall have the right to use the Buffer Stock as a security for a loan provided that the J.V. is able to borrow money to pay GECAMINES for the Slag (as further described in art. 4.3 and 6.3 of the Long Term Slag Sales Agreement). The quantity of Cobalt and Copper contained in the Alloy and taken out from the Buffer Stock shall be priced in the same way as normal lots of Cobalt Alloy taken into usage by KCO. 5. DELIVERY AND TITLES - --------------------------- The SELLER shall deliver the Cobalt Alloy, except the Buffer Stock, DDU KOKKOLA Finland, packed in drums, in bags or otherwise, as agreed in due course between the SELLER and the BUYER. GECAMINES, the SELLER and the BUYER shall agree before the end of each calendar year on the quantity of Cobalt Alloy to be delivered to KCO for the following year. The delivery shall be made monthly in approximately even supplies. The transfer of titles and risks shall pass from the SELLER to the BUYER DDU KOKKOLA. 80 12 6. PRICING - ---------------- 6.1. Price Determination ------------------- The BUYER shall pay to the SELLER only for the Cobalt and Copper contents of each direct shipment or taken out from the Buffer Stock. The price of Cobalt and Copper shall be determined separately for each Used Lot of Cobalt Alloy as follows: (a) Cobalt Price Formula b) Copper Price Formula 81 13 6.2. Quotational Period ------------------ In case of direct delivery, the Cobalt and Copper Quotational Period is the month following the month of the delivery of Cobalt Alloy to KOKKOLA, FINLAND. In case of taken into Usage from the Buffer Stock, the Cobalt and Copper Quotational Period is the month following the month of the Taken into Usage. 6.3. Payment ------- The payment by the BUYER to the SELLER for each delivery, except for the deliveries to the Buffer Stock, shall be made as follows: The payments by the BUYER shall be made within twenty calendar days from the end of each Quotational Period. The price payable for all Lots delivered to KCO during any one month shall be calculated based on the relevant average cobalt and copper contents of each shipment and on the weight as determined by KCO. The BUYER shall notify the SELLER no later than ten days after the end of the Quotational Period applicable to the supplied Lots the following: (i) weight of supplied Lots during the preceding month (ii) the average Cobalt and Copper contents of the supplied Lots and (iii) the price payable for the supplied Lots taking into account the applicable reference price set out in Article 5 above. In case the averages of the final analysis of Cobalt and Copper contents are not available at the time of payment, the BUYER shall make a preliminary payment based on weights and analysis preliminary determined. When the final analysis is available, such payment shall be adjusted to reflect the final weights and analysis by crediting or debiting the difference in the next payment to be made by the BUYER to the SELLER. 82 14 6.4. Taxes and Duties ---------------- Any and all taxes, customs duties, Government charges or other duties paid or levied on the Cobalt Alloy in Finland shall be paid by the BUYER. All taxes, customs duties, Government char- ges or other duties on Cobalt Alloy outside of Finland shall be paid by the SELLER. 7. WEIGHING, SAMPLING AND ANALYSIS - --------------------------------------- The BUYER, the SELLER and GECAMINES shall confer and before the first dispatch shall adopt and record mutually agreed methods of weighing, sampling and analyzing. Such methods shall be accurate and reliable. They shall be appropriate and, based on internationally recognized and industrial standards, provide efficient economic and practical ways of determining accurate weights, obtaining representative samples, and producing accurate analyses of Cobalt Alloy. 8. INVOICING CURRENCIES AND PAYMENT PROCEDURES - --------------------------------------------------- 8.1. USD --- All bills and payments shall be in USD. 8.2. Method of payment ----------------- Payments by the BUYER to the SELLER shall be made by bank transfer to the SELLER's account. 83 15 9. HARDSHIP - ---------------- If at any moment unanticipated events by the Parties fundamentally alter the balance of this Agreement, resulting in an excessive burden to one of the parties in fulfilling its contractual obligations vis-a-vis the other Party, this aggrieved Party may proceed as follows : - - The aggrieved Party may request a review of this Agreement within three months after it has got the knowledge of the said change in circumstances and its effects on the economy of this Agreement. - - The request shall mention the reasons causing such review. - - The Parties shall confer within thirty calendar days of receipt of the notice in view to revise this Agreement on an equitable basis to avoid the excessive burdens for any of the Parties. The request to review does not have any suspension effects as to the execution of this Agreement. 