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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1999 Commission File Number 1-15147
OMNOVA SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
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OHIO 34-1897652
(State of Incorporation) (I.R.S. Employer Identification No.)
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175 GHENT ROAD, FAIRLAWN, OHIO 44333-3300
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (330) 869-4200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value 10c per share New York Stock Exchange
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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 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 the registrant's common stock held by
nonaffiliates of the registrant as of February 1, 2000, was $310,260,040.
As of February 1, 2000, there were 41,273,251 outstanding shares of the
Company's Common Stock, 10c par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2000 Proxy Statement of OMNOVA Solutions Inc. are
incorporated by reference into Part III of this Report.
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OMNOVA SOLUTIONS INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999
TABLE OF CONTENTS
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ITEM
NUMBER PAGE
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PART I
1 Business.................................................... 1
2 Properties.................................................. 7
3 Legal Proceedings........................................... 8
4 Submission of Matters to a Vote of Security Holders......... 8
4A Executive Officers of the Registrant........................ 8
PART II
5 Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 10
6 Selected Financial Data..................................... 10
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 11
7A Quantitative and Qualitative Disclosures About Market
Risk...................................................... 16
8 Consolidated Financial Statements and Supplementary Data.... 16
9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 16
PART III
10 Directors and Executive Officers of the Registrant.......... 38
11 Executive Compensation...................................... 38
12 Security Ownership of Certain Beneficial Owners and
Management................................................ 38
13 Certain Relationships and Related Transactions.............. 38
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 38
Signatures.................................................. 41
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PART I
ITEM 1. BUSINESS
INTRODUCTION
OMNOVA Solutions Inc. (OMNOVA Solutions or Company) was organized in June
1999 as a wholly-owned subsidiary of GenCorp Inc. as part of a plan to spin-off
GenCorp's Performance Chemicals and Decorative & Building Products businesses as
a separate publicly traded company. On October 1, 1999 OMNOVA Solutions Inc.
became an independent publicly-held company when GenCorp Inc. distributed a
dividend payable in one share of OMNOVA Solutions common stock for each share of
GenCorp common stock held on the September 27, 1999 record date (the
"spin-off"). The Company's headquarters are at 175 Ghent Road, Fairlawn, Ohio
44333.
OMNOVA Solutions operates two business segments, Performance Chemicals and
Decorative & Building Products. The Performance Chemicals segment manufactures a
broad range of emulsion polymers and specialty chemicals used as coatings,
binders, adhesives, and additives for paper, carpet, textile and various other
specialty chemical applications. Decorative & Building Products designs,
manufactures and markets a comprehensive line of decorative and functional
surface products including commercial wallcovering, coated fabrics, printed and
solid color surface laminates, graphic arts and industrial films, and transfer
printed products for furniture, transportation, cabinets, home furnishings,
apparel, new construction and remodeling and other commercial applications, as
well as membrane systems for commercial and industrial roofing. (Financial
information relating to the Company's business segments appears on pages 34
through 36 of this report.)
BACKGROUND
The Performance Chemicals business was founded in 1952 as a segment of The
General Tire & Rubber Company, GenCorp's predecessor, focusing primarily on the
manufacture of latex, an emulsion polymer, for the paper industry and for tire
cord adhesives in its Mogadore, Ohio facility. During the 1960s, the business
began expanding its product lines for the paper and carpet industries, and in
1993 opened a latex plant in Green Bay, Wisconsin to better serve the needs of
its paper customers in the upper Midwest. The Decorative & Building Products
segment began in 1945 when The General Tire & Rubber Company purchased the
Jeannette, Pennsylvania coated fabrics facility from the Pennsylvania Rubber
Company. In 1963 the Company built a production facility in Columbus,
Mississippi to increase its capacity and product offerings in coated fabrics.
The manufacturing of commercial wallcovering was added at the plant in the early
1970s.
Performance Chemicals' 1996 acquisition of Morton International's Lytron(R)
plastic pigment product line broadened offerings to the paper industry. The 1998
acquisition of Goodyear's Calhoun, Georgia latex facility provided additional
manufacturing capacity, a strong presence in the southeast and an expanded
customer base. Performance Chemicals also acquired Sequa Chemicals' U.S.
specialty chemicals business in 1998, gaining manufacturing facilities in
Chester, South Carolina and Greensboro, North Carolina. This acquisition
expanded existing emulsion polymer market positions and provided entry into new,
related specialty chemical markets. The fiscal year 1999 acquisition of
PolymerLatex's U.S. acrylics business in Fitchburg, Massachusetts provided a key
northeast location while strengthening and diversifying served markets in
acrylic emulsions and other specialty chemicals. The latest acquisition of
Morton International's global floor care polymer business in April 1999 provided
Performance Chemicals with a new and complementary product line and new
customers, based on existing manufacturing technology. Performance Chemicals
holds a strong number two market position in the domestic styrene butadiene
latex industry. The number of Performance Chemicals facilities has increased
from two to six in the past few years.
Decorative & Building Products expanded its commercial wallcovering
capabilities in 1991 through the acquisition of Canadian General Towers'
commercial wallcovering business. With the 1998 acquisition of Walker
Greenbank's U.K.-based Muraspec and Brymor commercial wallcovering businesses,
Decorative & Building Products has grown to be a worldwide leader in this
product category. Brymor provides a European manufacturing base. Muraspec, a
distribution business with sales offices throughout the U.K. and Europe, serves
as a key European distribution platform from which to market commercial
wallcoverings and other decorative products. Goodyear's Reneer Films Division
was acquired in 1993, increasing vinyl film and decorative laminate
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capability for the Decorative & Building Products business and elevating its
position in vinyl woodgrain laminates to number one in North America. In 1997,
Decorative & Building Products acquired the Printworld business of
Technographics, Inc., adding paper laminates to its vinyl laminate portfolio and
gaining entry into transfer printing for home furnishings and apparel. Then in
1999, Decorative & Building Products formed a joint venture company with a
subsidiary of Thailand-based Charoen Pokphand Group. The joint venture, CPPC
Decorative Products Co., Ltd., will serve the decorative vinyl film and fabric
product categories in the Asia-Pacific region and provide expanded product lines
to North America and Europe. The GenFlex roofing products business was started
in 1980 as a single product line (PVC) and has expanded over the years to
include TPO and EPDM membrane systems for the domestic market.
GENERAL
OMNOVA Solutions develops, manufactures and markets emulsion polymers,
specialty chemicals and decorative and building products for a variety of
industrial, commercial and consumer markets. The Performance Chemicals segment
manufactures a broad range of emulsion polymers and specialty chemicals used as
coatings, binders, adhesives, and additives for paper, carpet, textile and
various other specialty chemical applications. Decorative & Building Products
designs, manufactures and markets a comprehensive line of decorative and
functional surface products including commercial wallcovering, coated fabrics,
printed and solid color surface laminates, graphic arts and industrial films,
and transfer printed products for furniture, transportation, cabinets, home
furnishings, apparel, new construction and remodeling and other commercial
applications, as well as membrane systems for commercial and industrial roofing.
The Company utilizes the OMNOVA Solutions Technology Center in Akron, Ohio
to support its priorities of operational excellence and value-creating growth by
developing new products and improving existing products and processes. The
Center has a key role in the Company's technical activity and supports research
and development efforts across the Company. The Technology Center teams with the
business segments to develop high impact technologies that enable new business
opportunities by leveraging core competencies in cross-cutting application
disciplines such as: (i) adhesives, coatings and printing inks; (ii) graphics
and information technology; and (iii) materials selection, substitution and
fabrication. Design and development centers at segment locations focus on
specific areas of segment businesses. (Information relating to research and
development expense is set forth in Note G on page 28 of this report.)
OMNOVA Solutions had approximately 2,700 employees at November 30, 1999
located at offices, plants and other facilities located principally throughout
the United States and the United Kingdom.
Of OMNOVA Solutions' 1999 revenues, approximately 42.2% were derived from
the Performance Chemicals business and 57.8% from the Decorative & Building
Products business.
PRODUCTS AND SERVICES
PERFORMANCE CHEMICALS
Performance Chemicals manufactures a broad line of emulsion polymers and
specialty chemicals for use in the paper, carpet, textile, nonwovens,
construction, graphic arts, coatings, adhesives, floor care and transportation
industries. Performance Chemicals' products for the paper industry improve the
strength, gloss and printability of its customers' products. These products are
primarily used in the manufacture of coated papers for applications such as
magazines, photo papers and office forms. Paper coatings represented 17.4%,
17.8% and 17.9% of OMNOVA Solutions' consolidated revenues for fiscal 1999, 1998
and 1997, respectively. Latex formulations are also used to provide these same
characteristics to paperboard packaging for food and household products. The
business is also a leading producer of styrene butadiene latex for use as carpet
backing adhesive, which secures carpet fibers to backing materials. Through the
1998 acquisition of Sequa Chemicals, Performance Chemicals significantly
expanded its product line breadth to include specialty additives for coating
formulations such as lubricants and insolubilizers and wet end opacifiers used
in the making of paper. The acquisition significantly expanded total product
offerings to paper customers and enabled Performance Chemicals to generate
significant synergies through consolidated purchasing of acrylic monomers,
cross-selling of polymers and auxiliary chemicals and enhanced applications
development. Additionally, the acquisition added a diverse line of textile
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processing, coating and finishing chemicals that provide water, stain and oil
repellency and permanent press properties to natural and synthetic textile
fibers for apparel, home furnishings and upholstery applications.
Performance Chemicals' product portfolio includes a growing specialty
segment that provides resins, binders, coatings, adhesives and saturants to a
broad variety of markets that include nonwovens, graphic arts, industrial
coatings, floor care and construction. These products provide greater strength,
improved processibility and enhanced appearance and function for customer
products.
With a strong number two position in the latex industry, Performance
Chemicals is recognized in all of its markets for its core capabilities in
polymer technology, its ability to rapidly develop highly customized products
and its ability to provide innovative, cost effective customer solutions.
DECORATIVE & BUILDING PRODUCTS
Decorative & Building Products is the leading global manufacturer of
wallcoverings for commercial applications. Its product line includes a broad
range of fabric-backed vinyl and paper-backed vinyl wallcovering designs. Its
industry leading styling and design library covers a broad range of styles,
patterns, textures, and colors, ranging from traditional to contemporary
designs. Additionally, Decorative & Building Products has built its leading
position in commercial wallcoverings by leveraging its reputation for product
durability and quality, global distribution network, extensive emboss and print
roll library, long-term customer relationships, and integrated
manufacturing/distribution/sourcing value proposition. Well-known brands include
Bolta(R), Essex(R), Genon(R), Lanark(R), Tower(TM) and X-Quest(R) in North
America and Muralon and Muraspec in Europe. Key end user markets include the
hospitality, healthcare and commercial office industries. Commercial
wallcoverings represented 20.1%, 17.9% and 18.9% of OMNOVA Solutions'
consolidated revenues for fiscal 1999, 1998 and 1997, respectively.
Based on industry data and information, Decorative & Building Products
believes that it is the leading North American supplier of vinyl coated fabrics
and urethane fabrics for contract and residential home furnishings,
transportation seating and marine applications as well as a variety of other
industrial and commercial end use applications. Its coated fabrics offer
durable, stain resistant and cost effective alternatives or complements to
leather and textile coverings. Competitive advantages in the coated fabrics
industry are leveraged through creative design and styling capabilities,
performance enhancing coatings, innovative technical support programs, leading
brand names and established distribution channels. Coated fabrics represented
10.4%, 12.0% and 13.1% of OMNOVA Solutions' consolidated revenues for fiscal
1999, 1998 and 1997, respectively.
Decorative & Building Products believes that it is a leading supplier of
decorative surfacing laminates for wood and metal applications and that it holds
the number one North American position in combined paper and vinyl woodgrain
laminates. Decorative laminate products are manufactured utilizing vinyls,
lightweight papers and foils. Unique ultraviolet (UV) and electronic beam (EB)
coatings provide scratch, stain and UV resistance. In addition, Decorative &
Building Products has further differentiated itself in the decorative laminate
market as a single source supplier of integrated vinyl and paper laminate
designs for the furniture and cabinet industries, building a unique library of
matched vinyl and paper laminate design patterns and textures and developing
rapid make-to-order production capabilities. Important markets for these
products include furniture, kitchen cabinets, manufactured housing, flooring
laminates, consumer electronics and wrapped wood components. In particular, the
growing ready-to-assemble furniture market provides an attractive market for
Decorative & Building Products' unique decorative laminates product offerings.
Double polished clear vinyl films for the graphic arts, office products and
stationery markets are also produced. Decorative laminates represented 9.7%,
11.8% and 10.5% of OMNOVA Solutions' consolidated revenues for fiscal 1999, 1998
and 1997, respectively.
Decorative & Building Products is also a leading North American
manufacturer and marketer of single-ply roofing membrane systems for the
commercial and industrial roofing market. Selling under the GenFlex(TM) brand
name, it was the first in the industry and is one of few North American
single-ply roofing suppliers that offers all three single-ply roofing systems,
EPDM, TPO and PVC. This allows for a tailored solution for each type of roofing
application requirement. Through the introduction of innovative products,
GenFlex roofing systems has developed programs that reduce the time and cost of
installation. GenFlex roofing systems represented 12.8%, 12.9% and 13.1% of
OMNOVA Solutions' consolidated revenues for fiscal 1999, 1998 and 1997,
respectively.
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Through its Printworld operations, Decorative & Building Products
manufactures heat-transfer prints on paper used to decorate apparel and home
furnishings. Heat-transfer printing is an innovative, unique process for
printing intricate patterns on synthetic fabrics that can be used widely in the
home furnishing, commercial furnishing and apparel industries.
Decorative & Building Products has established leading positions in all of
its product categories by utilizing the Company's core competencies in design,
compounding, calendering, printing, embossing and coating. Given similar core
competencies and base technology requirements, the business is able to leverage
its investments in manufacturing, process and design improvements across this
broad set of product lines and benefit from economies of scale. In addition, its
broad offering of decorative products uniquely positions it to provide
integrated decorative solutions for its customers.
BUSINESS STRATEGY
ORGANIC GROWTH BY PROVIDING TOTAL SOLUTIONS. OMNOVA Solutions intends to
grow organically by developing long-term customer relationships and positioning
itself as the preferred total solutions partner. OMNOVA Solutions' strategy is
to avoid commodity market segments and focus on products that are highly
customized to meet specific customer requirements. These relationships have
enabled OMNOVA Solutions to develop innovative products that provide superior
functional performance, higher decorative content, and more efficient, lower
cost production processes to meet customers' specific application needs and
enhance the value of their products. For example, new roofing system
developments have provided significant benefits to contractors and building
owners by substantially reducing installation time and labor costs.
PURSUE GROWTH THROUGH STRATEGIC ACQUISITIONS. OMNOVA Solutions' businesses
have achieved significant growth through acquisitions of companies that build on
existing markets and core product and process technologies. OMNOVA Solutions
plans to continue to pursue acquisitions, strategic partnerships and joint
ventures in the future, targeting technologies and products in high growth
markets that are strategically related to its existing product portfolio,
customer base and markets.
LEVERAGE CORE COMPETENCIES ACROSS BUSINESSES. OMNOVA Solutions' expertise
in high performance polymer-based chemistries, the design and development of
customized product applications and polymer processing capabilities are shared
across its business segments and provide a unique and differentiating
competitive advantage. Performance Chemicals and Decorative & Building Products
have identified common growth platforms to capitalize on these technology
linkages. For example, Performance Chemicals has pursued the development and
commercialization of new polymers and specialty chemical additives to meet the
needs of its broadening market portfolio. These new formulations in advanced
coatings, inks and adhesives are beginning to be leveraged in the Decorative &
Building Products segment to enhance the performance of a number of its
products. OMNOVA Solutions' aligned growth strategy targets opportunities for
both businesses to team as customers or suppliers in the paper, textile, carpet,
furniture and construction industries.
EXPAND STRONG RESEARCH AND DESIGN CAPABILITIES. OMNOVA Solutions is an
industry leader in research and development, as well as styling and design
capabilities. The Performance Chemicals segment has recently made a major
investment in a new high speed pilot paper coater, which will be used to
accelerate OMNOVA Solutions' development and commercialization of new coating
technologies in its core markets. OMNOVA Solutions started construction of a new
pilot plant in 1998, which will support and accelerate new product development
and customer qualification efforts for its Performance Chemicals business. The
Decorative & Building Products segment maintains design centers in Salem, New
Hampshire, New York, New York and Hertfordshire, England where designers combine
traditional design techniques with state-of-the-art computer aided design
equipment to create unique designs for incorporation across OMNOVA Solutions'
decorative product spectrum. OMNOVA Solutions continues to strengthen its design
capability through investments in digital archiving of designs and digital
sampling. In addition, the business has increased its focus on technology and
new product development to provide differentiated value-added products to
customers.
INCREASE TECHNOLOGY LINKAGES. By increasing technology linkages and
materials utilization between the two segments, OMNOVA Solutions can
aggressively pursue the development and commercialization of new
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polymers as well as improve the functionality and performance of its decorative
coatings. These technical and materials synergies allow Performance Chemicals
and Decorative & Building Products to target and expand key markets.
Technological linkages, purchasing, marketing and sales economies, and
manufacturing economies will enable more cost effective development of new
products and will increase the effectiveness of cost reduction initiatives at
OMNOVA Solutions. For example, the OMNOVA Solutions business segments have a
powerful collective knowledge base in paper, nonwovens, textiles, printing
technology, ink systems and performance coatings, and the chemicals application
skills to develop and supply advanced products in their respective served
markets.
BROADEN INTERNATIONAL OPERATIONS. OMNOVA Solutions plans to continue to
increase its global supply capabilities and the markets it serves. For example,
the acquisition of the Brymor and Muraspec U.K.-based commercial wallcovering
business provided a European manufacturing, design and distribution platform for
the Decorative & Building Products segment. Performance Chemicals recently
opened a European business office outside London and completed a marketing
alliance with PolymerLatex in Europe to serve global paper customers.
Additionally, the 1999 formation of CPPC Decorative Products Co., Ltd., a
Thailand-based joint venture, will serve the decorative vinyl film and fabric
markets in the Asia-Pacific region and expand product lines to North America and
Europe. The Company intends to continue to expand its international presence
through a continued aggressive acquisition, joint venture and alliance strategy.
IMPROVE PROFITABILITY THROUGH OPERATIONAL EXCELLENCE
INITIATIVES. Operational excellence processes including Six Sigma quality,
supply chain management and high performance workplace initiatives are utilized
throughout OMNOVA Solutions' businesses. OMNOVA Solutions plans to continue to
focus on operational excellence initiatives across the supply chain to drive
improvements in productivity, quality cost and safety.
MARKETS AND CUSTOMERS
Management believes that Performance Chemicals is a leader in its targeted
product categories. The polymer and chemical coating and binding categories are
highly competitive based on price, quality, customer service, product
performance and innovations. Performance Chemicals is a leading quality producer
of latex for the paper and carpet industry. Major latex customers include
industry leaders such as Champion International, Shaw and Consolidated Paper.
Management believes that Decorative & Building Products is a leader in its
targeted product categories. The wallcovering, coated fabrics, roofing and other
Decorative & Building Products' categories are highly competitive based on
decorative content, enhanced performance characteristics, price, quality,
customer service, brand name recognition and reputation. Decorative & Building
Products markets its products under numerous brand names to different
industries. Major customers of this segment are Steelcase, Bradco and Ashley
Furniture.