10. LIABILITIES - ------------------- In the event of a breach to this Agreement, each Party shall be liable for all direct damage as well as costs, charges and expenses resulting from that breach. These damages shall be compensated in full. However, any loss or damage which is an indirect or consequential result of the nonfulfillment of obligations under or in connection of this Agreement is excluded unless resulting from a willful or intentional act from the defaulting Party. All direct damages and claims can only be set off or deducted from the agreed price as and when the disagreement thereof between the Parties has been finally settled or solved otherwise. 84 16 III. GENERAL DISPOSALS ----------------- 1. HIERARCHICAL ORDER OF THE AGREEMENTS ------------------------------------ This Agreement is part of the Agreements concluded between the Parties. The aim of these Agreements is to set up the terms and conditions of the purchase of the Slag located at the Site, the setting up of the J.V. and of the Processing Company and selling the Cobalt-bearing Alloy to KCO for further processing. These Agreements are : (i) JOINT VENTURE AGREEMENT (ii) LONG TERM SLAG SALES AGREEMENT (iii) LONG TERM COBALT ALLOY SALES AGREEMENT (iv) TOLLING AGREEMENT Although each Agreement mentioned above can be interpreted independently and according to its own terms, it is to be noted that it is part of a larger contractual arrangement and that it has to be interpreted in light of the other Agreement. In the event of a conflict between the listed Agreements, they shall be interpreted in the above order so that a prior Agreement shall always supersede a later one. 2. AMENDMENTS ---------- Any amendments or additions to this Agreement shall be valid only if made in writing and signed by duly authorized representatives of the Parties hereto. 85 17 Should an amendment or modification to this Agreement have an effect on the other Agreements, the Parties undertake to change or modify these other Agreements in order to avoid any conflicts between this Agreements and the other Agreements. 3. RESTRICTIONS ON TRANSFERS - --------------------------------- 3.1. A Party shall not have the right to sell, assign, transfer, mortgage, pledge, charge or otherwise deal with the rights and obligations it holds in this Agreement. 3.2. The provisions of Article 3.1. shall not be applicable in the case of a transfer, sale or assignment of participation by a Party to an affiliate company provided that the transfer, sale or assignment is total and is imposed by legitimate reorganization needs of the Party concerned. For the purposes of this Agreement, an Affiliate Company shall mean any company or entity which is a subsidiary or a parent of the transferor Party or which directly or indirectly controls or is controlled by the transferor Party. 3.3. Any transfer beyond the terms and conditions of Article 3.1. or 3.2. shall not be possible without the prior written consent of all the Parties. 3.4. Any transfer described or permitted in accordance with Articles 3.2 and 3.3 shall be subject to the transferee giving its written undertaking to be bound by all the terms, conditions and undertakings of this Agreement and relating Agreements. 4. ARBITRATION AND APPLICABLE LAWS - --------------------------------------- In the event the Parties are unable to settle a dispute in connection with this Agreement out of court, they agree the dispute shall be submitted to the French section of the tribunals of Brussels which shall give a verdict pursuant to the Belgian laws. 86 18 5. CONFIDENTIALITY - ----------------------- 5.1. Unless otherwise provided in this Article, all reports, records, data or any other information of any kind whatsoever developed or acquired by any Party in connection with the activities of the J.V. and/or the Processing Company in the DEMOCRATIC REPUBLIC OF CONGO controlled by the J.V., shall be treated as confidential and no Party shall reveal or otherwise disclose such confidential information to third parties Without the prior consent of the other Parties. The above restrictions shall not apply to the disclosure of confidential information to any affiliate companies or any private or public financing institutions, any contractors or subcontractors, employees or consultants of the Parties or of the J.V. or the Processing Company or to any third party to which a Party envisage the transfer, the sale, assignment, encumbrance or other disposition of all of its participation in the J.V. in accordance with the terms of the Article 3 above. However, this shall only be applicable provided the confidential information shall only be disclosed to third parties having a legitimate need for this information and the persons or company to whom such disclosure is made shall first undertake in writing to protect the confidential nature of such information, to the same extent as the Parties are obligated under this Article. In addition, the above restrictions shall not apply to any Government or governmental Department or Agency which has the right to require the disclosure of such confidential information. These restrictions shall also not apply to such confidential information which comes into the Public Domain, except the fault from any Party. This confidentiality obligation shall survive for a period of 5 years commencing at the termination/dissolution of this Agreement. The above mentioned restrictions are not valid for information retained by GECAMINES related to the Site. 87 19 6. FORCE MAJEURE - --------------------- 6.1. The obligations of any Party shall be suspended to the extent that the performance of its obligations is prevented or delayed, in whole or in part by: - accidental act, bad weather, floods, slides, mine disasters or major accidents, cave-ins, strikes, lock-out, labor disputes, labor shortage, demonstrations, riots, sabotage, laws, rules or regulations of agency or governmental bodies. The obligations shall also be suspended in the event of governmental actions or inactions, restraints of governmental or other competent authorities, inability to obtain or unavoidable delay in obtaining necessary materials, facilities and equipment in the open market, suspension or refusal of access to the deposit Slag Site, interruption or unavoidable delay in communication or transportation, or any other cause, whether similar or not to those specifically listed, which shall be beyond the reasonable control of the Party. 6.2. In the event of such occurrences, the affected Party shall give written notice to the other party as soon as possible after the occurrence of the event causing the delay or prevention, setting out full particulars and estimating the duration of the delay or prevention. The Party affected shall use all possible diligence to remedy the situation causing the delay as quickly as possible. The requirement that any such delay shall be remedied with all possible diligence shall not require a Party to settle strikes, lock out or other labor conflicts contrary to its wishes and this type of difficulty shall be handled within the discretion of the Party concerned. In the event the situation of force majeure would remain enforce for more than 6 months, the Parties shall meet to analyze the situation en envisage the termination of this Agreement. 88 20 7. NOTICES - --------------- 7.1. All notices required under this Agreement shall be in writing and directed to the respective Parties at the following addresses: - If to J.V. - If to KCO OMG EUROPE GMBH Mr Kari MUURAISKANGAS Morsenbraicherweg 200 D - 40470 DUSSELDORF GERMANY Tel : 00.49.211.96.18.80 Fax : 00.49.211.61.46.29 Any notice shall be deemed to have been given to any Party if personally delivered to a designated officer of the Party to whom the notice is addressed, or if sent by registered mail, postage prepaid, with return receipt, and properly addressed as set forth herein, or if sent by fax or telex to an authorized representative with evidence of transmission receipt. The notice shall be effective as of the moment of personal delivery, or in the case of mailing, as of the date shown on the return receipt, or in the case of fax or telex, as of the date faxed or telexed. A Party may, at any time, change the address to which notices or communications shall be given by written notice to the other Party. 89 21 8. NO WAIVER - ----------------- The failure of a Party at any time to require the performance of any provision of this Agreement shall not affect its right to execute that provision and a waiver by such Party upon a breach thereof shall not be interpreted as a waiver by such Party of any later non execution of such provision or as a waiver by such Party of any other provision of this Agreement. 9. SEVERABILITY AND HEADINGS - --------------------------------- 9.1. If any provision of this Agreement or its related Appendices should be null and void, such a nullity shall not invalidate all the other provisions in this Agreement or related Appendices. The Parties of this Agreement shall endeavor to negotiate so as to replace any null and void provision as well as any other affected provision. 9.2. The headings in this Agreement are considered for convenience only and shall not have any effect or limit in interpreting the provisions of this Agreement. 10. SOVEREIGN IMMUNITY - -------------------------- To the extent that a Party may be entitled to claim in any jurisdiction in which legal proceedings may at any time be commenced with respect to this Agreement, for itself or its activities, properties or assets any immunity either: - - from jurisdiction of any court or arbitration - - from attachment prior to judgment, from execution of a judgment or set-off 90 22 - - from any other legal process, and to the extent where such immunity could be granted by that jurisdiction,the Parties hereby irrevocably agree not to claim and hereby waive such immunity in respect of suit, jurisdiction of any court, attachment prior to judgment, set-off, execution of a judgment and from other legal process, as well as any immunity whatsoever. 11. FURTHER ENGAGEMENTS - --------------------------- 11.1. The Parties respectively agree to execute and deliver such further instruments, papers and documents and to take the necessary measures that may reasonably be necessary or as may reasonably be requested for the purpose of carrying out the provisions of this Agreement. 