DISTRIBUTION METHODS
Methods of distribution used by OMNOVA Solutions vary widely depending on
the nature of the products and the industry or market served. Products are sold
either directly or through distributors.
COMPETITION
Performance Chemicals competes with several large global chemical companies
including Dow, BASF and Rohm & Haas, some of which are vertically integrated in
one or more major raw materials. Performance Chemicals also competes with small
to mid-sized U.S.-focused suppliers of specialty chemicals including B.F.
Goodrich, National Starch and S. C. Johnson Polymers. Depending on the products
involved and markets served, the basis of competition varies among price,
quality, customer and technical service, product performance and innovation, and
industry recognition. Overall, Performance Chemicals regards its products to be
competitive in its major categories and believes that it holds leading or strong
number two positions in several North American categories including paper
coatings, styrene butadiene latex carpet backing binders, textile permanent
press resins, nonwoven binders, paper tape release coatings and saturants, and
vinyl pyridine tire cord adhesives.
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Decorative & Building Products competes with numerous companies, many of
which are smaller and privately-owned. Key competitors in each product group
include:
- Commercial Wallcovering -- RJF International, Fidelity and paint systems
- Coated Fabrics -- Haartz and Uniroyal
- Decorative Laminates -- Chiyoda, Dai Nippon and Toppan
- Building Systems -- Carlisle, Firestone, and Manville
- Heat Transfer Printing -- Miroglio, Sublistatic and Transfertex
INTELLECTUAL PROPERTY
OMNOVA Solutions regards patents, trademarks, copyrights and other
intellectual property as important to its success and relies on them, both in
the United States and foreign countries, to protect its investment in products
and technology. Patents to which OMNOVA Solutions has rights expire at various
times but the Company believes that the loss or expiration of any patent would
not materially affect the business of the Company. OMNOVA Solutions, like any
other company, may be subject to claims of alleged infringement of the patents,
trademarks and other intellectual property rights of third parties from time to
time in the ordinary course of business.
RAW MATERIALS
Performance Chemicals utilizes a variety of raw materials, primarily
monomers, in the manufacture of its products, all of which are generally
available from several qualified suppliers. Monomer costs are a major component
of the emulsion polymers produced by the business. Key monomers include styrene,
butadiene, acrylonitrile, vinyl pyridine, acrylic acid, vinyl acetate, butyl
acrylate, ethyl acrylate and methyl methacrylate.
Decorative & Building Products also utilizes a variety of raw materials
which are generally available from multiple suppliers. Key raw materials include
polyvinyl chloride resins, textiles, plasticizers, paper, and titanium dioxide.
Textiles and polyvinyl chloride resins represent approximately 44% of total raw
materials purchased on a dollar basis.
The cost of these raw materials has a significant impact on OMNOVA
Solutions' profitability. A significant increase in the price of monomers or
polyvinyl chloride resins could materially increase OMNOVA Solutions' operating
costs and materially adversely affect its profit margins. OMNOVA Solutions
generally attempts to pass increased raw materials prices on to its customers in
the form of price increases. The success of attempted price increases depends on
a variety of factors including the competitive environment. Under certain
circumstances, OMNOVA is not able to pass along the increase. In addition, if
accepted by customers, price increases generally lag the increase in raw
material costs.
ENVIRONMENTAL MATTERS
The business operations of OMNOVA Solutions, like those of other companies
in the industries in which OMNOVA Solutions operates, are subject to numerous
foreign, federal, state and local environmental laws and regulations. These laws
and regulations not only affect OMNOVA Solutions' current operations, but also
could impose liability on OMNOVA Solutions for past operations that were
conducted in compliance with then applicable laws and regulations. OMNOVA
Solutions anticipates that these laws and regulations will become increasingly
stringent. A discussion of capital and noncapital expenditures incurred in 1999
and forecasted for 2000 and 2001 for environmental compliance is included under
the heading Environmental Matters beginning on page 14 of this report and is
incorporated herein by reference.
EMPLOYEES
OMNOVA Solutions employed approximately 2,700 employees at November 30,
1999. Approximately 33% of these employees are covered by collective bargaining
agreements. Of the covered employees, approximately 9% are covered by collective
bargaining agreements that are due to expire within one year. A prolonged work
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stoppage at any of OMNOVA Solutions' facilities could materially adversely
affect the Company's business and results of operations.
ITEM 2. PROPERTIES
Significant operating, manufacturing, research, design and/or sales and
marketing facilities of the Company are set forth below.
CORPORATE HEADQUARTERS:
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OMNOVA Solutions Inc. *OMNOVA Solutions Overseas
175 Ghent Road 545 Orchard Road
Fairlawn, OH 44333-3300 #09-05 Far East Shopping Centre
330/869-4200 Singapore 238882
(65) 733-7080
OMNOVA Solutions Technology Center
2990 Gilchrist Road
Akron, OH 44305-4489
330/794-6300
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PERFORMANCE CHEMICALS:
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Headquarters: Sales/Manufacturing/Technical/Distribution:
175 Ghent Road Akron, OH
Fairlawn, OH 44333-3300 Calhoun, GA
330/869-4200 Chester, SC
*Dalton, GA
Fitchburg, MA
Green Bay, WI
Greensboro, NC
Hertfordshire, England
Mogadore, OH
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DECORATIVE & BUILDING PRODUCTS:
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Headquarters: Manufacturing Facilities: Sales/Marketing/Design/Distribution:
175 Ghent Road Auburn, PA *Asnieres, France
Fairlawn, OH 44333-3300 Columbus, MS *Bangkok, Thailand
330/869-4200 Jeannette, PA *Brussels, Belgium
Kent, England *Charlotte, NC
Monroe, NC Hertfordshire, England
*Rayong, Thailand *Dubai, UAE
*Maumee, OH
*New York, NY
*Paris, France
*Pine Brook, NJ
*Rayong, Thailand
*Salem, NH
*Sao Paulo, Brazil
*Warsaw, Poland
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* An asterisk next to a facility listed above indicates that it is a leased
property.
In addition, the Company owns and leases properties (primarily warehouse
and office facilities) in various regions of the United States for use in the
ordinary course of its business. Data appearing in Note N on page 32 of this
report with respect to leased properties is incorporated herein by reference.
During 1999 the Company generally made effective use of its productive
capacity. The Company believes that the quality and productive capacity of its
properties are sufficient to maintain the Company's competitive position for the
foreseeable future.
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ITEM 3. LEGAL PROCEEDINGS
OMNOVA Solutions is subject to various legal actions, governmental
investigations, and proceedings relating to a wide range of matters. In the
opinion of management, after reviewing the information which is currently
available with respect to these matters and consulting with counsel, any
liability which may ultimately be incurred with respect to these matters will
not materially affect future results of operations, liquidity, capital resources
or the consolidated financial condition of OMNOVA Solutions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of OMNOVA Solutions' public security
holders, through the solicitation of proxies or otherwise, during the quarter
ended November 30, 1999.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is given as of February 1, 2000, and except as
otherwise indicated, each individual has held the same office during the
preceding five-year period.
JOHN B. YASINSKY, age 60, Chairman of the Board and Chief Executive Officer
of the Company since January 4, 2000; Chairman, Chief Executive Officer and
President from the Company's formation until January 2000; served as Chairman of
the GenCorp Board from March 1995 until the spin-off and Chief Executive Officer
and President of GenCorp since July 1994. He was President and Chief Operating
Officer of GenCorp from November 1993 until July 1994. Previously, he was Group
President, Westinghouse Electric Corporation, Pittsburgh, PA, a power generation
and electrical equipment manufacturing company, from February 1993 until
November 1993 and President, Westinghouse Power Systems from 1990 to 1993. He is
also a director of CMS Energy Corporation, Dearborn, MI and Consumers Power
Company, Jackson, MI. Mr. Yasinsky is Chairman of the Executive Committee of the
OMNOVA Solutions Board.
KEVIN M. MCMULLEN, age 39, President and Chief Operating Officer of the
Company since January 4, 2000; Vice President of the Company; President,
Decorative & Building Products from September 1999 until January 2000; served as
Vice President of GenCorp and President of GenCorp's Decorative & Building
Products business unit from September 1996 until the spin-off. He was previously
General Manager of General Electric Corporation's Commercial & Industrial
Lighting business from 1993 to 1996 and General Manager of General Electric
Lightings' Business Development and Strategic Planning activities from 1991 to
1993. Prior to General Electric, he was Senior Engagement Manager at McKinsey
and Company, a business consulting firm, from 1985 to 1991.
MICHAEL E. HICKS, age 41, Senior Vice President and Chief Financial
Officer; Treasurer of the Company from its formation; served as Senior Vice
President, Chief Financial Officer and Treasurer of GenCorp from February 1999
until the spin-off. He was previously Treasurer of GenCorp since September 1994
and Director of Treasury of GenCorp from 1989 to 1994.
JAMES C. LEMAY, age 43, Senior Vice President, Law; General Counsel of the
Company from its formation; served as Assistant General Counsel of GenCorp since
May 1997. He was previously Senior Counsel of GenCorp from May 1990 to May 1997.
NATHANIEL J. MASS, age 49, Senior Vice President, Strategic Growth of the
Company since September 1999; served as Senior Vice President, Strategic Growth
of GenCorp from June 1996 until the spin-off. He was previously Partner and
Director of the Business Dynamics Center, McKinsey and Company from 1994 to June
1996; Chief Executive Officer, Light Sciences Inc. from 1991 to 1993 and
Director of Worldwide Strategic Planning, Exxon Chemical Company from 1988 to
1991.
GREGORY T. TROY, age 44, Senior Vice President, Human Resources of the
Company since September 1999; served as Director, Human Resources of GenCorp's
Performance Chemicals unit from December 1996 until the spin-off. He was
previously Director, Human Resources of Bosch Braking Systems (formerly
AlliedSignal) from
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1995 to December 1996; Employee Relations Area Manager, Manufacturing, of Mobil
Corporation's Plastics Division from 1994 to 1995.
KEVIN M. BYRNE, age 46, Vice President of the Company and President,
Decorative Products since January 4, 2000; Vice President and Managing Director,
Global Wallcovering, Decorative & Building Products from the spin-off until
January 2000; served as Vice President and Managing Director, Global
Wallcovering of GenCorp's Decorative & Building Products business unit from
August 1998 until the spin-off and Vice President, Product Management and
Marketing of Decorative & Building Products from June 1997 until August 1998. He
was previously Director, Sales and Marketing, Plastics and Business
Manager -- Fluorine Products of AlliedSignal, Inc., from August 1994 to May 1997
and Director, Sales and Marketing of Rexam -- Custom Division from April 1992 to
August 1994.
MARVIN W. ZIMA, age 62, Vice President of the Company and President,
Performance Chemicals since September 1999; served as Vice President of GenCorp
from August 1994 until the spin-off and President of GenCorp's Performance
Chemicals business unit from 1991 until the spin-off. He was previously
President and Chief Executive Officer of Uniroyal Engineered Products from 1987
to 1991 and held various other management positions with Uniroyal from 1982 to
1987.
CYNTHIA A. SLACK, age 51, Secretary and Assistant General Counsel of the
Company from its formation; served as Assistant Secretary and Senior Counsel,
Finance and Securities of GenCorp from September 1997 until the spin-off.
Previously, Ms. Slack was Assistant Secretary and Counsel, Finance and
Securities of GenCorp from March 1997 to September 1997 and Counsel, Finance and
Securities of GenCorp from February 1990 until March 1997.
The Company's executive officers generally hold terms of office of one year
and/or until their successors are elected.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to the spin-off, the Company's common stock was not publicly traded.
The Company's common stock is currently listed on the New York Stock Exchange.
At December 31, 1999, there were approximately 11,800 holders of record of the
Company's common stock. On November 30, 1999, the Company paid a quarterly cash
dividend on its common stock of $.05 per share. Information regarding the high
and low quarterly sales prices of the Company's common stock for the fourth
quarter of fiscal 1999 (beginning on October 1, 1999, the date "regular-way"
trading began) is contained in the Quarterly Financial Data (Unaudited) which
appears on page 37 of this report and is incorporated herein by reference.
Information concerning long-term debt, including material restrictions and
provisions relating to distributions and cash dividends on the Company's common
stock (if any), appears in Note M on page 32 of this report and is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET SALES
Decorative & Building Products................ $443.5 $398.6 $367.7 $340.0 $343.8
Performance Chemicals......................... 323.9 225.6 180.6 165.5 181.8
------ ------ ------ ------ ------
$767.4 $624.2 $548.3 $505.5 $525.6
====== ====== ====== ====== ======
SEGMENT OPERATING PROFIT
Decorative & Building Products................ $ 51.4 $ 51.5 $ 44.2 $ 44.8 $ 18.2
Performance Chemicals......................... 31.2 35.0 21.9 25.2 24.1
------ ------ ------ ------ ------
$ 82.6 $ 86.5 $ 66.1 $ 70.0 $ 42.3
====== ====== ====== ====== ======
NET INCOME.................................... $ 34.4 $ 42.6 $ 34.3 $ 36.8 $ 25.2
====== ====== ====== ====== ======
EARNINGS PER SHARE OF COMMON STOCK
Basic......................................... $ .82 $ 1.03 $ .93 $ 1.09 $ .77
Diluted....................................... $ .82 $ 1.01 $ .91 $ 1.03 $ .77
GENERAL
Cash dividends paid........................... $ .05 $ -- $ -- $ -- $ --
Capital expenditures.......................... $ 35.0 $ 18.0 $ 10.9 $ 14.6 $ 11.2
Depreciation and amortization................. $ 30.7 $ 21.5 $ 16.0 $ 13.8 $ 13.6
Total assets.................................. $722.5 $602.7 $277.1 $233.3 $225.9
Long-term debt................................ $190.0 $ -- $ -- $ -- $ --
</TABLE>
You should keep the following in mind when reviewing this data:
- OMNOVA Solutions Inc. was spun off from GenCorp Inc. as an independent
public company as of October 1, 1999.
- During fiscal 1997, OMNOVA Solutions acquired Printworld. During fiscal
1998, OMNOVA Solutions acquired (1) the U.S. speciality chemicals business
of Sequa Chemicals, (2) the commercial wallcovering business of Walker
Greenbank PLC, and (3) the Calhoun, Georgia latex facility of The Goodyear
Tire & Rubber Company. During fiscal 1999, the Company acquired (1) the
global latex floor care business of Morton International Inc., and (2) the
U.S. acrylic emulsion polymers business of PolymerLatex. The historical
income statement data reflects operations from these acquisitions from the
date of purchase.
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- During 1999, the Company recorded unusual income of $1.1 million related
primarily to the gain recognized on the sale of the corporate jet, offset by
charges associated with the restructuring of a Decorative & Building
Products business and settlement of other contingent obligations.
- During fiscal 1998, the Company recorded unusual expense of $3.4 million
pre-tax related to exiting the residential wallcovering business.
- During fiscal 1996, OMNOVA Solutions recorded unusual pre-tax income of $4.0
million from the sale of the structural urethane adhesives business.
- For periods ended prior to the spin-off, earnings per share were calculated
based on a one-for-one share distribution and equivalent stock options being
granted to holders of GenCorp stock options.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OMNOVA Solutions operates two business segments, Performance Chemicals and
Decorative & Building Products. The Performance Chemicals segment manufactures a
broad range of emulsion polymers and specialty chemicals used as coatings,
binders, adhesives, and additives for paper, carpet, textile and various other
specialty chemical applications. Decorative & Building Products designs,
manufactures and markets a comprehensive line of decorative and functional
surface products including commercial wallcovering, coated fabrics, printed and
solid color surface laminates, graphic arts and industrial films, and transfer
printed products for furniture, transportation, cabinets, home furnishings,
apparel, new construction and remodeling and other commercial applications, as
well as membrane systems for commercial and industrial roofing.
OMNOVA Solutions' sales are affected by numerous factors. In the
Performance Chemicals segment, the key sales drivers are the ability to create
custom polymer and specialty chemical solutions to enhance customer product
performance; domestic demand for coated paper and carpeting; and trends in the
textile and specialty chemical industries. In the Decorative & Building Products
segment, commercial wallcovering and building systems' sales are driven by
trends in refurbishment of commercial office buildings, hotels, hospitals and
schools and, to a lesser degree, new construction cycles. Product design and
styling are important product differentiators in the commercial wallcovering
business. Sales trends in decorative laminates and coated fabrics are driven by
both design and performance durability of the surface product. The Decorative &
Building Products segment focuses on achieving sales growth by its ability to
produce enhanced designs and styles and through technology in substrate and
coating systems that provide enhanced stain and scratch resistance, along with
improved durability to meet the needs of commercial and residential furniture
customers, as well as customers in transportation upholstery and demountable
office systems. OMNOVA Solutions is subject to changes in its operating costs
arising from volatility in the price of several key raw materials including
polyvinyl chloride resins, styrene and butadiene.
OMNOVA Solutions' annual sales have grown from $525.6 million in 1995 to
$767.4 million in 1999. During the same period, OMNOVA Solutions' segment
operating profit increased from $42.3 million to $82.6 million in 1999. OMNOVA
Solutions' revenue growth was due to both strategic acquisitions and growth in
existing product lines. The significant growth in segment operating profit was
due to acquisitions, operational improvement initiatives and aggressive cost
containment.
Recent strategic acquisitions of Performance Chemicals included the
acquisition of The Goodyear Tire & Rubber Company's Calhoun, Georgia latex
facility in 1998, which provided new manufacturing capacity, increased presence
in the Southeastern U.S. and an expanded customer base; and the acquisition of
Sequa Chemical's U.S. specialty chemicals business in 1998, which expanded
existing emulsion polymer market positions and provided entry into new, related
specialty chemical markets. In fiscal 1999, Performance Chemicals acquired
PolymerLatex's U.S. acrylics business in Fitchburg, Massachusetts which
strengthened and diversified markets in acrylic emulsions and other specialty
chemicals; and Morton International's global polymer floor care business, which
provided a complementary product line and new customer base.
Recent strategic acquisitions of Decorative & Building Products included
the purchase of Printworld in 1997, which added paper laminates to its vinyl
laminate portfolio and provided entry into the transfer printing market for home
furnishings and apparel; and the 1998 acquisition of Walker Greenbank's
U.K.-based
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<PAGE> 14
commercial wallcovering business which provided a manufacturing plant,
distribution business and numerous sales offices throughout Europe to serve as a
platform from which to market other decorative and building products. In 1999,
Decorative & Building Products continued its globalization efforts with the
formation of a strategic joint venture with Thailand-based Charoen Pokphand
Group. The joint venture, which included two manufacturing plants, is focused on
serving the coated fabrics and decorative laminates markets in the Asia-Pacific
region, providing expanded product lines to North America and Europe and serving
as a platform for future growth in the region. Also during 1998, Decorative &
Building Products sold its residential wallcovering business.
RESULTS OF OPERATIONS FISCAL 1999 COMPARED TO FISCAL 1998
Net sales for the Company in 1999 increased 23 percent to $767.4 million
compared to $624.2 million in fiscal 1998. Sales increased in both Decorative &
Building Products and Performance Chemicals, primarily from sales attributable
to acquisitions. Total segment operating profit decreased 5 percent to $82.6
million for fiscal 1999 versus $86.5 million in fiscal 1998. Operating margins
decreased to 10.8 percent in fiscal 1999 compared to 13.9 percent in fiscal
1998, due primarily to lower average unit selling prices across certain
Performance Chemicals product lines, and significant levels of raw material
inflation that occurred in the second half of fiscal 1999.
Net sales for Decorative & Building Products increased for fiscal 1999 by
11 percent to $443.5 million compared to $398.6 million in fiscal 1998. The
increase was mainly related to the European wallcovering acquisition,
GenFlex(TM) roofing systems and the coated fabrics businesses. Segment operating
profit stayed the same during fiscal 1999 at $51.4 million versus $51.5 million
in fiscal 1998 excluding unusual items. Segment operating margins declined to
11.6 percent for fiscal 1999 versus 12.9 percent for fiscal 1998. The decline
was primarily due to significant increases in key raw materials, unfavorable
product mix including lower commercial wallcovering volumes and costs associated
with compliance of newly enacted federal environmental standards.
Net sales for Performance Chemicals increased in fiscal 1999 by 44 percent
to $323.9 million compared to $225.6 million in fiscal 1998. The increase in
sales was attributable to the acquisition activity. Excluding the effect of
acquired businesses, volume was flat compared to 1998 while pricing was down.
Segment operating profit decreased to $31.2 million for fiscal 1999 versus $35.0
million in fiscal 1998. Segment operating margins declined to 9.6 percent in
fiscal 1999 versus 15.5 percent in fiscal 1998. The decline was primarily due to
lower pricing, increased raw material prices and integration costs related to
acquisition activity in the latter half of 1998.
During fiscal 1999, Performance Chemicals completed the $7.6 million
acquisition of Morton International's global latex floor care business, adding a
complementary product line and new customer base, and expanding its presence in
Europe and the Far East. Also during the first half of 1999, Performance
Chemicals acquired the U.S. acrylic emulsion polymers business of PolymerLatex
located in Fitchburg, Massachusetts for $8.8 million. This acquisition
strengthened and diversified markets in acrylic emulsions and other specialty
chemicals.
Also during fiscal 1999, Performance Chemicals announced that it had
completed a strategic alliance agreement with Germany-based PolymerLatex (a
joint venture between Bayer AG and Degussa-Huls AG) to serve the needs of OMNOVA
Solutions' global paper customers.
Interest expense allocated from GenCorp increased to $16.2 million in
fiscal 1999 compared to $7.9 million in fiscal 1998. The increase in interest
expense related to the increase in GenCorp's debt from November 30, 1998 to
September 30, 1999 due primarily to acquisitions made for the OMNOVA Solutions
businesses in 1998.
In 1999, the Company recognized unusual income of $1.1 million. Unusual
items included charges related to Decorative & Building Products of $3.9 million
and Performance Chemicals of $0.5 million, offset by unusual income of $5.5
million related primarily to the gain recognized on the sale of the corporate
jet.
Decorative & Building Products' unusual expense of $3.9 million included
charges of $2.8 million related to a restructuring of one of its businesses
which is expected to be completed during the first half of fiscal 2000 and $1.1
million primarily associated with the write-off of obsolete equipment and other
assets. Performance
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<PAGE> 15
Chemicals' unusual expense relates to the anticipated settlement of an asserted
claim with one of the Company's vendors.
During the fourth quarter of 1999, the Company recognized $2.2 million of
spin-off costs which primarily related to the new corporate identity program,
retention bonuses for key executives and certain franchise and property taxes
associated with the spin-off.
In 1998, the Company's Decorative & Building Products segment recognized
unusual expense of $3.4 million related to exiting the residential wallcovering
business. This business was sold to Blue Mountain Wallcoverings, Inc. for
approximately $9.0 million on December 14, 1998. Assets disposed of consisted of
equipment and inventory with carrying amounts of $7.9 million and $1.9 million,
respectively. Trademarks and sample books totaling $2.1 million were written off
since they no longer had a use and severance costs of $0.5 million were accrued.
The severance costs related to termination benefits which were paid to employees
in 1999.
RESULTS OF OPERATIONS FISCAL 1998 COMPARED TO 1997
Total sales for the Company increased $75.9 million, or 14 percent, to
$624.2 million in 1998 from $548.3 million in 1997. Total segment operating
profit, excluding unusual items, in 1998 increased $20.4 million, or 31 percent
to $86.5 million in 1998 from $66.1 million in 1997. Net income was $42.6
million in 1998 compared to $34.3 million in 1997, a 24 percent increase.
Decorative & Building Products' sales increased $30.9 million, or 8
percent, to $398.6 million in 1998 from $367.7 million in 1997. The increase was
primarily attributable to sales related to the commercial wallcovering business
acquired in 1998 and higher sales in the building systems, decorative laminates
and coated fabrics businesses. Segment operating profit increased by $7.3
million, or 17 percent, to $51.5 million in 1998 from $44.2 million in 1997.
Segment operating profit margins for this segment increased to 12.9 percent in
1998 from 12.0 percent in 1997. These increases were related to the European
wallcovering acquisition and the strong performance of building systems,
decorative laminates and heat transfer product lines.
Sales for Performance Chemicals increased $45.0 million, or 25 percent, to
$225.6 million in 1998 from $180.6 million in 1997. The increase was
attributable to acquisitions and volume growth in the existing product lines,
partially offset by a modest decline in pricing. Segment operating profit for
Performance Chemicals increased by $13.1 million, or 60 percent, to $35.0
million in 1998 from $21.9 million in 1997. The increase was also attributable
to the acquisitions and volume growth in the existing product lines. Operating
profit margins for Performance Chemicals increased to 15.5 percent in 1998 from
12.1 percent in 1997, resulting primarily from lower raw material pricing in
1998.
Interest expense allocated from GenCorp increased to $7.9 million in 1998
compared to $3.7 million in 1997. The increase in interest expense related to
the increase in GenCorp's debt during fiscal 1998 due primarily to the fiscal
1998 acquisitions.
As compared to 1998, other (income) expense was favorably impacted in
fiscal 1997 by the reimbursement of expenses related to an environmental
settlement. OMNOVA Solutions recognized unusual expense of $3.4 million in 1998
related to exiting the residential wallcovering business.
FINANCIAL RESOURCES AND CAPITAL SPENDING
Cash flow provided by operating activities for fiscal 1999 was $35.0
million compared to $52.9 million in 1998 and $55.1 million in 1997. Working
capital requirements for OMNOVA Solutions have remained relatively constant from
year-to-year.
In fiscal 1999, $29.0 million was used for investing activities, including
the acquisitions of the global latex floor care business of Morton International
Inc. for $7.6 million and the U.S. acrylic emulsion polymers business of
PolymerLatex for $8.8 million, consisting of cash of $3.3 million and a note for
$5.5 million, the investment of $2.6 million in the newly formed joint venture
company, CPPC Decorative Products Co., Ltd., and capital expenditures of $35.0
million, offset by proceeds of $19.5 million from the sale of the residential
wallcovering
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<PAGE> 16
business and the corporate jet. In fiscal 1998, $312.4 million was used for
investing activities including $294.4 million for acquisitions and capital
expenditures of $18.0 million. The acquisitions included Sequa Corporation's
specialty chemicals unit for $108.0 million, Walker Greenbank's commercial
wallcovering business for $112.6 million and The Goodyear Tire & Rubber
Company's Calhoun, Georgia latex facility for $73.8 million. This is compared to
$57.4 million used for investing activities in fiscal 1997, which included the
acquisition of Technographics, Inc.'s Printworld business for $46.5 million and
capital expenditures of $10.9 million.
Cash flow provided by financing activities in fiscal 1999 was $1.0 million
compared to $263.0 million in 1998 and $2.3 million in 1997. The increase in net
transactions with GenCorp during fiscal 1998 was primarily due to cash required
by OMNOVA Solutions for its fiscal 1998 acquisitions.
Capital expenditures were made and are planned principally for capacity
expansion and asset replacement, new product capability, cost reduction, safety
and productivity improvements and environmental protection. Capital expenditures
totaled $35.0 million for fiscal 1999, $18.0 million in 1998 and $10.9 million
in 1997. OMNOVA Solutions' total capital expenditures in 1999 increased
significantly due to $10 million of equipment upgrades and additions in
Decorative & Building Products; $8 million for Performance Chemicals' capacity
expansion and renovation of its pilot plant; and $12 million for improvements to
recently acquired businesses. The Company plans to fund substantially all of its
capital expenditures from cash flow from operations. If necessary, a portion of
capital expenditures will be funded through borrowings under its new credit
facility.
On September 30, 1999, OMNOVA Solutions entered into a five-year unsecured
$300 million revolving credit facility (Facility). OMNOVA Solutions pays a
variable commitment fee, which is currently .30 of one percent, on the unused
balance. Interest rates will be variable, primarily based on LIBOR, and were at
an average rate of 6.9 percent at November 30, 1999. The Facility contains
various debt, dividend and investment restrictions and provisions requiring
maintenance of an earnings before interest, taxes, depreciation and amortization
to interest coverage (EBITDA/Interest Expense) ratio of 3.50 to 1.00 and debt to
earnings before interest, taxes, depreciation and amortization (Debt/EBITDA)
ratio of 3.25 to 1.00. The Facility was utilized to fund a $200 million dividend
paid to GenCorp at the time of the spin-off and will also be available for
future working capital, capital expenditures and acquisition needs.
Based upon current and anticipated levels of operations and plans for
integrating recent acquisitions, the Company believes that its cash flow from
operations, combined with borrowings that will be available under the Facility,
will be sufficient to enable the Company to meet its current and anticipated
cash operating requirements, including scheduled interest and principal
payments, capital expenditures and working capital needs for the next 12 months.
Substantially all of the debt of the Company bears interest at variable rates;
therefore, its liquidity and financial condition is and will continue to be
affected by changes in prevailing interest rates.
STOCK REPURCHASE PLAN
On November 29, 1999, OMNOVA Solutions announced that its Board of
Directors authorized the purchase from time to time of up to $25 million of
OMNOVA Solutions' common stock. The stock repurchases may be made over a period
of up to 18 months, principally through open market transactions or in
privately-negotiated transactions in accordance with applicable regulations of
the Securities and Exchange Commission. Depending on market conditions and other
factors, such purchases may be commenced or suspended at any time without prior
notice.
ENVIRONMENTAL MATTERS
OMNOVA Solutions' policy is to conduct its businesses with due regard for
the preservation and protection of the environment. OMNOVA Solutions devotes
resources and management attention to environmental matters and actively manages
its ongoing processes to comply with extensive environmental laws and
regulations. OMNOVA Solutions' Consolidated Balance Sheet as of November 30,
1999 reflects environmental reserves of $1.2 million.
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<PAGE> 17
Capital expenditures for projects related to the environment were $2.1
million in 1999, $1.0 million in 1998 and $0.5 million in 1997. OMNOVA Solutions
currently forecasts that capital expenditures for environmental projects will
approximate $4.1 million in fiscal 2000. During 1999, noncapital expenditures
for environmental compliance and protection totaled $5.2 million all of which
were for recurring costs associated with managing hazardous substances and
pollution abatement in ongoing operations. Similar noncapital expenditures were
$3.9 million and $2.8 million in each of 1998 and 1997, respectively. It is
presently expected that noncapital environmental expenditures for the next
several years will be consistent with historical expenditure levels.
Management believes, on the basis of presently available information, that
resolution of environmental matters will not materially affect future results of
operations, liquidity, capital resources or the consolidated financial condition
of OMNOVA Solutions.
INFORMATION SYSTEMS AND THE YEAR 2000
The Company completed a comprehensive project to upgrade its information,
technology and manufacturing and facilities computer hardware and software
programs to address the Year 2000 issue. The project consisted of an iterative
process of remediating, testing and implementing new software as required. The
Company spent approximately $4.5 million on the project and funded it through
operating cash flows. The Company was also in contact with each of its major
customers and vendors to make sure that they were also Year 2000 compliant.
Based upon currently available information and considering the Company's
diversified business base, decentralized systems and Year 2000 efforts,
management believes that the most reasonably likely worst case scenario from a
Year 2000 failure would result in a minor short-term business interruption. The
Company has not yet experienced any material Year 2000 problems.
ADOPTION OF THE EURO
Management believes that the adoption of the Euro by the European Economic
Community will not have a material impact on the Company's international
businesses. The Company's foreign operations currently are small and each
operation conducts the majority of its business in a single currency with
minimal price variations between countries.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which is required to be adopted in fiscal year 2001. Because of
OMNOVA Solutions' minimal use of derivatives, management does not anticipate
that the adoption of this Statement will have a significant effect on earnings
or the financial position of OMNOVA Solutions.
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-5, "Reporting the Costs of Start-up
Activities" (SOP 98-5). SOP 98-5 is effective for OMNOVA Solutions beginning on
December 1, 1999, and requires that start-up costs capitalized prior to December
1, 1999 be written off and any future start-up costs to be expensed as incurred.
OMNOVA Solutions has no capitalized start-up costs; therefore, the adoption of
SOP 98-5 will not have an effect on the consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This Form 10-K contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. These statements present
(without limitation) the expectations, beliefs, plans and objectives of
management and future financial performance and/or assumptions underlying or
judgments concerning matters discussed in this document. These discussions and
any other discussions contained in this Form 10-K, except to the extent that
they contain historical facts, are forward-looking and accordingly involve
estimates, assumptions, judgments and uncertainties; in particular, this
pertains to management's comments on financial resources and capital spending.
The outcomes of forward-looking statements and material contingencies could
differ materially from those discussed due to inherent economic risks and
changes in prevailing governmental policies and regulatory actions. In addition
to certain contingency matters and their respective cautionary statements
discussed
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<PAGE> 18
elsewhere in this Form 10-K, the Forward-Looking Statements section of this
Management's Discussion and Analysis indicates some important factors that could
cause actual results or outcomes to differ materially from those addressed in
the forward-looking statements.
Some important factors that could cause OMNOVA Solutions' actual results or
outcomes to differ from those expressed in its forward-looking statements
include, but are not limited to, the following:
- General economic trends affecting OMNOVA Solutions' markets
- Governmental and regulatory policies including environmental regulations
- OMNOVA Solutions' acquisition activities
- Raw material prices for chemical feed stocks including polyvinyl
chloride, styrene and butadiene
- Fluctuations in exchange rates of foreign currencies and other risks
associated with foreign operations
Additional risk factors may be described from time to time in OMNOVA
Solutions' filings with the Securities and Exchange Commission. All these risk
factors are difficult to predict, contain material uncertainties that may affect
actual results and may be beyond OMNOVA Solutions' control.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
OMNOVA Solutions is exposed to market risk from changes in interest rates
on long-term debt obligations. OMNOVA Solutions' policy is to manage its
interest rate exposures through the use of a combination of fixed and variable
rate debt. Currently, OMNOVA Solutions does not use derivative financial
instruments to manage its interest rate risk. Substantially all of OMNOVA
Solutions' long-term debt of $190.0 million that was in place after the spin-off
will mature in the year 2004 and will be variable. The average variable interest
rate applicable to this debt was 6.9 percent as of November 30, 1999. OMNOVA
Solutions' long-term debt under this debt agreement bears interest at market
rates and therefore, any carrying value would approximate fair value.
Although OMNOVA Solutions conducts business in foreign countries,
international operations were not material to OMNOVA Solutions' consolidated
financial position, results of operations or cash flows as of November 30, 1999.
Additionally, foreign currency transaction gains and losses were not material to
OMNOVA Solutions' results of operations for the year ended November 30, 1999.
While international operations have not been significant in the past, OMNOVA
Solutions could be subject to material foreign currency exchange rate risk with
respect to future operations and cash flows due to OMNOVA Solutions' acquisition
of the European wallcovering business in late 1998. To date, OMNOVA Solutions
has not entered into any significant foreign currency forward exchange contracts
or other derivative financial instruments to hedge the effects of adverse
fluctuations in foreign currency exchange rates. OMNOVA Solutions is evaluating
the future use of these financial instruments.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements listed under the heading
"(a)(1) Consolidated Financial Statements" of Item 14 hereof, which financial
statements are incorporated herein by reference in response to this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants or disagreements with the
Company's independent auditors regarding accounting and financial disclosure
matters during the two most recent fiscal years of the Company and GenCorp Inc.,
its former parent, or during any period subsequent to the date of the Company's
most recent consolidated financial statements.
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REPORT OF MANAGEMENT
TO THE SHAREHOLDERS OF OMNOVA SOLUTIONS INC.:
Management of OMNOVA Solutions Inc. is responsible for preparing the
accompanying consolidated financial statements and for assuring their integrity
and objectivity. These financial statements were prepared in accordance with
generally accepted accounting principles and fairly represent the transactions
and financial condition of the Company in all material respects. The financial
statements include amounts that are based on management's best estimates and
judgments. The Company's financial statements have been audited by Ernst & Young
LLP, independent auditors selected by the Board of Directors and approved by the
shareholders. Management has made available to Ernst & Young LLP all of the
Company's financial records and related data, as well as the minutes of
shareholders' and directors' meetings.
Management of the Company has established and maintains a system of
internal accounting controls that is designed to provide reasonable assurance
that assets are safeguarded, transactions are properly recorded and executed in
accordance with management's authorization and the books and records accurately
reflect the disposition of assets. The system of internal controls includes
appropriate division of responsibility. The Company maintains an internal audit
department that conducts an extensive program of internal audits and
independently assesses the effectiveness of the internal controls.
The Audit Committee is composed of directors who are not officers or
employees of the Company. It meets regularly with members of management, the
internal auditors and the independent auditors to discuss the adequacy of the
Company's internal controls, financial statements and the nature, extent and
results of the audit effort. Both the internal auditors and the independent
auditors have free and direct access to the Audit Committee without the presence
of management.