11.2. This Agreement shall be binding upon to the benefit of the Parties hereto and their respective duly authorized representatives, providing they have agreed to be bound. 12. GENERAL CLAUSES - ------------------------ 12.1. A Party shall be entitled to terminate this Agreement in the event of a material breach of any provision by the other Party. However, the termination can only occur in the event it has not been remedied within thirty days from the date of a written notice to the defaulting Party. A material breach shall be considered one which endangers the successful completion of operations and the general equilibrium of this Agreement. 12.2. The responsibilities and liabilities of the Parties according to this Agreement shall survive after the expiry or termination. 91 23 The expiry or termination of the Agreement or liabilities arising under this Agreement shall not affect the Parties' obligations expressly stated in this Agreement to survive, or expressly contemplated in the event of such expiry or termination. 13. ENTERING INTO FORCE - --------------------------- This Agreement shall become effective when it has been signed by the duly authorized representatives of the Parties and provided that the Joint Venture Agreement has become effective. In witness whereof the Parties have signed this Agreement drafted in French and translated into English (French version being binding) in two original copies, one for each party, by their duly authorized representatives. place, date For J.V. For OMG-KCO. EX-10.34 7 EXHIBIT 10.34 1 Exhibit 10.34 1 COMMERCIAL CONTRACT No. CO/265/97 March 1997 Between: 1 LA GENERALE DES CARRIERES ET DES MINES a corporation duly incorporated under the laws of Zaire. And: OMG KOKKOLA CHEMICALS OY, a corporation duly incorporated under the laws of Finland (hereafter called "Buyer") of the second part. IT HAS BEEN AGREED AS FOLLOWS: 1 DEFINITION AND INTERPRETATION 1.1 DEFINITIONS Wherever used in this agreement unless the context otherwise requires: "Year" means calendar year commencing on 1 January and ending on 31 December that year. "Concentrate Co-Cu or "Concentrate" "means the material defined in Clause 4 hereafter. "Agreement" means this Agreement. "Business Day" means a day which is not a Saturday, Sunday or a public holiday in Finland or Zaire. "Delivered lot" means a lot of concentrate containing approximately 500 wmt from Kipushi or Luiswishi. "Received lot" means the concentrate received by OMG in Kokkola containing approximately 500 wmt "Payable metals" are cobalt, copper or all other metals which are economically recoverable and agreed by both parties. "Month" means calendar month. "Quotational period" explained In Clause 8.2 hereunder. 2 2 "Project" defines Luiswishi project. "Average Cobalt Content" is defined in Clause 4 hereafter. "Average Copper Content" is defined in Clause 4 hereafter. "Ton" and "metric ton" means 2204,62 pounds avoirdupois "WMT" means wet metric ton. "DMT" means dry metric ton. "USD" shall mean lawful money of the United States of America 2 SUBJECT Gecamines will deliver to OMG the monthly quantity of concentrate, defined in article 6 hereinafter according to the specifications defined in articles 3 and 4 hereafter, to OMG Kokkola Chemicals in Finland. 3 MATERIAL TO BE DELIVERED Cobalt and copper metal content in the concentrate are defined in article 4 hereinafter. 4 SPECIFICATIONS Gecamines agrees to sell and deliver and OMG agrees to purchase Co-Cu concentrate having the following characteristics assayed on a dry basis: The parties can agree to modify the characteristics and possible conditions and add other payable metals. 5 DURATION This agreement is in force for two years commencing on the date of starting the production and deliveries (Article 17). OMG has the option to continue the contract until this material can be replaced by cobalt smelter alloy. 6 QUANTITY Gecamines shall deliver to OMG and OMG shall purchase from Gecamines 300-400 t cobalt content in concentrate in accordance with the specifications in article 4, 7 DELIVERY The delivery term to OMG in Kokkola, Finland (DDU Incoterms edition 1990). Freight, charges, transportation and insurance to be charged from OMG. OMG will choose the transportation agent as well as the way of packing (big bags or bulk) after consulting Gecamines. 3 3 8 PRICE The price of concentrate is based on metal content and fixed according the following formulas 8.1 PRICE DETERMINATION OMG shall pay to Gecamines for the Cobalt and Copper in the concentrate. The price will be determined separately for each received Lot DDU Kokkola. 8.1.1 COBALT PRICE (PCo) Payable cobalt price for received lot is determined according the following formula: 8.1.2 COPPER PRICE (PCu) Payable copper price for each received lot is determined according the following formula. 8.1.3 PRICE OF OTHER RECOVERABLE METALS 8.2 QUOTATIONAL PERIOD The applicable Quotational Period for cobalt, copper and other metals is the month of arrival in Kokkola. 4 4 8.3 PAYMENT After reception in Kokkola OMG will make the payment for received lots. Weighing and sampling is done according to the procedure described in article 9.2 for the quantities and that described in 8.1 and 8.2 for the currency in use. In any case the final payment shall be made in 30 days after QP. The title is passed from Gecamines to OMG at arrival in Kokkola. 8.4 TAXES AND DUTIES Any and all taxes, and duties in Zaire relating to this Agreement shall be paid by Gecamines. Any and all taxes, and duties paid outside Zaire relating to this Agreement shall be paid by OMG. 8.5 ACCOUNT OMG will credit "Project Luiswishi" by opening an account at a bank approved by the parties of this project. 9 WEIGHING, SAMPLING AND ASSAYING 9.1 WEIGHING, SAMPLING AND MOISTURE DETERMINATION IN KIPUSHI OR LUISWISHI To be used for transportation and insurance invoicing purposes, only: (a) OMG and Gecamines shall confer and, before the first shipment, shall adopt and record mutually acceptable methods of weighing, sampling and analysing. (b) The Co-Cu concentrate will be weighed, sampled and analysed in Kipushi or Luiswishi at Gecamines costs. The shipment shall be divided in lots of approximately 500 tons. Each lot shall form a separate and complete delivery for all purposes under this Agreement (c) Sampling and analysing will be made using mutually agreed methods. Such weight and moisture content will be provisional for all purposes of this agreement. After weighing, sampling and analysing Gecamines will pass the results to OMG by telecopy. 9.2. WEIGHING, SAMPLING AND MOISTURE DETERMINATION AT DISCHARGING PORT (a) OMG and Gecamines shall mutually agree the methods of weighing, sampling and analysing before the first shipment. These shall be appropriate, based on internationally approved methods, defining exact weights, samples and analyses. (b) The Co-Cu concentrate will be weighed and sampled at the discharging port at OMG's cost. Each received lot means a separate and complete delivery under this agreement. 5 5 (c) Sampling and analyses are made according mutually agreed analytical methods. Weighing and moisture will be determined according this contract. In case of arbitration demanded by either of the parties the procedure will be according art. (9.3). A total of five sets of samples shall be drawn from each lot and distributed as follows: - one set of samples for the OMG - one set of samples for Gecamines - one set of samples for eventual umpire analysis kept by OMG - one set of samples for eventual umpire analysis kept by Gecamines - one set of samples for reserve kept by OMG During these operations Gecamines shall have the right to be represented at its own expense. After getting results OMG and Gecamines shall exchange the assays. If the assays are not ready in 30 calendar days, the analysis that is at disposal will be used for final invoicing. The invoice will be sent by telecopy to OMG and the original by courier They shall be final and binding for both parties of this agreement. For each lot of 500 tonnes WMT Gecamines will calculate the amount of cobalt, copper and other elements applicable for each lot preparing an invoice in accordance with the shipment. The invoice shall be sent by telecopy to OMG and the original by courier. 9.3 UMPIRE ASSAYING This process is applicable for the samples taken at the port of arrival. The analyses should be made independently by OMG and Gecamines. The exchange of assays will be made by telecopy. If the difference of assays for Co, Cu and Ni of the two parties is not higher than 0.20% the arithmetic mean of these two results will be accepted final. In the event of greater difference and if either of parties demand, an umpire assay may be made on the samples reserved by two independent laboratories, mutually approved. The reference assayers cannot act as representative agent of OMG or Gecamines at the weighing, sampling and moisture determination operations and/or carry out, for any or both parties, the analysis for the assay exchange. Should the umpire assay fall between the results of the two parties or coincide with either, the arithmetical mean of the umpire assay and the assay of the party which is the nearer one to the umpire shall be taken as the agreed assay. 6 6 Should the umpire assay be the exact mean of the two parties then the umpire result shall be final. The cost of the umpire assay shall be borne equally by both parties when the umpire assay is the exact mean of the exchanged results. Should the umpire assay fall outside the exchanged results, the assay of the party which is nearer the umpire shall be taken as agreed assay. The cost of this assay shall be borne by the other party. 10 FORCE MAJEURE In the event of any strike, act of God, war, lockout, flood, accident, lack transport facilities or any other reason beyond the control of the parties which prevent the parties to fulfill the obligations of the agreement, the party involved should immediately inform the other party in writing of such event and of the estimated duration of fulfilling the obligations. If these circumstances or the Force Majeure situation should persist more than 3 months the parties shall meet and consider the cancelling this agreement. 