/s/ John B. Yasinsky
JOHN B. YASINSKY
Chairman and Chief Executive Officer
/s/ Michael E. Hicks
MICHAEL E. HICKS
Senior Vice President and Chief Financial Officer; Treasurer
17
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF OMNOVA SOLUTIONS INC.:
We have audited the accompanying consolidated balance sheets of OMNOVA
Solutions Inc. as of November 30, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended November 30, 1999. These financial statements are the
responsibility of OMNOVA Solutions Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 OMNOVA
Solutions Inc. at November 30, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended November 30, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Akron, Ohio
January 13, 2000
18
<PAGE> 21
OMNOVA SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------
1999 1998 1997
------ ------ ------
(DOLLARS IN MILLIONS,
EXCEPT PER-SHARE DATA)
<S> <C> <C> <C>
NET SALES................................................... $767.4 $624.2 $548.3
COSTS AND EXPENSES
Cost of products sold....................................... 503.8 406.8 368.8
Selling, general and administrative......................... 156.0 116.3 105.4
Depreciation and amortization............................... 30.7 21.5 16.0
Interest expense allocated from GenCorp..................... 16.2 7.9 3.7
Interest expense after spin-off............................. 2.4 -- --
Other (income) expense, net................................. (1.3) (2.1) (2.6)
Unusual items............................................... (1.1) 3.4 --
Spin-off related costs...................................... 2.2 -- --
------ ------ ------
708.9 553.8 491.3
------ ------ ------
INCOME BEFORE INCOME TAXES.................................. 58.5 70.4 57.0
Income taxes................................................ 24.1 27.8 22.7
------ ------ ------
NET INCOME............................................. $ 34.4 $ 42.6 $ 34.3
====== ====== ======
EARNINGS PER SHARE OF COMMON STOCK
Basic....................................................... $ .82 $ 1.03 $ .93
Diluted..................................................... $ .82 $ 1.01 $ .91
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 22
OMNOVA SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------
1999 1998
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS:
CURRENT ASSETS
Cash and cash equivalents................................... $ 10.5 $ 3.5
Accounts receivable, net.................................... 122.0 102.0
Inventories................................................. 68.4 56.6
Deferred income taxes....................................... 11.6 9.1
Prepaid expenses and other.................................. 9.3 2.3
------ ------
TOTAL CURRENT ASSETS................................... 221.8 173.5
Property, plant and equipment, net.......................... 212.0 192.7
Goodwill, net............................................... 158.4 155.0
Patents and other intangible assets, net.................... 78.4 75.7
Prepaid pension............................................. 41.4 --
Other assets................................................ 10.5 5.8
------ ------
TOTAL ASSETS........................................... $722.5 $602.7
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
Notes payable............................................... $ 10.5 $ --
Accounts payable............................................ 82.9 72.5
Accrued payroll and personal property taxes................. 16.7 12.9
Other current liabilities................................... 20.3 3.9
------ ------
TOTAL CURRENT LIABILITIES.............................. 130.4 89.3
Long-term debt.............................................. 190.0 --
Postretirement benefits other than pensions................. 51.7 --
Deferred income taxes....................................... 16.3 16.5
Other liabilities........................................... 19.4 8.8
SHAREHOLDERS' EQUITY
Divisional equity........................................... -- 488.1
Preference stock -- $1.00 par value; 15.0 million shares
authorized; none outstanding.............................. -- --
Common stock -- $.10 par value; 135.0 million shares
authorized; 41.8 million shares outstanding............... 4.2 --
Additional contributed capital.............................. 308.5 --
Retained earnings........................................... 1.8 --
Accumulated other comprehensive income...................... .2 --
------ ------
TOTAL SHAREHOLDERS' EQUITY............................. 314.7 488.1
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............. $722.5 $602.7
====== ======
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 23
OMNOVA SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------
1999 1998 1997
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
DIVISIONAL EQUITY
Balance at beginning of period.............................. $488.1 $181.9 $145.3
Activity to date of spin-off:
Net income................................................ 30.5 42.6 34.3
Foreign currency translation adjustment................... (1.7) .8 --
Net transactions with GenCorp............................. (5.9) 262.8 2.3
Net assets transferred at spin-off........................ (511.0) -- --
------ ------ ------
Balance at end of period.................................... $ -- $488.1 $181.9
====== ====== ======
COMMON STOCK
Balance at beginning of period.............................. $ -- $ -- $ --
Issuance of 41.8 million shares at spin-off................. 4.2 -- --
------ ------ ------
Balance at end of period.................................... $ 4.2 $ -- $ --
====== ====== ======
ADDITIONAL CONTRIBUTED CAPITAL
Balance at beginning of period.............................. $ -- $ -- $ --
Contributed capital transferred at spin-off................. 508.5 -- --
Dividend paid to GenCorp.................................... (200.0) -- --
------ ------ ------
Balance at end of period.................................... $308.5 $ -- $ --
====== ====== ======
RETAINED EARNINGS
Balance at beginning of period.............................. $ -- $ -- $ --
Net income from date of spin-off through November 30,
1999...................................................... 3.9 -- --
Cash dividends -- $.05 per share............................ (2.1) -- --
------ ------ ------
Balance at end of period.................................... $ 1.8 $ -- $ --
====== ====== ======
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance at beginning of period.............................. $ -- $ -- $ --
Accumulated currency adjustments............................ .4 -- --
Minimum pension liability adjustments....................... (.2) -- --
------ ------ ------
Balance at end of period.................................... $ .2 $ -- $ --
====== ====== ======
TOTAL SHAREHOLDERS' EQUITY............................. $314.7 $488.1 $181.9
====== ====== ======
COMPREHENSIVE INCOME
Net income.................................................. $ 34.4 $ 42.6 $ 34.3
Other comprehensive income (loss):
Foreign currency translation adjustment................... (.4) .8 --
Minimum pension liability................................. (.2) -- --
------ ------ ------
TOTAL COMPREHENSIVE INCOME............................. $ 33.8 $ 43.4 $ 34.3
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
OMNOVA SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------
1999 1998 1997
------ ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 34.4 $ 42.6 $34.3
Adjustments to reconcile net income to net cash provided by
operating activities:
Unusual items.......................................... 4.1 3.4 --
Gain on sale of fixed assets........................... (5.2) -- --
Depreciation........................................... 23.2 18.0 15.0
Amortization........................................... 7.5 3.5 1.0
Deferred income taxes.................................. (2.7) 1.0 (.5)
Changes in operating assets and liabilities net of
effects of acquisitions and dispositions of
businesses:
Accounts receivable.................................. (20.0) (7.3) (1.9)
Inventories.......................................... (10.2) 1.6 3.3
Other current assets................................. (7.0) (.2) --
Current liabilities.................................. 17.0 (6.8) 5.3
Other non-current assets............................. (14.3) (3.1) (1.9)
Other long-term liabilities.......................... 8.2 .2 .5
------ ------ -----
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 35.0 52.9 55.1
INVESTING ACTIVITIES
Capital expenditures........................................ (35.0) (18.0) (10.9)
Proceeds from business and asset dispositions............... 19.5 -- --
Business acquisitions....................................... (10.9) (294.4) (46.5)
Investment in joint venture................................. (2.6) -- --
------ ------ -----
NET CASH USED IN INVESTING ACTIVITIES............. (29.0) (312.4) (57.4)
FINANCING ACTIVITIES
Net transactions with GenCorp prior to spin-off............. 7.9 262.8 2.3
Dividend paid to GenCorp.................................... (200.0) -- --
Long-term debt proceeds..................................... 210.0 -- --
Repayment of debt obligations............................... (20.0) -- --
Short-term debt proceeds.................................... 5.0 -- --
Dividends paid to shareholders.............................. (2.1) -- --
Other financing activities.................................. .2 .2 --
------ ------ -----
NET CASH PROVIDED BY FINANCING ACTIVITIES......... 1.0 263.0 2.3
------ ------ -----
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 7.0 3.5 --
Cash and cash equivalents at beginning of period............ 3.5 -- --
------ ------ -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 10.5 $ 3.5 $ --
====== ====== =====
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
BASIS OF PRESENTATION -- OMNOVA Solutions Inc. (OMNOVA Solutions or the
Company) develops, manufactures and markets emulsion polymers, specialty
chemicals and decorative and building products for a variety of industrial,
commercial and consumer markets. Prior to September 30, 1999, the OMNOVA
Solutions businesses were operated as divisions of GenCorp Inc. (GenCorp). On
September 30, 1999, GenCorp transferred to OMNOVA Solutions certain corporate
assets and the assets related to these businesses and OMNOVA Solutions assumed
liabilities related to the assets and businesses transferred and issued shares
of common stock to GenCorp. On October 1, 1999, GenCorp distributed as a
dividend to its shareholders one share of OMNOVA Solutions common stock for each
share of GenCorp common stock held of record as of September 27, 1999 (the
spin-off). As a result of the spin-off, OMNOVA Solutions became an independent,
publicly held company and its operations ceased to be owned by GenCorp. GenCorp
and OMNOVA Solutions have entered into a number of agreements with respect to
the separation of the companies and to provide mechanisms for an orderly
transition following the spin-off.
PRE SPIN-OFF FINANCIAL INFORMATION -- Financial data included in the
accompanying consolidated financial statements, for periods prior to the
spin-off, were prepared on a combined basis; however, for financial statement
reporting purposes, the financial statements for all periods presented are
labeled as consolidated. They reflect an estimate of what the historical assets,
liabilities and operations would have been if OMNOVA Solutions had been
organized as a separate legal entity, owning certain net assets of GenCorp.
The spin-off was accomplished through a Distribution Agreement which
defined the assets that were contributed to OMNOVA Solutions and the liabilities
that were assumed by OMNOVA Solutions along with a $200 million dividend payment
to GenCorp which was financed through a new debt facility.
GenCorp and OMNOVA Solutions also entered into an Agreement on Employee
Matters that sets forth the manner in which assets and liabilities under
employee benefit plans and other employment-related liabilities were divided
between them. Certain assets and liabilities related to the plans have not been
included in the accompanying Consolidated Balance Sheet at November 30, 1998.
Items excluded were comprised principally of assets and liabilities for defined
benefit pension plans as well as additional obligations for health care and
other postretirement benefits that OMNOVA Solutions assumed for substantially
all of its active and retired U.S. employees.
The final determination of the assets contributed to OMNOVA Solutions and
the liabilities assumed by OMNOVA Solutions was made pursuant to the agreements
entered into between GenCorp and OMNOVA Solutions in connection with the
spin-off. As of the date of the spin-off, a net asset transfer of $511.0 million
to OMNOVA Solutions was affected directly through the "Divisional Equity"
account in the Consolidated Balance Sheet.
Prior to the spin-off, GenCorp provided certain general and administrative
services to OMNOVA Solutions including administration, finance, legal, treasury,
information systems and human resources. The cost for these services was
allocated to OMNOVA Solutions by GenCorp based upon a formula that included
sales, gross payroll and average invested capital. Management of the Company
believes that the allocation of costs for these services was reasonable. These
allocations were $9.5 million, $12.1 million, and $13.1 million in 1999, 1998
and 1997, respectively. Since the spin-off, OMNOVA Solutions has been required
to perform these general and administrative services using its own resources or
purchased services and has been responsible for the costs and expenses
associated with the management of a public company. For the two month period
ended November 30, 1999, these costs were $3.7 million. OMNOVA Solutions'
management estimates that the costs of such general and administrative expenses
on a stand-alone basis would have been approximately $22.5 million and $22.0
million in 1999 and 1998, respectively.
As described in Note L, prior to the spin-off, OMNOVA Solutions' employees
and retirees participated in various GenCorp pension, health care, savings and
other benefit plans. The net expenses related to these plans were included in
the OMNOVA Solutions consolidated financial statements generally based on
historical pension
23
<PAGE> 26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
asset allocations and actuarial analyses for pension and retiree health care
obligations and based on actual costs for active health care, savings and other
benefit plans.
GenCorp used a centralized approach to cash management and financing for
its domestic operations. As a result, cash and cash equivalents and debt were
not allocated to OMNOVA Solutions' domestic operations in the historical
financial statements. The cash and cash equivalents included in the Consolidated
Balance Sheets related to OMNOVA Solutions' foreign operations. Prior to the
spin-off, OMNOVA Solutions generally had no borrowings except amounts due to
GenCorp. Interest expense for periods prior to the spin-off was allocated to
OMNOVA Solutions in the consolidated financial statements to reflect OMNOVA
Solutions' pro rata share of the financing structure of GenCorp. The allocation
in the consolidated financial statements was based upon the percentage
relationship between the average net assets employed in OMNOVA Solutions'
operations and GenCorp's overall average net assets.
The allocation methodology followed in preparing the consolidated financial
statements for periods prior to the spin-off may not necessarily reflect the
results of operations, cash flows, or financial position of OMNOVA Solutions in
the future, or what the results would have been had OMNOVA Solutions been a
separate, stand-alone public entity for all periods presented.
POST SPIN-OFF FINANCIAL INFORMATION -- Financial data included in the
accompanying consolidated financial statements, for periods subsequent to the
spin-off, have been prepared on a basis that reflects the historical value of
the assets, liabilities, and operations of the businesses that were contributed
to OMNOVA Solutions by GenCorp in accordance with the distribution and employee
benefits and compensation allocation agreements described in the preceding
paragraphs.
Included in the OMNOVA Solutions' accounts receivable balance at November
30, 1999 is a net amount of $10.7 million due from GenCorp.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION -- Subsequent to the spin-off, the consolidated
financial statements include the accounts of the Company and its majority owned
subsidiaries. Investments in 20 to 50 percent owned affiliates are accounted for
using the equity method. Prior to the spin-off, the consolidated financial
statements included the accounts of the businesses that comprise the Company
when it was a division of GenCorp as described in Note A.
REVENUE RECOGNITION -- Revenue from product sales is recognized when
shipment to the customer has been made, which is when title passes. The Company
estimates and records provisions for quantity rebates, sales returns, allowances
and original warranties in the period the sale is recorded, based upon its
experience.
USE OF ESTIMATES -- The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
ENVIRONMENTAL COSTS -- The Company expenses, on a current basis, recurring
costs associated with managing hazardous substances and pollution in ongoing
operations. The Company accrues for costs associated with the remediation of
environmental pollution when it becomes probable that a liability has been
incurred and its proportionate share of the amount can be reasonably estimated.
The Company recognizes amounts recoverable from insurance carriers when the
collection of such amounts is probable.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's cash equivalents bear
interest at market rates and therefore their carrying values approximate their
fair values.
INVENTORIES -- Inventories are stated at the lower of cost or market,
primarily using the last-in, first-out method.
24
<PAGE> 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
LONG-LIVED ASSETS -- Property, plant and equipment are recorded at cost.
Refurbishment costs are capitalized in the property accounts whereas ordinary
maintenance and repair costs are expensed as incurred. Depreciation is computed
principally using the straight-line method. Depreciable lives on buildings and
improvements and machinery and equipment range from 10 to 40 years and 3 to 20
years, respectively.
Goodwill represents the excess of the purchase price over the estimated
fair value of the net assets acquired and is amortized on a straight-line basis
over periods ranging from 30 to 40 years. Identifiable intangible assets, such
as patents, trademarks and licenses, are recorded at cost or when acquired as
part of a business combination at their estimated fair value. Identifiable
intangible assets are amortized over their estimated useful lives using the
straight-line method over periods ranging from 3 to 15 years. Accumulated
amortization of goodwill and identifiable intangible assets at November 30, 1999
and 1998 was $12.2 million and $4.7 million, respectively.
Impairment of long-lived assets is recognized when events or changes in
circumstances indicate that the carrying amount of the asset or related group of
assets may not be recoverable. If the expected future undiscounted cash flows
are less than the carrying amount of the asset, an impairment loss is recognized
at that time. Measurement of impairment may be based upon appraisal, market
value of similar assets, or discounted cash flows.
FOREIGN CURRENCY TRANSLATION -- The financial position and results of
operations of the Company's foreign subsidiaries are measured using the local
currency as the functional currency. Assets and liabilities of operations
denominated in foreign currencies are translated into U.S. dollars at exchange
rates in effect at year-end, while revenues and expenses are translated at the
weighted average exchange rates prevailing during the year. The resulting
translation gains and losses on assets and liabilities are charged or credited
directly to shareholders' equity, and are not included in net income until
realized through sale or liquidation of the investment.
INCOME TAXES -- Deferred income taxes are provided for temporary
differences between the carrying amount of assets and liabilities for financial
reporting and income tax purposes.
NOTE C -- UNUSUAL ITEMS AND SPIN-OFF RELATED COSTS
In 1999, the Company recognized unusual income of $1.1 million. Unusual
items included charges related to Decorative & Building Products of $3.9 million
and Performance Chemicals of $0.5 million, offset by unusual income of $5.5
million related primarily to the gain recognized on the sale of the corporate
jet.
Decorative & Building Products' unusual expense of $3.9 million included
charges of $2.8 million related to a restructuring of one of its businesses
which is expected to be completed during the first half of fiscal 2000 and $1.1
million primarily associated with the write-off of obsolete equipment and other
assets. Performance Chemicals' unusual expense relates to the anticipated
settlement of an asserted claim with one of the Company's vendors.
During the fourth quarter of 1999, the Company recognized $2.2 million of
spin-off costs which primarily related to the new corporate identity program,
retention bonuses for key executives and certain franchise and property taxes
associated with the spin-off.
In 1998, the Company's Decorative & Building Products segment recognized
unusual expense of $3.4 million related to exiting the residential wallcovering
business. This business was sold to Blue Mountain Wallcoverings, Inc. for
approximately $9.0 million on December 14, 1998. Assets disposed of consisted of
equipment and inventory with carrying amounts of $7.9 million and $1.9 million,
respectively. Trademarks and sample books totaling $2.1 million were written off
since they no longer had a use and severance costs of $0.5 million were accrued.
The severance costs related to termination benefits which were paid to employees
in 1999.
25
<PAGE> 28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE D -- NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which is required to be adopted in fiscal year 2001. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of this Statement will have a significant effect on earnings or the
financial position of the Company.
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-5, "Reporting the Costs of Start-up
Activities" (SOP 98-5). SOP 98-5 is effective beginning on December 1, 1999, and
requires that start-up costs capitalized prior to December 1, 1999 be written
off and any future start-up costs to be expensed as incurred. The Company has no
capitalized start-up costs; therefore the adoption of SOP 98-5 will not have an
effect on the consolidated financial statements.
NOTE E -- ACQUISITIONS AND JOINT VENTURE
ACQUISITIONS
On April 27, 1999, the Company acquired the global latex floor care
business of Morton International Inc. for $7.6 million. The preliminary purchase
price allocation resulted in goodwill and other intangible assets of $6.9
million, which are being amortized over periods ranging from 5 to 40 years.
On December 2, 1998, the Company acquired the U.S. acrylic emulsion
polymers business of PolymerLatex, located in Fitchburg, Massachusetts, for $8.8
million, consisting of cash of $3.3 million and a note payable of $5.5 million
due December 1, 1999. The purchase price allocation resulted in goodwill and
other intangible assets of $2.3 million, which are being amortized over periods
ranging from 5 to 40 years.
On October 29, 1998, the Company acquired certain net assets of Sequa
Chemicals, the specialty chemicals unit of Sequa Corporation, for $108.0 million
in cash. This acquisition provided technology, customers and increased capacity
for an array of emulsion polymers and polymer hybrids including acrylics and
vinyl acetate. The acquisition resulted in goodwill and other intangible assets
of approximately $61.2 million which are being amortized over periods ranging
from 5 to 40 years.
On August 14, 1998, the Company acquired the commercial wallcovering
business of Walker Greenbank PLC, which is based in the United Kingdom, for
$112.6 million in cash. The acquisition resulted in goodwill and other
intangible assets of approximately $80.6 million which are being amortized over
periods ranging from 5 to 40 years.
On March 1, 1998, the Company acquired The Goodyear Tire & Rubber Company's
Calhoun, Georgia latex facility for an aggregate consideration of $78.0 million,
of which $73.8 million was paid in cash and $4.2 million was paid through the
retention of receivables. The acquisition resulted in goodwill and other
intangible assets of $59.4 million which are being amortized over periods
ranging from 3 to 40 years.
On May 7, 1997, the Company acquired certain net assets of Printworld from
Technographics, Inc. for $46.5 million in cash. The acquisition resulted in
goodwill and other intangible assets of $31.7 million which are being amortized
over periods ranging from 3 to 30 years.
All of the above acquisitions were accounted for using the purchase method
and were included in the results of operations of the Company from the
respective dates of acquisition.
The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company as if the fiscal 1998
acquisitions had occurred at the beginning of fiscal 1997, with pro forma
adjustments to reflect the amortization of goodwill and other intangible assets
and interest expense on incurred debt together with the related income tax
effects. The pro forma financial information is not necessarily indicative of
the consolidated results of operations if the acquisitions had actually occurred
at the beginning of fiscal 1997.