11 FAIR CLAUSE In case or events not foreseen by the parties, regardless of the agreement, one of the parties may demand additional charge to be able to fulfil its obligation in accordance with this agreement, this party has to request in writing for a possible modification of this agreement. The demand should, without delay, include the reason for the request, explain the situation of the party and the economical consequences to this agreement. At default of notifying the party will loose the wright to present the request in accordance with this article. 12 NOTICES All notices, requests for information, complaints and other communication which are required or may be given under this Agreement shall be in writing delivered personally or sent by registered mail or telecopy at the following addresses or to other such address as a party may notify the other party in writing: If for Gecamines La Generale des Carrieres et des Mines Monsieur le President Delegue General B.P. 450 Lubumbashi Republic of Zaire Telephone: +32 2 67 68 045 Telecopy:+32 2 67 68 047 Brussels Telephone: +32 2 67 68 983 Telecopy: +32 2 67 68 984 7 7 Or if for OMG Kokkola Chemicals Oy Att: The President P.O. Box 286, FIN-67101 Kokkola Finland Telephone: +358 6 8280 111 Telecopy: +358 6 8280 373 13 ASSIGNMENT OF THE AGREEMENT This agreement as well as all rights and obligations for each party arising thereof cannot be transferred, assigned, or pledged to a third party without written permission of the other party before notice with the exception where assigning company controls the majority. This permission cannot be withheld unreasonably 14 AMENDMENTS This present Agreement can only be modified by means of clauses duly signed by both parties. 15 GOVERNING LAW AND JURISDICTION Any dispute, occurred between the Parties and resulting from misinterpretation or execution of the present agreement, shall be preferably settled amicably. If it is not the case, it will be referred to the Commercial Arbitration court in Paris which will make a ruling based on French Law. 16 INTERPRETATION A) The titles of various articles and paragraphs have no effect in the interpretation of this agreement. B) If any period specified in this agreement shall expire in non business day, the expiring date is the following business day. 17 The agreement shall come into effect after the production has started, which should be November, 1997. In Lubumbashi 4 April, 1997 This agreement has been executed in two copies, one for each party. FOR GECAMINES YAWILI NYI ZONGIA UMBA KYAMITALA DELEQUE GENERAL ADJOINT PRESIDENT DELEQUE GENERAL FOR OMG KOKKOLA CHEMICALS OY ANTTI AALTONEN PRESIDENT EX-21 8 EXHIBIT 21 1 Exhibit 21 Subsidiaries ------------ Name of Subsidiary* Jurisdiction of organization - ------------------ ---------------------------- Auric Corporation (dba OMG Fidelity) Delaware Fidelity Chemical Products Malaysia SDN.BHD Malaysia Fidelity Chemical Products (BAH) Limited Bahamas D&O Incorporated (50%) Japan J&O Incorporated (50%) Korea Kokkola Chemicals Oy Finland OMG Americas, Inc. Ohio OMG Apex, Inc Delaware OMG JETT, Inc. Ohio OMG Europe GmbH Germany OMG Asia Pacific Co., Ltd. Taiwan SCM Metal Products Inc. Delaware SCM Metal Products Singapore PTE Ltd. (70%) Singapore Vasset, S.A. France OMG Belleville Limited Canada OM Group Export Limited Barbados OMG BV Netherlands *Percentage in parenthesis indicates the Company's ownership if other than 100% EX-23 9 EXHIBIT 23 1 Exhibit 23 - Consent of Ernst & Young LLP We consent to the incorporation by reference in the following Registration Statements of OM Group, Inc. of our report dated February 3, 1998, with respect to the consolidated financial statements of OM Group, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1997:
Registration Number Description Filing Date - ------------------- ----------- ----------- 33-74674 OM Group, Inc. Long-Term Incentive Compensation Plan -- Form S-8 Registration Statement -- 1,015,625 Shares January 27, 1994 333-07529 OMG Americas, Inc. Employees' Profit Sharing Plan -- Form S-8 Registration Statement -- 250,000 Shares July 3, 1996 333-07531 OM Group, Inc. Non-Employee Directors' Equity Plan -- Form S-8 Registration Statement -- 250,000 Shares July 3, 1996 Cleveland, Ohio March 19, 1998 /s/ Ernst & Young LLP
EX-24 10 EXHIBIT 24 1 Exhibit 24 OM GROUP, INC. Form 10-K Power of Attorney for Directors The undersigned, a director of OM Group, Inc., a Delaware corporation (the "Company"), which anticipates the filing with the Securities and Exchange Commission (the "Commission") under the provisions of the Securities Exchange Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent amendments, the "Form 10-K"), does hereby constitute and appoint James P. Mooney, James M. Materna or Michael J. Scott and any one of them with full power of substitution and resubstitution, as attorney or attorneys to execute and file on behalf of the undersigned, in his capacity as director of the Company, the Form 10-K and any and all other documents to be filed with the Commission pertaining to the Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever required or necessary to be done in the premises, as fully as to all intents and purposes as he could do if personally present, hereby ratifying and approving the acts of said attorneys and any of them and any such substitution. Executed this 20th day of March, 1998. /s/ Eugene Bak 2 OM GROUP, INC. Form 10-K Power of Attorney for Directors The undersigned, a director of OM Group, Inc., a Delaware corporation (the "Company"), which anticipates the filing with the Securities and Exchange Commission (the "Commission") under the provisions of the Securities Exchange Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent amendments, the "Form 10-K"), does hereby constitute and appoint James P. Mooney, James M. Materna or Michael J. Scott and any one of them with full power of substitution and resubstitution, as attorney or attorneys to execute and file on behalf of the undersigned, in his capacity as director of the Company, the Form 10-K and any and all other documents to be filed with the Commission pertaining to the Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever required or necessary to be done in the premises, as fully as to all intents and purposes as he could do if personally present, hereby ratifying and approving the acts of said attorneys and any of them and any such substitution. Executed this 20th day of March, 1998. /s/ Lee R. Brodeur 3 OM GROUP, INC. Form 10-K Power of Attorney for Directors The undersigned, a director of OM Group, Inc., a Delaware corporation (the "Company"), which anticipates the filing with the Securities and Exchange Commission (the "Commission") under the provisions of the Securities Exchange Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent amendments, the "Form 10-K"), does hereby constitute and appoint James P. Mooney, James M. Materna or Michael J. Scott and any one of them with full power of substitution and resubstitution, as attorney or attorneys to execute and file on behalf of the undersigned, in his capacity as director of the Company, the Form 10-K and any and all other documents to be filed with the Commission pertaining to the Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever required or necessary to be done in the premises, as fully as to all intents and purposes as he could do if personally present, hereby ratifying and approving the acts of said attorneys and any of them and any such substitution. Executed this 20th day of March, 1998. /s/ Frank Butler 4 OM GROUP, INC. Form 10-K Power of Attorney for Directors The undersigned, a director of OM Group, Inc., a Delaware corporation (the "Company"), which anticipates the filing with the Securities and Exchange Commission (the "Commission") under the provisions of the Securities Exchange Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent amendments, the "Form 10-K"), does hereby constitute and appoint James P. Mooney, James M. Materna or Michael J. Scott and any one of them with full power of substitution and resubstitution, as attorney or attorneys to execute and file on behalf of the undersigned, in his capacity as director of the Company, the Form 10-K and any and all other documents to be filed with the Commission pertaining to the Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever required or necessary to be done in the premises, as fully as to all intents and purposes as he could do if personally present, hereby ratifying and approving the acts of said attorneys and any of them and any such substitution. Executed this 20th day of March, 1998. /s/ Thomas R. Miklich 5 OM GROUP, INC. Form 10-K Power of Attorney for Directors The undersigned, a director of OM Group, Inc., a Delaware corporation (the "Company"), which anticipates the filing with the Securities and Exchange Commission (the "Commission") under the provisions of the Securities Exchange Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent amendments, the "Form 10-K"), does hereby constitute and appoint James P. Mooney, James M. Materna or Michael J. Scott and any one of them with full power of substitution and resubstitution, as attorney or attorneys to execute and file on behalf of the undersigned, in his capacity as director of the Company, the Form 10-K and any and all other documents to be filed with the Commission pertaining to the Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever required or necessary to be done in the premises, as fully as to all intents and purposes as he could do if personally present, hereby ratifying and approving the acts of said attorneys and any of them and any such substitution. Executed this 20th day of March, 1998. /s/ John E. Mooney 6 OM GROUP, INC. Form 10-K Power of Attorney for Directors The undersigned, a director of OM Group, Inc., a Delaware corporation (the "Company"), which anticipates the filing with the Securities and Exchange Commission (the "Commission") under the provisions of the Securities Exchange Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent amendments, the "Form 10-K"), does hereby constitute and appoint James P. Mooney, James M. Materna or Michael J. Scott and any one of them with full power of substitution and resubstitution, as attorney or attorneys to execute and file on behalf of the undersigned, in his capacity as director of the Company, the Form 