26
<PAGE> 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
NET SALES................................................... $766.2 $748.0
====== ======
NET INCOME.................................................. $ 49.6 $ 35.0
====== ======
</TABLE>
JOINT VENTURE
The Company formed a joint venture company with a subsidiary of
Thailand-based Charoen Pokphand Group in 1999. The new company, CPPC Decorative
Products Co., Ltd., will serve the decorative PVC film and fabric markets in the
Asia-Pacific region and provide expanded product lines to North America and
Europe. The Company's initial investment in this joint venture was $2.6 million
and is being accounted for using the equity method.
NOTE F -- EARNINGS PER SHARE
For periods ended prior to the spin-off, the number of weighted average
shares outstanding and common share equivalents used in the earnings per share
calculation equal GenCorp's corresponding outstanding shares for the applicable
periods.
A reconciliation of the numerator and denominator used in the basic and
diluted earnings per share computations is as follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-----------------------------
1999 1998 1997
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NUMERATOR
Numerator for basic earnings per share - income available to
common shareholders....................................... $ 34.4 $ 42.6 $ 34.3
Effect of dilutive securities:
8% convertible subordinated debentures.................... -- -- 3.2
------- ------- -------
Numerator for diluted earnings per share - income available
to common shareholders after assumed conversions.......... $ 34.4 $ 42.6 $ 37.5
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
<S> <C> <C> <C>
DENOMINATOR
Denominator for basic earnings per share - weighted average
shares outstanding........................................ 41,733 41,468 37,023
Effect of dilutive securities:
8% convertible subordinated debentures.................... -- -- 3,855
Employee stock options.................................... 445 549 468
Other..................................................... -- 16 16
------- ------- -------
Dilutive potential common shares............................ 445 565 4,339
------- ------- -------
Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversions........... 42,178 42,033 41,362
======= ======= =======
EARNINGS PER SHARE OF COMMON STOCK
Basic Earnings Per Share.................................... $ .82 $ 1.03 $ .93
======= ======= =======
Diluted Earnings Per Share.................................. $ .82 $ 1.01 $ .91
======= ======= =======
</TABLE>
27
<PAGE> 30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE G -- RESEARCH AND DEVELOPMENT EXPENSE
Research and development (R&D) expenses were $10.3 million in 1999, $8.6
million in 1998 and $7.6 million in 1997. R&D expenses include the costs of
technical activities that are useful in developing new products, services,
processes or techniques, as well as those expenses for technical activities that
may significantly improve existing products or processes.
NOTE H -- INCOME TAXES
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------
1999 1998 1997
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
INCOME TAX PROVISION (BENEFIT)
CURRENT
U.S. federal................................................ $21.1 $21.6 $18.8
State and local............................................. 4.1 5.2 4.4
Foreign..................................................... 1.6 -- --
----- ----- -----
26.8 26.8 23.2
DEFERRED
U.S. federal................................................ (2.1) 1.0 (.5)
State and local............................................. (.6) -- --
----- ----- -----
(2.7) 1.0 (.5)
----- ----- -----
INCOME TAX PROVISION................................... $24.1 $27.8 $22.7
===== ===== =====
EFFECTIVE INCOME TAX RATE
Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal income tax
benefit................................................... 4.9 5.0 5.0
Other, net.................................................. 1.3 -- --
----- ----- -----
EFFECTIVE INCOME TAX RATE.............................. 41.2% 40.0% 40.0%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------------------------
1999 1998
--------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
DEFERRED TAXES
Accrued estimated costs.............................. $11.6 $ -- $12.4 $ --
Depreciation......................................... -- 21.7 -- 19.8
Pension.............................................. -- 18.1 -- --
Other................................................ 1.1 -- -- --
Postretirement employee benefits..................... 22.4 -- -- --
----- ----- ----- -----
DEFERRED TAXES $35.1 $39.8 $12.4 $19.8
===== ===== ===== =====
</TABLE>
Prior to the spin-off, the Company was included in the consolidated income
tax returns filed by GenCorp and its subsidiaries in various U.S. and foreign
jurisdictions. The tax provisions reflected in the consolidated financial
statements for the periods prior to the spin-off were computed as if OMNOVA
Solutions was a separate
28
<PAGE> 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
company. Under the provisions of the Tax Matters Agreement, GenCorp is generally
responsible for all federal, state and local income taxes for all periods prior
to October 1, 1999. Taxes currently payable and income tax payments were
recorded directly by GenCorp and, as a result, amounts related to the Company
are included in "Net transactions with GenCorp prior to spin-off" in the
Consolidated Statements of Cash Flows. Taxes paid during the two month period
following the spin-off were not significant.
NOTE I -- ACCOUNTS RECEIVABLE
The Company's accounts receivable are generally unsecured and are not
backed by collateral from its customers. No one customer represented more than
10 percent of the Company's net trade receivables. The allowance for doubtful
accounts was $3.5 million and $3.6 million at November 30, 1999 and 1998,
respectively. Write-offs of uncollectible accounts receivable totaled $0.3
million in fiscal 1999, $0.1 million during fiscal 1998 and $0.8 million during
fiscal 1997. The provision for bad debts totaled $0.2 million in fiscal 1999,
$0.7 million in 1998 and $0.9 million in 1997.
NOTE J -- INVENTORIES
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------
1999 1998
----- -----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Raw materials and supplies.................................. $31.1 $24.6
Work-in-process............................................. 5.9 5.0
Finished products........................................... 65.6 60.1
----- -----
Approximate replacement cost of inventories................. 102.6 89.7
Reserves, primarily LIFO.................................... (34.2) (33.1)
----- -----
INVENTORIES $68.4 $56.6
===== =====
</TABLE>
Inventories using the LIFO method represented 80 percent and 82 percent of
total FIFO inventories at November 30, 1999 and 1998, respectively. The LIFO
reserve was $25.7 million and $19.8 million at November 30, 1999 and 1998,
respectively.
NOTE K -- PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------
1999 1998
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Land........................................................ $ 9.7 $ 7.0
Building and improvements................................... 89.5 70.9
Machinery and equipment..................................... 296.7 280.9
Construction in progress.................................... 16.3 15.0
------- -------
412.2 373.8
Accumulated depreciation.................................... (200.2) (181.1)
------- -------
PROPERTY, PLANT AND EQUIPMENT, NET $ 212.0 $ 192.7
======= =======
</TABLE>
29
<PAGE> 32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE L -- EMPLOYEE BENEFIT PLANS
POSTRETIREMENT BENEFITS -- PENSIONS
Prior to the spin-off, the Company's employees participated in GenCorp's
noncontributory pension plans. In conjunction with the spin-off, OMNOVA
Solutions assumed pension liabilities and received related assets from those
plans for its active employees and for certain former employees who left GenCorp
in earlier years. OMNOVA Solutions' plans are substantially identical to
GenCorp's plans. Pension benefits are based on the employee's years of service
and/or compensation level. The pension plans are funded in accordance with
OMNOVA Solutions' long-range projections of the plans' financial conditions.
These projections take into account benefits earned and expected to be earned,
anticipated returns on pension plan assets, and income tax and other
regulations.
The Company's net pension costs were $6.1 million in 1999 and consisted of
$(0.5) million of net pension costs incurred subsequent to the spin-off and $6.6
million of cost allocations from GenCorp. OMNOVA Solutions' net pension cost
allocations from GenCorp were $6.1 million and $5.3 million in 1998 and 1997,
respectively. Separate calculations of the components of OMNOVA Solutions' net
pension costs and the funded status of the plans prior to the spin-off are not
available. Subsequent to the spin-off, the Company's net pension costs were
$(0.5) million and its components were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Service costs for benefits earned........................... $ .8
Interest costs on benefit obligation........................ 1.6
Assumed return on plan assets(1)............................ (2.8)
Amortization of unrecognized net gain....................... (.1)
-----
TOTAL.................................................. $ (.5)
=====
</TABLE>
(1) Actual return on plan assets was $11 million for the two months ended
November 30, 1999.
<TABLE>
<S> <C>
PLAN ASSETS AT FAIR VALUE................................... $ 219.9
Projected benefit obligation(1)............................. (140.6)
--------
Excess of plan assets over projected benefit obligation..... 79.3
Less:
Unrecognized transition amounts........................... 3.9
Unrecognized prior service costs.......................... (7.4)
Additional liability...................................... 1.1
Unrecognized net gain..................................... 40.3
--------
NET PENSION ASSET AT NOVEMBER 30, 1999(2).............. $ 41.4
========
</TABLE>
(1) Included $2.9 million in 1999 for unfunded plans.
(2) Included $2.4 million in 1999 for unfunded plans.
Plan assets consist principally of common stocks and U.S. government and
corporate obligations. Contributions to these plans were neither required nor
made in 1999 because OMNOVA Solutions' plans are adequately funded, using
assumed returns.
30
<PAGE> 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The significant actuarial assumptions used to estimate the projected
benefit obligation for the Company's pension plans were as follows:
<TABLE>
<S> <C>
Discount rate............................................... 7.00%
Assumed long-term rate of return on plan assets............. 8.75%
Annual rates of salary increase............................. 4.50%
(for plans that base benefits on final compensation
level)
</TABLE>
POSTRETIREMENT BENEFITS -- HEALTH CARE AND OTHER
In connection with the spin-off, OMNOVA Solutions assumed retiree medical
liabilities for its active employees and for certain former employees who left
GenCorp in earlier years. The Company currently provides certain health care and
life insurance benefits to most retired employees in the United States with
varied coverage by employee groups. The health care plans generally provide for
cost sharing in the form of employee contributions, deductibles and coinsurance
between the Company and its retirees. Retirees in certain other countries are
provided similar benefits by plans sponsored by their governments. These
postretirement benefits are unfunded and are accrued by the date the employee
becomes eligible for the benefits.
OMNOVA Solutions' postretirement benefit costs in 1999 were $3.3 million,
which consisted of $0.6 million of postretirement benefit costs incurred
subsequent to the spin-off and $2.7 million of cost allocations from GenCorp.
OMNOVA Solutions' postretirement benefit cost allocations from GenCorp were $3.2
million in 1998 and $3.1 million in 1997. Separate calculations of the
components of OMNOVA Solutions' total costs for postretirement benefits and the
status of the plans prior to the spin-off are not available. Subsequent to the
spin-off, the Company's postretirement benefit costs were $0.6 million, and its
components were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Service costs for benefits earned........................... $ .1
Interest costs on benefit obligation........................ .6
Amortization of unrecognized prior service costs............ (.1)
-------
TOTAL............................................. $ .6
=======
ACCUMULATED BENEFIT OBLIGATION:
Retirees.................................................. $ 31.5
Eligible active employees................................. 7.7
Other active employees.................................... 12.2
-------
TOTAL............................................. $ 51.4
Unrecognized benefits from prior service.................. 3.0
Unrecognized subsequent net loss.......................... 1.8
-------
ACCRUED LIABILITY AT AUGUST 31, 1999........................ $ 56.2
Benefits paid from September 1, 1999 to November 30,
1999................................................... (.9)
-------
ACCRUED LIABILITY AT NOVEMBER 30, 1999...................... $ 55.3
Current portion........................................... (3.6)
-------
Long-term portion......................................... $ 51.7
=======
</TABLE>
31
<PAGE> 34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Postretirement benefit costs were determined using the following
assumptions:
<TABLE>
<S> <C>
Discount rate............................................... 7%
Initial trend rate for health care costs.................... 9%
Ultimate trend rate for health care costs................... 6%
Year reached................................................ 2002
</TABLE>
Because most employer benefits are capped, assumed health care cost trend
rates have a minimal effect on the amounts reported for the health care plans. A
one-percentage point increase/decrease in assumed health care cost trend rates
would not significantly increase/decrease the benefit obligation at November 30,
1999 and would have no effect on the aggregate of the service and interest
components of net periodic cost.
The Company participates in multi-employer defined contribution pension
plans sponsored jointly by GenCorp and OMNOVA Solutions. Participation in these
plans is available to substantially all salaried employees and to certain groups
of hourly employees. Contributions to these plans are based on either a
percentage of employee contributions or on a specified amount per hour based on
the provisions of each plan. The costs of these plans for the Company were
approximately $2.2 million in 1999 and $2.0 million in 1998 and 1997,
respectively.
NOTE M -- LONG-TERM DEBT AND CREDIT LINES
On September 30, 1999, the Company entered into a five-year unsecured $300
million revolving credit facility (Facility) which expires in September 2004. At
November 30, 1999, the unused and available balance under this Facility was $110
million. The Company pays a variable commitment fee, which is currently .30 of
one percent, on the unused balance. Interest rates are variable, primarily based
on LIBOR, and were at an average rate of 6.9 percent at November 30, 1999. The
Facility contains various debt, dividend and investment restrictions and
provisions requiring maintenance of an earnings before interest, taxes,
depreciation and amortization to interest coverage (EBITDA/Interest Expense)
ratio of 3.50 to 1.00 and debt to earnings before interest, taxes, depreciation
and amortization (Debt/EBITDA) ratio of 3.25 to 1.00. The Facility was utilized
to fund a $200 million dividend paid to GenCorp at the time of the spin-off and
will also be available for future working capital, capital expenditures and
acquisition needs.
At November 30, 1999, the Company had unsecured, uncommitted lines of
credit with several banks for short-term borrowings aggregating $25.0 million,
of which $5.0 million was outstanding. Interest rates for these lines of credit
were variable and were at an average rate of 6.2 percent on November 30, 1999.
Borrowings under such lines are payable on demand. The Company also had
outstanding letters of credit totaling $0.7 million at November 30, 1999.
Interest paid during the two month period following the spin-off was $1.8
million.
NOTE N -- LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment and office
buildings under long-term, noncancelable operating leases. The leases generally
provide for renewal options ranging from five to ten years and require the
Company to pay for utilities, insurance, taxes and maintenance. Rent expense was
$6.0 million in 1999, $3.8 million in 1998 and $2.9 million in 1997. Future
minimum commitments at November 30, 1999 for existing operating leases were
$12.2 million with annual amounts declining from $4.3 million in 2000 to $0.4
million in 2004. The Company's obligation for leases after 2004 is $0.7 million.
NOTE O -- CONTINGENCIES
The Company is subject to various legal actions, governmental
investigations and proceedings relating to a wide range of matters. In the
opinion of management, after reviewing the information which is currently
available with respect to such matters and consulting with legal counsel, any
liability which may ultimately be incurred
32
<PAGE> 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
with respect to these matters will not materially affect future results of
operations, liquidity, capital resources or the consolidated financial condition
of the Company.
NOTE P -- STOCK-BASED COMPENSATION PLANS
OMNOVA Solutions' 1999 Equity and Performance Incentive Plan (the 1999
Plan) permits the Company to grant to officers, key employees and nonemployee
directors of the Company, incentives directly linked to the price of OMNOVA
Solutions' stock. The 1999 Plan authorizes up to 2.4 million shares of Company
stock for grants of nonqualified stock options, stock appreciation rights,
restricted stock awards, performance stock awards and deferred stock. Shares
used may be either newly issued shares or treasury shares or both. All options
granted under the 1999 Plan have been granted with the exercise price of the
stock option equal to the fair market value of the Company's common stock on the
grant date. Additionally, the 1999 Plan provides that the term of any stock
option granted under the Plan may not exceed ten years. As of November 30, 1999,
approximately 2.3 million shares of Company common stock remained available for
grants under the 1999 Plan.
Stock options granted under the GenCorp 1993 and 1997 Stock Option Plans
(GenCorp Options) to OMNOVA Solutions employees and GenCorp employees prior to
the spin-off were partially converted into OMNOVA Solutions options and
partially into GenCorp options with adjustments to preserve their value. The
OMNOVA Solutions options which were issued pursuant to the conversion process
were granted under the OMNOVA Solutions Inc. Option Adjustment Plan (the
"Adjustment Plan"). The Adjustment Plan authorized up to 4.0 million shares of
Company stock solely for the purpose of accomplishing the conversion described
above. Shares used may be either newly issued shares or treasury shares or both.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Due to OMNOVA Solutions' limited period of operations subsequent to its
spin-off from GenCorp, it is impractical to determine the compensation cost of
stock options based on the fair value method prescribed by FASB Statement No.
123 "Accounting for Stock-Based Compensation".
A summary of the Company's stock option activity, and related information
for the period subsequent to the spin-off through November 30, 1999 is as
follows:
<TABLE>
<CAPTION>
WEIGHTED
OPTIONS AVERAGE
------------------------ EXERCISE
EXERCISABLE TOTAL PRICE
----------- --------- --------
<S> <C> <C> <C>
Outstanding at October 1, 1999............................. 2,623,352 4,033,748 $8.9215
Granted.................................................... -- 50,000 $7.0000
Exercised.................................................. (3,000) (3,000) $6.6701
--------- ---------
Outstanding at November 30, 1999........................... 2,620,352 4,080,748
========= =========
</TABLE>
33
<PAGE> 36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table summarizes the range of exercise prices and
weighted-average exercise prices for options outstanding and exercisable at
November 30, 1999 under the Company's stock option plans:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
OUTSTANDING EXERCISE CONTRACTUAL EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICE OPTIONS PRICE LIFE (YRS) OPTIONS PRICE
----------------------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 5.0764 - $5.7493 463,374 $ 5.2947 5.8 463,374 $ 5.2947
$ 5.7494 - $7.1867 590,464 $ 6.3620 5.4 540,464 $ 6.3030
$ 7.1868 - $8.6240 1,451,410 $ 8.1999 8.0 685,035 $ 7.9629
$ 8.6241 - $10.0613 722,043 $ 8.9971 7.3 512,032 $ 8.9924
$10.0614 - $11.4986 97,701 $10.7591 8.6 43,611 $10.5954
$11.4987 - $12.9360 57,846 $12.4329 8.2 41,003 $12.5780
$12.9361 - $14.3733 697,910 $14.2317 8.3 334,833 $14.2244
--------- ---------
TOTAL................ 4,080,748 2,620,352
========= =========
</TABLE>
NOTE Q -- COMMON STOCK
At November 30, 1999, 6,422,948 shares of $.10 par value common stock were
reserved for future issuance for discretionary payments of the Company's portion
of Retirement Savings Plan contributions, exercise of options and payments of
awards under stock-based compensation plans.
NOTE R -- BUSINESS SEGMENT INFORMATION
In 1999, the Company adopted FASB Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company operates two
business segments, Performance Chemicals and Decorative & Building Products. The
Company's reportable segments are strategic business units that offer different
products and services. They are managed separately based on fundamental
differences in their operations. The Performance Chemicals segment manufactures
a broad range of emulsion polymers and specialty chemicals used as coatings,
binders, adhesives, and additives for paper, carpet, textile and various other
specialty chemical applications. Decorative & Building Products designs,
manufactures and markets a comprehensive line of decorative and functional
surface products including commercial wallcovering, coated fabrics, printed and
solid color surface laminates, graphic arts and industrial films, and transfer
printed products for furniture, transportation, cabinets, home furnishings,
apparel, new construction and remodeling and other commercial applications, as
well as membrane systems for commercial and industrial roofing.
Segment operating profit represents net sales less applicable costs and
expenses relating to operations. Segment operating profit excludes corporate
income and expenses, provisions for unusual items, interest expense and income
taxes. No one customer accounts for 10 percent of consolidated sales.