10-K and any and all other documents to be filed with the Commission pertaining to the Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever required or necessary to be done in the premises, as fully as to all intents and purposes as he could do if personally present, hereby ratifying and approving the acts of said attorneys and any of them and any such substitution. Executed this 20th day of March, 1998. /s/ Markku Toivanen EX-27 11 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE OM GROUP, INC. CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1997 AND 1996 AND THE OM GROUP INC. STATEMENTS OF CONSOLIDATED INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS 12-MOS DEC-31-1997 DEC-31-1996 DEC-31-1997 DEC-31-1996 13,193 7,818 0 0 81,282 60,264 680 210 219,201 195,050 324,749 275,370 224,359 167,805 74,112 57,184 601,063 443,456 100,682 101,509 0 0 0 0 0 0 222 188 301,019 185,134 601,063 443,456 487,296 387,999 487,296 387,999 369,933 304,025 416,724 336,578 (815) (467) 0 0 13,410 7,485 57,977 44,403 19,534 14,356 38,443 30,047 0 0 0 0 0 0 38,443 30,047 1.84 1.61 1.78 1.56
EX-27.1 12 EXHIBIT 27.1
5 This schedule contains summary financial information extracted from the OM Group, Inc. Consolidated Balance Sheets at March 31, 1996 (Unaudited) and the OM Group, Inc. Statements of Consolidated Income for the three months ended March 31, 1996 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1996 MAR-31-1996 7,630 0 69,664 0 151,801 243,590 145,782 46,540 369,544 85,537 0 0 0 125 167,009 369,544 102,853 102,853 82,642 90,595 (204) 0 1,894 10,568 3,417 7,151 0 0 0 7,151 .38 .37
EX-27.2 13 EXHIBIT 27.2
5 This schedule contains summary financial information extracted from OM Group, Inc. Consolidated Balance Sheets at June 30, 1996 (Unaudited) and the OM Group, Inc. Statements of Consolidated Income for the three and six months ended June 30, 1996 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 6-MOS DEC-31-1996 DEC-31-1996 JUN-30-1996 JUN-30-1996 9,718 9,718 0 0 64,462 64,462 0 0 161,726 161,726 249,575 249,575 151,424 151,424 50,465 50,465 398,005 398,005 88,975 88,975 0 0 0 0 0 0 125 125 173,031 173,031 398,005 398,005 101,485 204,338 101,485 204,338 80,455 163,097 88,401 178,996 (139) (343) 0 0 1,860 3,754 11,363 21,931 3,780 7,197 7,583 14,734 0 0 0 0 0 0 7,583 14,734 .41 .79 .39 .77
EX-27.3 14 EXHIBIT 27.3
5 This schedule contains summary financial information extracted from the OM Group, Inc. Consolidated Balance Sheets at September 30, 1996 (Unaudited) and the OM Group, Inc. Statements of Consolidated Income for the three months and nine months ended September 30, 1996 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 9-MOS DEC-31-1996 DEC-31-1996 SEP-30-1996 SEP-30-1996 5,263 5,263 0 0 58,561 58,561 0 0 194,997 194,997 268,903 268,903 157,327 157,327 54,044 54,044 419,312 419,312 100,775 100,775 0 0 0 0 0 0 125 125 178,802 178,802 419,312 419,312 89,071 293,409 89,071 293,049 68,166 231,263 76,035 255,031 (41) (384) 0 0 1,776 5,530 11,301 33,232 3,631 10,828 7,670 22,404 0 0 0 0 0 0 7,670 22,404 .41 1.20 .40 1.17
EX-27.4 15 EXHIBIT 27.4
5 This schedule contains summary financial information extracted from the OM Group, Inc. Consolidated Balance Sheets at March 31, 1997 (Unaudited) and the OM Group, Inc. Statements of Consolidated Income for the three months ended March 31, 1997 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1997 MAR-31-1997 8,177 0 76,412 0 223,260 316,984 197,628 61,154 592,955 97,718 0 0 0 188 191,862 592,955 110,055 110,055 83,477 94,359 (306) 0 3,666 12,336 4,120 8,216 0 0 0 8,216 .44 .43
EX-27.5 16 EXHIBIT 27.5
5 This schedule contains summary financial information extracted from the OM Group, Inc. Condensed Consolidated Balance Sheets at June 30, 1997 (Unaudited) and the OM Group, Inc. Statements of Consolidated Income for the three and six months ended June 30, 1997 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 6-MOS DEC-31-1997 DEC-31-1997 JUN-30-1997 JUN-30-1997 8,917 8,917 0 0 75,156 75,156 0 0 254,564 254,564 346,282 346,282 206,990 206,990 65,297 65,297 614,770 614,770 115,537 115,537 0 0 0 0 0 0 222 222 285,813 285,813 614,770 614,770 124,334 234,389 124,334 234,389 94,851 178,328 106,465 200,824 (106) (412) 0 0 3,488 7,154 14,487 26,823 4,908 9,028 9,579 17,795 0 0 0 0 0 0 9,579 17,795 .46 .90 .44 .87
EX-27.6 17 EXHIBIT 27.6
5 This schedule contains summary financial information extracted from the OM Group, Inc. Condensed Consolidated Balance Sheets at September 30, 1997 (Unaudited) and the OM Group, Inc. Statements of Consolidated Income for the three and nine months ended September 30, 1997 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 9-MOS DEC-31-1997 DEC-31-1997 SEP-10-1997 SEP-10-1997 6,766 6,766 0 0 82,825 82,825 0 0 228,864 228,864 325,954 325,954 213,492 213,492 69,752 69,752 595,632 595,632 84,496 84,496 0 0 0 0 0 0 222 222 293,759 293,759 595,632 595,632 126,317 360,706 126,317 360,706 96,368 274,696 107,997 308,821 (231) (643) 0 0 3,132 10,286 15,419 42,242 5,204 14,232 10,215 28,010 0 0 0 0 0 0 10,215 28,010 .46 1.36 .45 1.32
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