34
<PAGE> 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
BUSINESS SEGMENT INFORMATION (DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NET SALES
Decorative & Building Products.............................. $443.5 $398.6 $367.7
Performance Chemicals....................................... 323.9 225.6 180.6
------ ------ ------
$767.4 $624.2 $548.3
====== ====== ======
INCOME
Decorative & Building Products.............................. $ 51.4 $ 51.5 $ 44.2
Performance Chemicals....................................... 31.2 35.0 21.9
------ ------ ------
SEGMENT OPERATING PROFIT.................................... 82.6 86.5 66.1
Interest expense allocated from GenCorp..................... (16.2) (7.9) (3.7)
Interest expense after spin-off............................. (2.4) -- --
Corporate other income (expense)............................ (.5) (.2) (.3)
Corporate expenses.......................................... (3.9) (4.6) (5.1)
Unusual items............................................... 1.1 (3.4) --
Spin-off related costs...................................... (2.2) -- --
------ ------ ------
INCOME BEFORE INCOME TAXES.................................. $ 58.5 $ 70.4 $ 57.0
====== ====== ======
TOTAL ASSETS
Decorative & Building Products.............................. $323.1 $313.0 $186.4
Performance Chemicals....................................... 319.2 289.7 90.7
Corporate................................................... 80.2 -- --
------ ------ ------
$722.5 $602.7 $277.1
====== ====== ======
CAPITAL EXPENDITURES
Decorative & Building Products.............................. $ 20.7 $ 13.0 $ 5.3
Performance Chemicals....................................... 14.0 5.0 5.6
Corporate................................................... .3 -- --
------ ------ ------
$ 35.0 $ 18.0 $ 10.9
====== ====== ======
DEPRECIATION AND AMORTIZATION
Decorative & Building Products.............................. $ 15.6 $ 13.4 $ 11.0
Performance Chemicals....................................... 14.8 8.0 5.0
Corporate................................................... .3 .1 --
------ ------ ------
$ 30.7 $ 21.5 $ 16.0
====== ====== ======
</TABLE>
35
<PAGE> 38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The Company's operations are located primarily in the United States and
Europe. Inter-area sales are not significant to the total sales of any
geographic area.
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
GEOGRAPHIC INFORMATION (DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NET SALES
Europe...................................................... $ 68.7 $ 14.7 $ --
United States............................................... 654.3 572.0 512.4
United States export sales.................................. 44.4 37.5 35.9
------ ------ ------
$767.4 $624.2 $548.3
====== ====== ======
SEGMENT OPERATING PROFIT
Europe...................................................... $ 7.2 $ 1.9 $ --
United States............................................... 75.4 84.6 66.1
------ ------ ------
$ 82.6 $ 86.5 $ 66.1
====== ====== ======
TOTAL ASSETS
Europe...................................................... $139.1 $128.6 $ --
United States............................................... 503.3 474.1 277.1
Corporate................................................... 80.1 -- --
------ ------ ------
$722.5 $602.7 $277.1
====== ====== ======
LONG-LIVED ASSETS
Europe...................................................... $100.3 $100.4 $ --
United States............................................... 340.2 323.0 156.7
Corporate................................................... 8.3 -- --
------ ------ ------
$448.8 $423.4 $156.7
====== ====== ======
</TABLE>
36
<PAGE> 39
OMNOVA SOLUTIONS INC.
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
------------ ------- ---------- ------------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1999
Net sales..................................... $171.2 $195.9 $202.9 $197.4
------ ------ ------ ------
Segment operating profit...................... $ 17.3 $ 24.0 $ 22.1 $ 19.2
------ ------ ------ ------
Income before income taxes.................... $ 11.3 $ 17.9 $ 16.9 $ 12.4
------ ------ ------ ------
NET INCOME.................................... $ 6.8 $ 10.7 $ 10.1 $ 6.8
------ ------ ------ ------
- -----------------------------------------------------------------------------------------------------
Earnings per share of common stock(1)
Basic....................................... $ .16 $ .26 $ .25 $ .16
Diluted..................................... $ .16 $ .25 $ .24 $ .16
Common stock price range per share -- high.... N/A N/A N/A $11 1/8
-- low..... N/A N/A N/A $6 1/4
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
------------ ------- ---------- ------------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1998
Net sales..................................... $133.7 $153.7 $160.8 $176.0
------ ------ ------ ------
Segment operating profit...................... $ 14.9 $ 21.7 $ 22.6 $ 27.3
------ ------ ------ ------
Income before income taxes.................... $ 12.8 $ 10.2 $ 19.4 $ 28.0
------ ------ ------ ------
NET INCOME.................................... $ 7.7 $ 6.1 $ 11.7 $ 17.1
------ ------ ------ ------
- -----------------------------------------------------------------------------------------------------
Earnings per share of common stock(1)
Basic....................................... $ .19 $ .15 $ .28 $ .41
Diluted..................................... $ .18 $ .15 $ .28 $ .41
Common stock price range per share -- high.... N/A N/A N/A N/A
-- low..... N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) The sum of the quarterly EPS amounts may not equal the annual amount due to
changes in the number of shares outstanding during the year.
CAPITAL STOCK
The Company's common stock is listed on the New York Stock Exchange. At
November 30, 1999 and December 31, 1999, there were approximately 11,800 holders
of record of the Company's common stock. During the fourth quarter of 1999, the
Company paid its first cash dividend on its common stock of $.05 per share.
37
<PAGE> 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to nominees who will stand for election as a
director of the Company at the March 29, 2000 Annual Meeting of Shareholders is
set forth on pages 2 and 3 of the Company's 2000 Proxy Statement and is
incorporated herein by reference. Information with respect to directors of the
Company whose terms extend beyond the March 29, 2000 Annual Meeting of
Shareholders is set forth on pages 3 and 4 of the Company's 2000 Proxy Statement
and is incorporated herein by reference.
Also, see Executive Officers of the Registrant on pages 8 and 9 of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth on pages 9
through 23 of the Company's 2000 Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the security ownership of certain beneficial owners
and management is set forth on pages 5 and 6 of the Company's 2000 Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain transactions and employment arrangements with
management is set forth on pages 16 and 17 of the Company's 2000 Proxy Statement
and is incorporated herein by reference. Information regarding certain related
transactions with GenCorp Inc. is set forth on pages 25 and 26 of the Company's
2000 Proxy and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
(A)(1) CONSOLIDATED FINANCIAL STATEMENTS:
The following consolidated financial statements of OMNOVA
Solutions Inc. are included in Item 8:
Consolidated Statements of Income for the years ended
November 30, 1999, 1998 and 1997....................... 19
Consolidated Balance Sheets at November 30, 1999 and
1998................................................... 20
Consolidated Statements of Shareholders' Equity for the
years ended November 30, 1999, 1998 and 1997........... 21
Consolidated Statements of Cash Flows for the years ended
November 30, 1999, 1998 and 1997....................... 22
Notes to the Consolidated Financial Statements.............. 23
</TABLE>
(A)(2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:
All consolidated financial statement schedules are omitted because they are
inapplicable, not required by the instructions or the information is included in
the consolidated financial statements or notes thereto.
38
<PAGE> 41
(A)(3) EXHIBITS
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
ACQUISITION AGREEMENTS
2.1 Distribution Agreement between OMNOVA Solutions Inc.
("OMNOVA Solutions") and GenCorp Inc ("GenCorp").
CHARTER DOCUMENTS
3.1* Form of Amended and Restated Articles of Incorporation of
OMNOVA Solutions.
3.2* Amended and Restated Code of Regulation of OMNOVA Solutions.
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
4.1 Credit Agreement dated September 30, 1999 by and among
OMNOVA Solutions Inc., Bank of America, N.A. as Agent and as
Lender and the Lenders party thereto from time to time.
MATERIAL CONTRACTS
10.1*+ Employment Agreement dated October 15, 1993 (with
amendments) between GenCorp and John B. Yasinsky, as assumed
by OMNOVA Solutions.
10.2*+ Employment Agreement dated May 10, 1996 between GenCorp and
Nathaniel J. Mass, as assumed by OMNOVA Solutions.
10.3*+ Employment Agreement dated July 16, 1996 between GenCorp and
Kevin M. McMullen, as assumed by OMNOVA Solutions.
10.4*+ Severance Agreement granted to John B. Yasinsky by OMNOVA
Solutions.
10.5*+ Severance Agreement granted to Nathaniel J. Mass by OMNOVA
Solutions
10.6*+ Form of Severance Agreement granted to certain executive
officers of OMNOVA Solutions (other than the officers
identified above).
10.7*+ OMNOVA Solutions 1999 Equity and Performance Incentive Plan.
10.8*+ OMNOVA Solutions Deferred Compensation Plan for Nonemployee
Directors.
10.9*+ Retirement Plan for Nonemployee Directors of OMNOVA
Solutions.
10.10*+ OMNOVA Solutions Executive Incentive Compensation Program.
10.11*+ Benefits Restoration Plan for Salaried Employees of OMNOVA
Solutions.
10.12*+ OMNOVA Solutions Deferred Bonus Plan.
10.13*+ 1999 GenCorp Key Employee Retention Plan.
10.14*+ Form of Key Employee Retention Letter Agreement.
10.15 Tax Matters Agreement between OMNOVA Solutions and GenCorp.
10.16 Alternative Dispute Resolution Agreement between OMNOVA
Solutions and GenCorp.
10.17 Agreement on Employee Matters between OMNOVA Solutions and
GenCorp.
10.18 Services and Support Agreement between OMNOVA Solutions and
GenCorp.
10.19* Form of Director and Officer Indemnification Agreement.
10.20* Form of Director Indemnification Agreement.
10.21* Form of Officer Indemnification Agreement.
SUBSIDIARIES OF THE REGISTRANT
21.1 Listing of Subsidiaries.
CONSENTS OF EXPERTS
23.1 Consent of Ernst & Young LLP.
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
POWER OF ATTORNEY
24.1 Powers of Attorney executed by E. P. Campbell, C. A. Corry,
D. A. Daberko, B. G. Gower, D. E. McGarry, S. W. Percy, and
R. B. Pipes, Directors of the Company.
27. FINANCIAL DATA SCHEDULE
(Filed for EDGAR only)
The Company will supply copies of any of the foregoing
exhibits to any shareholder upon receipt of a written
request addressed to OMNOVA Solutions Inc., 175 Ghent Road,
Fairlawn, Ohio 44333-3300--Attention: Secretary, and payment
of $1 per page to help defray the costs of handling, copying
and return postage.
</TABLE>
- ---------------
* Incorporated by reference to the same-numbered exhibit to the Company's
Registration Statement on Form 10 (File No. 1-15147).
+ Management contract or compensatory arrangement.
40
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OMNOVA SOLUTIONS INC.
February 10, 2000
By /s/ J. C. LEMAY
------------------------------------
J. C. LEMAY
Senior Vice President, Law;
General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. B. YASINSKY Chairman and Chief Executive February 10, 2000
- ------------------------------------------------ Officer
J. B. Yasinsky
/s/ M. E. HICKS Senior Vice President and Chief February 10, 2000
- ------------------------------------------------ Financial Officer; Treasurer
M. E. Hicks
/s/ P. J. PARR Director-Audit, Accounting & Tax February 10, 2000
- ------------------------------------------------ (principal accounting officer)
P. J. Parr
* Director February 10, 2000
- ------------------------------------------------
E. P. Campbell
* Director February 10, 2000
- ------------------------------------------------
C. A. Corry
* Director February 10, 2000
- ------------------------------------------------
D. A. Daberko
* Director February 10, 2000
- ------------------------------------------------
B. G. Gower
* Director February 10, 2000
- ------------------------------------------------
D. E. McGarry
* Director February 10, 2000
- ------------------------------------------------
S. W. Percy
* Director February 10, 2000
- ------------------------------------------------
R. B. Pipes
*Signed by the undersigned as attorney-in-fact
and agent for the Directors indicated.
/s/ C. A. SLACK February 10, 2000
- ------------------------------------------------
C. A. Slack
</TABLE>
41
<PAGE> 1
Exhibit 2.1
Execution Copy
DISTRIBUTION AGREEMENT
Dated September 30, 1999
Between
GENCORP INC.
and
OMNOVA SOLUTIONS INC.
<PAGE> 2
<TABLE>
<CAPTION>
CONTENTS
Page
----
<S> <C>
I. Definitions...................................................................................... 1
II. Contribution..................................................................................... 2
2.01. Assets Contibuted....................................................................... 10
2.02. Retained Assets......................................................................... 10
2.03. Assumed Liabilities..................................................................... 11
2.04. Retained Liabilities ................................................................... 12
2.05. Issuance of Shares...................................................................... 12
2.06. Closing ................................................................................ 12
2.07. Assignment of Assets ................................................................... 12
2.08. Termination of Certain Contracts........................................................ 13
2.09. Disclaimer.............................................................................. 13
III. Distribution
3.01. Distribution.............................................................................. 14
3.02. Delivery ............................................................................... 14
IV. Certain Covenants ............................................................................... 14
4.01. Interim Use of GenCorp's Corporate Name................................................. 14
4.02. Transition and Further Assurances....................................................... 15
4.03. Assets Administration................................................................... 15
4.04. Correspondence.......................................................................... 16
4.05. Interim Permit Operations............................................................... 16
4.06. Agreement for Exchange of Information................................................... 16
4.07. Witness Services........................................................................ 17
4.08. Confidentiality......................................................................... 17
4.09. Certain Tax Matters..................................................................... 18
4.10. Insurance Matters....................................................................... 19
V. Indemnification ............................................................................... 21
5.01. Indemnification by GenCorp Inc.......................................................... 21
5.02. Indemnification by OMNOVA............................................................... 21
5.03. Third Party Claim Procedures............................................................ 22
5.04. Insurance Recovery...................................................................... 24
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
VI. Miscellaneous Provisions......................................................................... 24
6.01. Notices ............................................................................... 24
6.02. Entire Agreement........................................................................ 25
6.03. Assignment.............................................................................. 25
6.04. Captions ............................................................................... 25
6.05. Waiver; Consent......................................................................... 25
6.06. No Third Party Beneficiaries............................................................ 25
6.07. Survival of Agreements.................................................................. 26
6.08. Expenses ............................................................................... 26
6.09. Group Performance....................................................................... 26
6.10. Counterparts............................................................................ 26
6.11. Gender ............................................................................... 26
6.12. Governing Law........................................................................... 26
6.13. Interpretation.......................................................................... 26
6.14. Blue Pencil............................................................................. 26
6.15. Conflicts............................................................................... 27
Schedules
1.01(a) Corporate Real Property
1.01(b) Certain Discontinued Operations
1.01(c) OMNOVA Real Property
1.01(d) OMNOVA Entities
1.01(e) OMNOVA Discontinued Operations
1.01(f) OMNOVA Intellectual Property
1.01(g) OMNOVA Balance Sheet
</TABLE>
<PAGE> 4
Execution Copy
DISTRIBUTION AGREEMENT
----------------------
THIS DISTRIBUTION AGREEMENT (the "Agreement") dated September 30, 1999,
is by and between OMNOVA SOLUTIONS INC., an Ohio corporation ("OMNOVA"), and
GENCORP INC., an Ohio corporation ("GenCorp").
WHEREAS, the Board of Directors of GenCorp (the "GenCorp Board") has
determined that it is in the best interests of GenCorp and its shareholders to
transfer the Contributed Assets to OMNOVA in exchange for OMNOVA Common Stock
and OMNOVA's assumption of the Assumed Liabilities, all as more fully described
in this Agreement and the Ancillary Agreements (the "Separation");
WHEREAS, the GenCorp Board has further determined that it is
appropriate and desirable, on the terms and conditions contemplated hereby, for
GenCorp to distribute (the "Distribution") to the holders of GenCorp Common
Shares, as a dividend, all of the outstanding common shares, $0.10 par value, of
OMNOVA (the "OMNOVA Common Stock"); and
WHEREAS, it is appropriate and desirable to set forth the principal
transactions required to effect the Separation and the Distribution and certain
other agreements that will govern certain matters relating to the Separation and
the Distribution and the relationship between the GenCorp Group and the OMNOVA
Group following the Distribution.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, OMNOVA and GenCorp hereby agree as follows:
ARTICLE I: DEFINITIONS
----------------------
Section 1.01. Terms used in this Agreement shall have the meanings
ascribed to them by definition in this Agreement.
"ACTION" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
"ADDITIONAL ASSETS" means the following assets, properties and rights
of GenCorp and all rights and interests therein:
(a) the real property described in Schedule 1.01(a), including
all rights, easements and privileges appertaining or relating thereto and all
buildings, fixtures and improvements located thereon and therein and all such
items under construction;
<PAGE> 5
2
(b) all plant, equipment, apparatus, computers and other
electronic data processing equipment, fixtures, machinery, furniture, office
equipment, automobiles, trucks, dies, molds, patterns, aircraft, vessels, motor
vehicles and other transportation equipment, special and general tools, test
devices, prototypes and models and other tangible personal property (excluding
Information and Records), wherever located, whether, owned or leased, licensed
or otherwise which is used, held for use or being developed for use primarily
for the GenCorp Corporate Headquarters, the GenCorp Corporate Technology Center
or the GenCorp Flight Operations;
(c) all inventories of materials, parts, raw materials,
finished goods, products and supplies, wherever located, used, held for use or
being developed for use primarily for the GenCorp Corporate Headquarters, the
GenCorp Corporate Technology Center or the GenCorp Flight Operations;
(d) all computer applications, programs and other software,
user and system documentation and instructions, source code, functional and
design specifications, network software, design software, design tools and all
protocol/internet addresses, wherever located, used, held for use or developed
for use primarily for the GenCorp Corporate Headquarters, the GenCorp Technology
Center or the GenCorp Flight Operations, but excluding the PC based software for
the Treasury and Shareholder Services function, and excluding one copy of any
software code written by GenCorp for the Lawson human resource software package
and all data pertaining to employee and employee benefit matters in respect of
any employees who will not become employees of OMNOVA or an OMNOVA entity;
(e) the Additional Technology; and
(f) all Contracts, Leases, Intellectual Property, Records,
Information and Claims which (i) pertain primarily to the items described in
(a), (b), (c), (d) or (e) above, or (ii) pertain primarily to any Discontinued
OMNOVA Operations.
"ADDITIONAL TECHNOLOGY" means any Intellectual Property of GenCorp
which is not included in the OMNOVA Business Assets and which pertains to
coatings, adhesives, polymers (including, without limitation, polymer processing
and surface modification and oxetane monomer and polymer compositions,
structures, formulations, systems procedures and processing), blends or alloys
of polymers and other materials, non-polymer substrates, or processing methods,
but excluding any such Intellectual Property (other than Polyfox Intellectual
Property) to the extent of vehicle sealing applications and to the extent it has
been licensed by GenCorp to other Persons.
"AFFILIATE" is defined in the Tax Matters Agreement.
"AGREEMENT" means this Distribution Agreement, including all of the
Schedules hereto.
"ANCILLARY AGREEMENTS" mean (i) the Agreement on Employee Matters, the
Tax Matters Agreement, the Services and Support Agreement, and the Alternative
Dispute Resolution
<PAGE> 6
3
Agreement by and between the parties and dated as of the date hereof and (ii)
such deeds, stock powers, bills of sale, certificates of title, assignments,
assumptions and other agreements, instruments and conveyances (including,
without limitation, the License Agreement and the Non-Fluorinated Oxetane
License Agreement, dated the date hereof, among OMNOVA and Aerojet-General
Corporation and/or Aerojet Fine Chemicals LLC) as are executed and delivered by
or on behalf of a party pursuant to this Agreement or any Ancillary Agreement
described in (i).
"ASSUMED LIABILITY" is defined in Section 2.03.
"BUSINESS DAY" means any day on which commercial banks are not required
or authorized by law to close in the City of New York, State of New York, U.S.A.
"CAA" means the United States Clean Air Act.
"CERCLA" means the United States Comprehensive Environmental Response,
Compensation and Liability Act.
"CWA" means the United States Clean Water Act.
"CLAIM" means any cause of action, judgment, right of recovery, right
of action, right of payment, set-off, credit, rebate, indemnity or other claim
against other Persons, of whatever kind or nature, known or unknown, accrued or
to accrue, including, without limitation, all rights of rescission, replevin and
reclamation, all rights and claims in respect of past infringement, all credits
or rebates due in respect of charges incurred, goods received or services
rendered and all rights under any express or implied warranties, representations
or guarantees made by suppliers, contractors or others.
"CLOSING" is defined in Section 2.06.
"CLOSING TIME" is defined in Section 2.06.
"CODE" is defined in the Tax Matters Agreement.
"CONSENT" is defined in Section 2.07.
"CONTRACTS" means any agreements, contract rights, license agreements,
leases of personal property, open purchase orders for raw materials, supplies,
parts or services, unfilled orders for the manufacture and sale of products and
other contracts, agreements, commitments or undertakings.
"CONTRIBUTED ASSETS" is defined in Section 2.01.
<PAGE> 7
4
"DISCONTINUED OMNOVA OPERATIONS" means any terminated, divested or
discontinued business or operation of GenCorp or any OMNOVA Entity which is
described on Schedule 1.01(e).
"DISTRIBUTION AGENT" means Bank of New York, or such other trust
company or bank designated by GenCorp, to act as the agent responsible for the
distribution of the OMNOVA Common Stock in the Distribution.
"DISTRIBUTION DATE" is defined in Section 3.01.
"DISTRIBUTION " is defined in Section 3.01.
"DISTRIBUTION RECORD DATE" is defined in Section 3.01.
"DOLLARS" or "$" means United States dollars.
"ENVIRONMENTAL LAW" means any federal, state, local, foreign or
international statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law doctrine (including tort,
contribution, strict liability, negligence, trespass and nuisance), order,
judgment, decree, injunction, requirement or agreement with any Governmental
Authority, now or hereafter in effect relating to health, safety, pollution or
the environment (including ambient air, surface water, groundwater, land
surface, subsurface strata and natural resources) or to emissions, discharges,
releases or threatened releases of any substance currently or at any time
hereafter listed, defined, designated or classified as hazardous, toxic, waste,
radioactive or dangerous, or otherwise regulated, under any of the foregoing, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any such substances, including,
without limitation, CERCLA, RCRA, CWA, CAA, TSCA and comparable provisions in
state, local, foreign or international law.
"ENVIRONMENTAL LIABILITIES" means all liabilities and obligations
relating to, arising out of or resulting from any Environmental Law or contract
or agreement relating to environmental, health or safety matters (including all
removal, remediation or cleanup costs, investigatory costs, governmental
response costs, natural resources damages, property damages, personal injury
damages, costs of compliance with any settlement, judgment or other
determination of liability and indemnity, contribution or similar obligations)
and all costs and expenses (including allocated costs of in-house counsel and
other personnel), interest, fines, penalties or other monetary sanctions in
connection therewith.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, in effect
from time to time.
"FORM 10" means the registration statement on Form 10 filed by OMNOVA
with the SEC to effect the registration of the OMNOVA Common Stock under the
Exchange Act.
<PAGE> 8
5
"GENCORP ENTITY" means any corporation, partnership, joint venture,
limited liability company, alliance, association or legal entity in which
GenCorp, directly or indirectly, has or had any equity, ownership, investment,
profit, management or other interest, but excluding the OMNOVA Entities.
"GENCORP GROUP" means GenCorp and the GenCorp Entities.
"GENCORP COMMON STOCK" means the Common Shares, $.10 par value per
share, of GenCorp.
"GENCORP INSURANCE" is defined in Section 4.10.
"GENCORP OVERSEAS" means GenCorp Overseas Inc., an Ohio corporation.
"GOVERNMENTAL AUTHORITY" means (i) the United States of America, any
State thereof, or any court, department, commission, board, bureau, agency or
instrumentality of the United States of America, any State thereof, or political
subdivision of any of them, (ii) any other body, authority or agency exercising
any form of administrative or regulatory authority under any applicable Legal
Requirement, (iii) any quasi-governmental court, body, agency or authority, (iv)
any corporation established by or at the direction of any of the foregoing and
authorized by statute to exercise regulatory authority, and (v) any foreign
government or governmental authority comparable to any of the foregoing.
"GROUP" means the OMNOVA Group or the GenCorp Group.
"INDEMNIFIED PARTY" is defined in Section 5.03(a).
"INDEMNIFYING PARTY" is defined in Section 5.03(a).
"INDEMNITY NOTICE" is defined in Section 5.03(a).
"INFORMATION" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how, trade
secrets, techniques, designs, specifications, drawings, blueprints, diagrams,
models, prototypes, samples, flow charts, data, computer data, disks, diskettes,
tapes, computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
"INSURANCE PROCEEDS" means those monies (i) received by an insured from
an insurance carrier on an insurance claim or (ii) paid by an insurance carrier
on behalf of an insured on an
<PAGE> 9
6
insurance claim, in either case net of any applicable deductibles, retentions,
or costs paid by such insured, but such term does not refer to proceeds received
from an insurer on an employee benefits group insurance policy.
"INTELLECTUAL PROPERTY" means any and all United States and foreign:
(a) patents (including, without limitation, utility patents, design patents,
reissued and reexamined patents industrial designs and utility models),
inventors' certificates and patent applications (including docketed patent
disclosures awaiting filing determination or preparation, reissues, revisions,
reexaminations, divisions, continuations, continuations-in-part and extensions),
all extensions, the right to claim priority, and any improvements to any of the
foregoing; (b) trademarks, trade names, service marks, service names, fictitious
names, telephone numbers, trade dress, symbols, marks, logos, business and
product names, slogans and rights to obtain renewals and extensions thereof and
registrations and applications for registration thereof together with all
translations, adaptations, derivations, and combinations thereof; (c) works of
authorship (whether or not copyrightable and/or registerable and whether or not
registered), including, without limitation, work of art and computer software,
patterns and designs and copyright registrations, registration applications and
right to obtain renewals and extensions thereof; (d) inventions (whether
patentable or unpatentable and whether or not reduced to practice), processes,
designs, formulae, trade secrets, proprietary knowledge, know-how, industrial
models, technical information, manufacturing, engineering and technical
drawings, product specifications, compositions, research and development,
manufacturing and production processes and techniques; (e) mask work and other
semiconductor chip rights and registrations thereof; (f) computer applications,
programs and other software and all related data, user and system documentation
and instructions, source code, functional and design specifications, network
software, design software, design tools and, web sites and addresses; (g)
intellectual property rights similar to any of the foregoing; (h) all books,
records, documents, drawings, tapes, disks or other media or tangible
embodiments of any of the foregoing (in whatever form or media, including
electronic and magnetic media) and (i) all goodwill pertaining to any of the
foregoing.
"IRS" means the United States Internal Revenue Service and any
successor department, agency or organization of the United States.
"KNOWN" means the knowledge of any director or officer of the GenCorp
Group or the OMNOVA Group and the knowledge of the manager of any GenCorp Group
or OMNOVA Group location and the knowledge of any direct report to any such
director, officer or manager and the knowledge which any of such persons would
have after conducting a reasonable investigation within the scope of his or her
job responsibility.
"KNOWN LIABILITIES" means any actual or alleged liability or obligation
of the GenCorp Group or the OMNOVA Group which is Known to any member of the
GenCorp Group or the OMNOVA Group (which shall be deemed to include, without
limitation, any matter as to which any person included in the definition of
"Known" has received a notice claiming or alleging such liability or obligation,
any matter as to which any member of either Group has paid any amounts
<PAGE> 10
7
or entered into or became subject to any settlements, agreements, decrees,
orders, judgments, or other obligations, and the matters and locations included
on Section 1.01(b)), but the term "Known Liability" excludes any actual or
alleged liability or obligation which: (i) is provided for on the OMNOVA Balance
Sheet, (ii) arises from the condition of any facility listed on Schedule 1.01(c)
(including, without limitation, Environmental Liabilities resulting from any
such condition), or (iii) is an ordinary course liability or obligation arising
from the OMNOVA Business (e.g. performance of contracts and payment of trade
payables).
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign
or international, constitution, law, ordinance, principle of common law,
regulation, statute, treaty or order, including, without limitation the
Environmental Laws.
"LOSSES" means all Actions and threatened Actions, and all damages,
costs, expenses, losses, liabilities, judgments, awards, fines, sanctions,
orders, consent decrees, diminution in value, penalties, charges and settlement
payments, whether absolute or contingent, foreseen, unforeseen, accrued or
unaccrued, known or unknown, liquidated or unliquidated, matured or unmatured,
now existing or which may arise in the future (including, without limitation,
all reasonable costs, fees and expenses of attorneys, experts, accountants,
appraisers, consultants, witnesses, and investigators in connection with
defending or settling an Action or threatened Action) and interest on cash
disbursements in respect of any of the foregoing at the Reference Rate from the
date each such cash disbursement is made until the party incurring the same
shall have been indemnified in respect thereof.
"NON-PROPOSING PARTY" is defined in Section 4.09.
"NYSE" means the New York Stock Exchange.
"OMNOVA BALANCE SHEET" means the OMNOVA balance sheet consisting of the
column labeled "Adjusted OMNOVA Balance Sheet" on Schedule 1.01(g).
"OMNOVA BUSINESS" means the business and operations of: (a) the
Performance Chemicals Division of GenCorp as such business and operations are
currently being conducted, (b) the Decorative & Building Products Division of
GenCorp as such business and operations are currently being conducted, and (c)
the OMNOVA Entities.
"OMNOVA BUSINESS ASSETS" means any and all assets, properties and
rights of GenCorp, Penn International and GenCorp Overseas that are used, held
for use or being developed for use primarily for the OMNOVA Business and all
rights and interests therein, wherever located (including in the possession of
vendors or other third parties or elsewhere), whether real, personal or mixed,
tangible, intangible or contingent, in each case whether or not recorded or
reflected or required to be recorded or reflected on the books and records or
financial statements of GenCorp, GenCorp International, or GenCorp Overseas,
including, without limitation, the following:
<PAGE> 11
8
(a) All real property of whatever nature, whether owned,
leased, licensed or otherwise, including all rights, easements and privileges
appertaining or relating thereto and all buildings, fixtures and improvements
located thereon and therein and all such items under construction including,
without limitation, the real property listed on Schedule 1.01(c);
(b) All tangible personal property, plant, machinery and
equipment, apparatus, computers and other electronic data processing equipment,
fixtures, machinery, equipment, furniture, office equipment, automobiles,
trucks, dies, molds, patterns, vessels, motor vehicles and other transportation
equipment, special and general tools, test devices, prototypes and models and
other tangible personal property, whether owned, leased, licensed or otherwise;
(c) All inventories of materials, parts, raw materials,
supplies, work-in-process and finished goods and products including items
purchased for distribution or resale;
(d) All capital stock, minute books, stock records, corporate
records, corporate seals and treasury shares of the OMNOVA Entities;
(e) All rights, benefits and interests under any Contracts;
(f) All rights under any deposits, letters of credit and
performance and surety bonds;
(g) All accounts, accounts receivable and any payments with
respect thereto after the Closing Time, unpaid interest on accounts receivable
and any security or collateral relating thereto, notes receivable, security and
other deposits, advance payments, prepayments and credits, whether recorded or
unrecorded;
(h) All Intellectual Property including, without limitation,
the items on Schedule 1.01(f);
(i) All Information and Records;
(j) All rights under any Claim to the extent pertaining to the
OMNOVA Business, any OMNOVA Business Asset or any Assumed Liability;
(k) All rights under insurance policies and all rights in the
nature of insurance, indemnification or contribution which pertain exclusively
to the OMNOVA Business;
(l) all bank accounts, lock boxes and other deposit
arrangements; and
(m) all goodwill.
"OMNOVA DIVIDEND" is defined in Section 4.12.
<PAGE> 12
9
"OMNOVA Entities" means the entities listed on Schedule 1.01(d).
"OMNOVA Group" means OMNOVA and the OMNOVA Entities.
"PARTIES" means OMNOVA and GenCorp.
"PENN INTERNATIONAL" means Penn International Inc., an Ohio
corporation.
"PERMITS" means any authorization, approval, franchise, orders,
consent, license, permit, registration, waiver or certificate issued, granted,
given, or otherwise made available by or under the authority of any Governmental
Authority or pursuant to any Legal Requirement.
"PERSON" means any individual, partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, estate, trust,
organization, labor union, Governmental Authority or other legal entity of any
kind, other than the parties or member of a Group.
"POLYFOX" means fluorinated oxetane monomers having at least one
fluorinated alkoxymethylene side chain; methods and materials for producing said
fluorinated oxetane monomers; fluorinated polymers and prepolymers derived from
said fluorinated oxetane monomers, and polymers derived from prepolymers of said
fluorinated oxetane monomers including methods of producing said polymers and
prepolymers and methods of using, and products formed from, said fluorinated
oxetane monomers, polymers and prepolymers.
"PROPOSING PARTY" is defined in Section 4.09.
"RCRA" means the United States Resource Conservation and Recovery Act.
"RECORDS" means books, records, files, plans, surveys, studies,
reports, manuals, drawings, handbooks, catalogs, brochures, correspondence,
documents, forms, accounts, lists, catalogs, promotional or marketing materials
and other materials, whether in hard copy, electronic or any other form or
media, including, without limitation, any of the same pertaining to accounting,
sales, costs, pricing, marketing, advertising, promotions, suppliers, customers,
personnel, human resources, dealers, distributors, inventory, engineering,
equipment, manufacturing, business plans and strategies and product development.
"REFERENCE RATE" means the interest rate equal to the prime rate as
publicly announced by Citibank, N.A., New York, New York, from time to time.
"RETAINED ASSETS" is defined in Section 2.02.
"RETURN" is defined in the Tax Matters Agreement.
<PAGE> 13
10
"RULING" is defined in the Tax Matters Agreement.
"RULING REQUEST" is defined in the Tax Matters Agreement.
"SEC" means the Securities and Exchange Commission.
"SPIN-OFF" is defined in the Tax Matters Agreement.
"SPIN-OFF TAXES" is defined in the Tax Matters Agreement.
"TSCA" means the United States Toxic Substances Control Act.
"TAX MATTERS AGREEMENT" means the Tax Matters Agreement dated the date
hereof between GenCorp and OMNOVA.
"TAXES" is defined in the Tax Matters Agreement.
"TERMINATE" is defined in Section 4.10.
"THIRD PARTY CLAIM" means with respect to any party, the assertion of a
claim or demand or commencement of any Action against such party by any Person.
"TRANSACTION DOCUMENTS" means this Agreement and the Ancillary
Agreements.
"TRANSFER" is defined in Section 2.07.
ARTICLE II: CONTRIBUTION
---------- ------------
Section 2.01. ASSETS CONTRIBUTED. Upon the terms and subject to the
conditions of this Agreement, GenCorp does hereby, and shall cause GenCorp
Overseas and Penn International to hereby, contribute, assign, convey, transfer
and deliver to OMNOVA, and OMNOVA or its designee does hereby accept and acquire
from GenCorp, GenCorp Overseas, and Penn International all right, title and
interest of GenCorp, GenCorp Overseas and Penn International in and to the
following (collectively, the "Contributed Assets"):
(a) the OMNOVA Business Assets; and
(b) the Additional Assets.
Section 2.02. RETAINED ASSETS. Upon the terms and subject to the
conditions of this Agreement, notwithstanding Section 2.01, the following
rights, properties, assets of GenCorp and
<PAGE> 14
11
the GenCorp Entities are not included in and are excluded from the Contributed
Assets (the "Retained Assets"):
(a) All cash, other than petty cash held at any of the
facilities listed on Schedule 1.01(c);
(b) All minute books, stock records, corporation records,
corporate seals, treasury shares and tax returns and supporting schedules of
GenCorp and any GenCorp Entity;
(c) Subject to Section 4.01 and to the trademarks included in
the Contributed Assets, the name "GenCorp";
(d) Subject to Section 4.10 and item (k) in the definition of
OMNOVA Business Assets, all rights of GenCorp under any GenCorp Insurance and
Property Insurance;
(e) Subject to the Agreement on Employee Matters, all employee
benefit plans;
(f) All of the capital stock of the GenCorp Entities; and
(g) Any other right, property or asset not described in
Section 2.01.
Section 2.03. ASSUMED LIABILITIES. Upon the terms and subject to the
conditions of this Agreement (including, without limitation, Section 2.04)
OMNOVA does hereby absolutely and irrevocably assume and shall thereafter pay,
perform and discharge, without any recourse to GenCorp or any GenCorp entity,
the following liabilities and obligations to the extent not covered by GenCorp
Insurance or Property Insurance (the "Assumed Liabilities"):
(a) all liabilities and obligations, of any nature, of
GenCorp, Penn International and GenCorp Overseas to the extent arising out of
(i) the OMNOVA Business, (ii) the Discontinued OMNOVA Operations, or (iii) the
locations listed on Schedule 1.01(c), whether arising under contract, tort or
any other legal theory and whether absolute or contingent, foreseen or
unforeseen, accrued or unaccrued, known or unknown, liquidated or unliquidated,
matured or unmatured, now existing or which may arise in the future (including,
without limitation, Environmental Liabilities so arising); and
(b) all liabilities and obligations, of any nature, of GenCorp
to the extent arising out of the assets, properties and rights included in the
Additional Assets, whether arising under contract, tort or any other legal
theory and whether absolute or contingent, foreseen or unforeseen, accrued or
unaccrued, known or unknown, liquidated or unliquidated, matured or unmatured,
now existing or which may arise in the future;
<PAGE> 15
12
provided, however, that notwithstanding the foregoing Sections 2.03(a) and (b)
the Known Liabilities shall be excluded from such assumed liabilities and
obligations and the Known Liabilities shall be Retained Liabilities.
Section 2.04. RETAINED LIABILITIES. Except for the Assumed Liabilities
and notwithstanding anything to the contrary, OMNOVA and the OMNOVA Entities do
not assume and GenCorp and the GenCorp Entities shall absolutely and irrevocably
retain and be solely responsible for, without any recourse to OMNOVA or any
OMNOVA Entity, any and all liabilities or obligations of any nature of GenCorp
or any GenCorp Entity or claims of such liability or obligation, whether arising
under contract, tort or any other legal theory and whether absolute or
contingent, foreseen or unforeseen, accrued or unaccrued, known or unknown,
liquidated or unliquidated, matured or unmatured, now existing or which may
arise in the future including, without limitation, any and all liabilities or
obligations arising out of or related to the Retained Assets, any Known
Liabilities, any Environmental Liabilities (excluding Environmental Liabilities
which are Assumed Liabilities) and the liabilities and obligations of GenCorp
and any member of the GenCorp Group under this Agreement or under any Ancillary
Agreements (collectively, the "Retained Liabilities"). For purposes of this
Agreement, the Retained Liabilities shall be deemed to include all liabilities
and obligations described in the previous sentence (other than the Assumed
Liabilities) and for purposes of this Agreement no such liability or obligation
shall be deemed a liability or obligation of OMNOVA or an OMNOVA Entity even if
by operation of law any such liability or obligation is or becomes a liability
or obligation of OMNOVA or an OMNOVA Entity.
Section 2.05. ISSUANCE OF SHARES. In exchange for the contribution of
the Contributed Assets and the assumption of the Assumed Liabilities, at the
closing OMNOVA shall issue to GenCorp that number of shares of OMNOVA Common
Stock, $0.10 par value per share, of OMNOVA (the "OMNOVA Common Stock") as is
necessary to effect the Distribution in accordance with Section 3.02. The shares
of OMNOVA Common Stock shall initially be represented by one stock certificate.
Section 2.06. CLOSING. The closing of the transactions contemplated by
this Article II shall take place simultaneously with the execution and delivery
of this Agreement. The "Closing" shall mean the making of the deliveries to be
made by OMNOVA and GenCorp respectively pursuant to this Section 2.06 and shall
be deemed to have occurred at 12:00 p.m. on the date hereof (the "Closing
Time"). At or prior to the Closing Time the parties will executive and deliver
such deeds, stock powers, bills of sale, certificates of title, assignments,
transfers, assumptions and other agreements, instruments and conveyances as are
necessary to carry out this Agreement and the transactions contemplated hereby.
Section 2.07. ASSIGNMENT OF ASSETS. Anything in this Agreement to the
contrary notwithstanding, unless OMNOVA shall otherwise determine, this
Agreement shall not constitute a sale, assignment, transfer or conveyance (a
"Transfer") or an agreement to Transfer any Contributed Asset, or any claim,
right or benefit arising thereunder or resulting therefrom (collectively, the
"Interests") if an attempted Transfer thereof, without the consent, waiver,
<PAGE> 16
13
confirmation, novation or approval (a "Consent") of a third party, would
constitute a breach or other contravention thereof, be ineffective or in any way
adversely affect any rights thereunder, unless and until such Interest can be
effectively Transferred without such breach, contravention or adverse effect, at
which time each such Interest shall be deemed to be so Transferred. Until such
Transfer, all such Interests shall be held in trust by GenCorp for the sole
benefit of OMNOVA. GenCorp shall use all reasonable efforts to promptly obtain
all necessary Consents to Transfer all such Interests and GenCorp shall pay and
discharge all costs of obtaining any such Consent whether before or after the
Closing Time. To the extent any Consents necessary to Transfer any Interest have
not been obtained or are not in effect as of the Closing Time, GenCorp and
OMNOVA shall, during the remaining term of such Interest, use all reasonable
efforts to (i) cooperate in any reasonable and lawful arrangements designed to
provide the benefits of such Interest to OMNOVA, in which case OMNOVA shall pay
or satisfy the corresponding obligations for the enjoyment of such benefits to
the extent OMNOVA would have been responsible therefor if such Consent had been
obtained and such Interest had been transferred to OMNOVA; and (ii) enforce, at
the request of OMNOVA, any rights of GenCorp arising from such Interest against
the issuer thereof or the other party or parties thereto (including the right to
elect to terminate any such Interest in accordance with the terms thereof with
the consent of OMNOVA). Nothing in this Section 2.07 shall be deemed a waiver by
OMNOVA of its right to receive at the Closing Time an effective Transfer of all
of the Contributed Assets nor shall this Section 2.07 be deemed to constitute an
agreement to exclude any asset, property or right from the Contributed Assets.
Section 2.08. TERMINATION OF CERTAIN CONTRACTS. Except with respect to
this Agreement and the Ancillary Agreements (and agreements expressly
contemplated herein or therein to survive the Distribution by their terms or
which are included in the Contributed Assets), GenCorp and OMNOVA (on their own
behalf and on behalf of the members of the GenCorp Group and OMNOVA Group,
respectively) hereby terminate, any and all written or oral agreements,
arrangements, commitments or understandings, between members of the GenCorp
Group, on the one hand, and members of the OMNOVA Group, on the other, effective
as of the Distribution Date. Each party shall, at the reasonable request of any
other party, take, or cause to be taken, such other actions as may be necessary
to effect such termination.
Section 2.09. DISCLAIMER. (a) Each of the parties understands and agree
that no party hereto nor any member of a Group is (whether in this Agreement, in
any Ancillary Agreement or otherwise) making any representation or warranty,
express, implied or otherwise, including any representation or warranty as to
(i) the assets, businesses or liabilities retained, transferred or assumed, (ii)
any consents, authorizations or approvals of third parties (including
Governmental Authorities) required for the transfer or assumption by such party
of any asset or liability, (iii) the value of any asset or freedom of any asset
from any lien, claim, equity, encumbrance or other security interest or adverse
claim, (iv) the absence of any defenses or right of set-off or freedom from
counterclaim with respect to any claim or asset, or (v) the legal sufficiency to
convey title to any asset.
<PAGE> 17
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(b) Each party hereto understands and agrees that there are no
representations or warranties, express, implied or otherwise whatsoever,
including, without limitation, no warranty, as to the merchantability or fitness
of any of the Contributed Assets transferred to OMNOVA pursuant to this
Agreement or any Ancillary Agreement, and all such Contributed Assets so
transferred shall be transferred on an "AS IS, WHERE IS" basis.
(c) Nothing contained in Section 2.09(a) or (b) shall alter,
diminish or impair the obligations of the parties under any other provision of
this Agreement or any Ancillary Agreement including, without limitation, under
Article V hereof.
ARTICLE III: DISTRIBUTION
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Section 3.01. DISTRIBUTION. On the date (the "Distribution Date") that
has been established by the GenCorp Board for the distribution (the
"Distribution") of the OMNOVA Common Stock, GenCorp shall distribute to each
holder of record of shares of GenCorp Common Stock on the record date
established by the GenCorp Board for the Distribution (the "Distribution Record
Date") one share of OMNOVA Common Stock for every one share of GenCorp Common
Stock so held.
Section 3.02. DELIVERY. On the Distribution Date, GenCorp shall deliver
to the Distribution Agent one or more stock certificates representing all the
outstanding shares of OMNOVA Common Stock and shall instruct the Distribution
Agreement to effect the Distribution. OMNOVA shall provide all stock
certificates that the Distribution Agent may require in order to effect the
Distribution. The Distribution shall be effective at 12:01 a.m. on the
Distribution Date.
ARTICLE IV: CERTAIN COVENANTS
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Section 4.01. INTERIM USE OF GENCORP'S CORPORATE NAME. OMNOVA may,
after the Closing Time, utilize without further obligation to compensate
GenCorp, the trademarks or trade names "GenCorp" in connection with the items
described below:
(a) All stationery, forms, labels, product literature,
invoices, purchase orders and other similar documents and supplies included in
the Contributed Assets may be used by OMNOVA for a reasonable period after the
Distribution Date not to exceed 12 months.
(b) All inventory included in the Contributed Assets may be
sold or otherwise disposed of by OMNOVA without remarking.
(c) All molds, dies and similar items included in the
Contributed Assets which produce products displaying GenCorp's trademark, trade
name or corporate name, and all products produced using such molds or dies, may
be used and produced until such time as such molds, dies and similar items are
exhausted and replaced.
<PAGE> 18
15
(d) All sample goods (tip cards, swatch books, loose swatches,
binders and similar goods) both in stock and at distributors, specifiers, or
others may be used until discontinuation of all product lines to which such
sample goods pertain.
(e) As the corporate name for any OMNOVA Entity for a
reasonable period after the Distribution Date until a name change can be
registered and approved by the applicable Governmental Authority but not to
exceed 12 months.
(f) As signage, e-mail addresses and similar uses for a
reasonable period after the Distribution Date but not to exceed 12 months.
Section 4.02. TRANSITION AND FURTHER ASSURANCES.
(a) GenCorp shall, at any time and from time to time after the
Closing Time, upon the reasonable request of OMNOVA and at GenCorp's expense,
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered all such further deeds, stock powers, bills of sale, certificates of
title, assignments, transfers, conveyances, powers of attorney, notices of
commencement and assurances and take such other action as may be reasonably
requested by OMNOVA for the more effective assigning, transferring, granting,
conveying, assuring and confirming to OMNOVA, or to its successors and assigns,
of any of the Contributed Assets or aiding and assisting in collecting and
reducing to possession by OMNOVA any or all of the Contributed Assets, and to
protect the right, title and interest of OMNOVA therein and the enjoyment by
OMNOVA thereof, and otherwise to carry out the purpose and intent of this
Agreement.
(b) Without limiting any provision hereof, GenCorp agrees that
as of the Closing Time, OMNOVA shall be constituted and appointed the true and
lawful attorney of GenCorp with respect to the Contributed Assets, with full
power of substitution, in the name of OMNOVA or in the name of GenCorp or
otherwise and for the sole benefit and at the sole expense of OMNOVA, to
institute and prosecute all proceedings which OMNOVA may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in and to the
Contributed Assets, to defend or compromise any and all suits and proceedings in
respect of any of the Contributed Assets, and to do all such acts and things in
relation thereto as OMNOVA in its sole discretion as may deem advisable. GenCorp
acknowledges that the foregoing powers are coupled with an interest and shall
not be revocable by GenCorp. OMNOVA shall be entitled to retain for its own
account any amounts collected pursuant to the foregoing powers.
Section 4.03. ASSETS ADMINISTRATION. If at any time or from time to
time any party or member of such party's Group, shall receive or otherwise
possess a right, property or asset that is owned by the other party or a member
of the other party's Group, such party or member shall promptly notify the other
party and transfer or cause to be transferred, such right, property or asset to
such other party so entitled thereto without any hold back or set-off. Prior to
such
<PAGE> 19
16
transfer, such party or Group member receiving or possessing such right,
property or asset shall hold such right, property or asset in trust for such
other party.
Section 4.04. CORRESPONDENCE. GenCorp hereby authorizes OMNOVA, on and
after the Distribution Date, to receive and open mail addressed to GenCorp and
to deal with the contents thereof in a responsible manner. OMNOVA shall promptly
deliver to GenCorp any mail addressed to GenCorp that relates (or reasonably
appears to relate) to the Retained Assets or Retained Liabilities.
Section 4.05. INTERIM PERMIT OPERATIONS. Each party hereto shall
prepare and file with the appropriate licensing and permitting authorities for
the transfer or issuance, as may be necessary or advisable in connection with
the transactions contemplated hereby, of all Permits required in order for
OMNOVA to operate the Contributed Assets following the Closing Time. To the
extent permitted by Legal Requirements, OMNOVA shall have the right to operate
the Contributed Assets after the Closing Time under any Permits held by GenCorp
which were not transferred to OMNOVA at the Closing Time and with respect to
which notice has been given to the issuing Governmental Authority.
Section 4.06. AGREEMENT FOR EXCHANGE OF INFORMATION.
(a) Each of GenCorp and OMNOVA agrees to provide to the other,
and to cause the members of its Group to provide, as soon as reasonably
practicable after written request therefor, any Information in its possession or
under its control which the requesting party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the requesting
party (including under applicable securities or tax laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in any
other judicial, regulatory, administrative, tax or other proceeding or in order
to satisfy audit, accounting, claims, regulatory, litigation, tax or other
similar requirements, or (iii) to comply with its obligations under this
Agreement or any Ancillary Agreement; provided, however, that in the event that
any party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that avoids any such
harm or consequence.
(b) Any Information owned by GenCorp or OMNOVA that is
provided to a requesting party pursuant to this Section 4.06 shall be deemed to
remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
(c) If the party requested to provide such Information
reasonably incurs more then nominal out-of-pocket costs to create, gather or
copy such Information for the other party, then the providing party may request
the other party to reimburse it for all reasonable out-of-pocket costs incurred
to create, gather or copy such Information, which request shall not be
<PAGE> 20
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unreasonably denied.
(d) The parties agree to use their reasonable efforts to
retain all Information in their respective possession or control on the
Distribution Date for a period of six years or such longer period as required by
any applicable legal requirement and, with respect to the Information pertaining
to Taxes, until the expiration of the applicable statute of limitations or as
otherwise required by a Legal Requirement. No party will destroy or dispose of,
or permit any member of its Group to destroy or disposal of, any Information
which the other party may have the right to obtain pursuant to this Agreement
prior to the sixth anniversary of the date hereof or the expiration of any such
statute of limitations without first using its reasonable efforts to notify the
other party of the proposed destruction or disposal and giving the other party
the opportunity to take possession of such Information in lieu of such
destruction.
(e) The rights and obligations granted under this Section 4.06
are subject to any specific rights, obligations, limitations, qualifications or
additional provisions regarding the sharing, exchange or confidential treatment
of Information set forth in any Ancillary Agreement.
Section 4.07. WITNESS SERVICES. At all times from and after the
Distribution Date, each of GenCorp and OMNOVA shall use its reasonable efforts
to make available to the other party's Group, upon reasonable written request,
the officers, directors, employees and agents of the members of its Group for
the fact finding, consultation or interviews and as witnesses to the extent that
such persons may reasonably be required in connection with the prosecution or
defense of any action in which the requesting party or any member of its Group
may from time to time be involved. If the party providing such services to the
other party under this Section 4.07 reasonably incurs more than nominal
out-of-pocket costs in providing such services, the providing party may request,
which request shall not be unreasonably denied, the other party to shall
reimburse it for all reasonable out-of-pocket costs incurred in providing such
services.
Section 4.08. CONFIDENTIALITY. Each of GenCorp and OMNOVA, on behalf of
itself and each member of its Group, agrees to hold, and to cause its respective
directors, officers, employees and agents to hold, in strict confidence, all
Information owned by the other Group which is of a confidential or proprietary
nature and which may be in its possession or which may hereafter be furnished by
any member of such other Group or its respective directors, officers, employees
or agents, and shall not use any such Information other than for such purposes
as shall be expressly permitted hereunder, under an Ancillary Agreement or as
otherwise agreed, except, in each case, to the extent that such Information (a)
is in or later enters the public domain through no fault of such party or any
member of its Group or any of their respective directors, officers, employees or
agents, (b) later lawfully acquired from other sources by such party (or any
member of such party's Group) which sources are not themselves bound by a
confidentiality obligation, or (c) independently generated without reference to
any proprietary or confidential Information of the other party. Each party
agrees not to release or disclose, or permit to be released or disclosed, any
such Information to any other Person, except its directors, officers, employees
and agents who need to know such Information (who shall be advised of their
obligations hereunder
<PAGE> 21
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with respect to such Information). When any such Information is no longer needed
for the purposes contemplated by this Agreement, any Ancillary Agreement or
other agreement entered into by the parties, the party in possession thereof
will promptly after request of the other party either return to the other party
all Information in a tangible or electronic form (including all copies thereof
and all notes, extracts or summaries based thereon) or certify to the other
party that it has destroyed such Information (and such copies thereof and such
notes, extracts or summaries based thereon). Notwithstanding the immediately
three preceding sentences, in the event that a member of a Group either
determines on the advice of its counsel that it is required to disclose any
Information pursuant to applicable law or receives any demand under lawful
process or from any Governmental Authority to disclose or provide Information of
the other party (or any Group member of the other party) that is subject to the
confidentiality provisions hereof, such party shall notify the other party prior
to disclosing or providing such Information and shall cooperate at the expense
of the requesting party in seeking any reasonable protective arrangements
requested by such other party. Subject to the foregoing, the Person that
received such request may thereafter disclose or provide Information to the
extent required by such law (as so advised by counsel) or by lawful process or
such Governmental Authority.
Section 4.09. CERTAIN TAX MATTERS. (a) Neither the GenCorp Group nor
the OMNOVA Group shall take any action inconsistent with, nor fail to take any
action described in the Ruling Request or the Ruling, unless such Party (the
"Proposing Party") has obtained the prior written consent of the other Party
(the "Non-Proposing Party") which consent shall not be unreasonably withheld.
The Non-Proposing Party shall grant its consent to an action proposed by the
Proposing Party if the Proposing Party either (i) obtains a ruling with respect
to the proposed action from the IRS or other applicable Tax Authority that is
reasonably satisfactory, in form and substance, to the Non-Proposing Party and
its tax counsel (except that the Proposing Party shall not submit any ruling
request for the purpose of complying with this Section 4.09 if the Non-Proposing
Party reasonably determines that filing such request might adversely affect the
Non-Proposing Party), or (ii) obtains an opinion from tax counsel reasonably
satisfactory to the Non-Proposing Party (both as to choice of counsel and the
opinion given). Each of the parties covenants that it will cooperate in
connection with any future submissions to the IRS in connection with the Ruling
Request and the Ruling, and will certify to the extent it can do so, upon
reasonable request, that the factual statements, representations and other
similar conditions contained therein are true, correct and complete in all
material respects. Each of the parties represents that neither it nor any of its
Affiliates has any plan or intention to take any action which is inconsistent
with any factual statements, representations or other similar conditions
contained in the Ruling Request or in the Ruling.
(b) ACTIVE BUSINESS; CONTINUITY OF BUSINESS ENTERPRISE.
GenCorp and OMNOVA each represents that it has no plan or intent to reduce,
eliminate or otherwise discontinue the businesses relied upon in the Ruling
Request. Each of GenCorp and OMNOVA covenant that it will not take any action
which might violate the "active trade or business" requirement under Section
355(b) of the Code or the "continuing of business enterprise" requirement for
tax-free distributions under Section 355 of the Code within the two year period
<PAGE> 22
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beginning on the Distribution Date, without the prior written consent of the
other party, which consent shall not be unreasonably withheld.
(c) CHANGE IN CONTROL. GenCorp and OMNOVA each represents
that, apart from the Spin-off, it has no plan or intention to engage in any
transaction or transactions having the effect of a change in the ownership of
50% or more of its outstanding stock (by vote or value), within the meaning of
Section 355(e) of the Code.
Section 4.10. INSURANCE MATTERS.
(a) With respect to any Losses suffered by OMNOVA or the
OMNOVA Business relating to, resulting from or arising out of any events or
occurrences prior to the Distribution Date (including, without limitation, in
respect of the conduct of the OMNOVA Business or the ownership or operation of
the Contributed Assets) for which GenCorp, any GenCorp Entity or any OMNOVA
Entity would be entitled to assert, or cause any other Person to assert, a claim
for recovery under any policy of insurance maintained by or for the benefit of
GenCorp, any GenCorp Entity or any OMNOVA Entity (excluding insurance included
in the Contributed Assets, first party property damage insurance, and any
insurance which provides coverage exclusively to Aerojet-General and its
subsidiaries and to no other member of the GenCorp Group or the OMNOVA Group)
(collectively, "GenCorp Insurance"), at the request of OMNOVA, GenCorp will, in
good faith, promptly assert and diligently prosecute one or more claims (an
"Insurance Claim") under the GenCorp Insurance; provided that all of GenCorp's
and any GenCorp Entities reasonable out-of-pocket costs and expenses incurred in
connection with asserting and prosecuting such claim shall be promptly
reimbursed by OMNOVA (including, without limitation, costs and expenses
resulting from any deductible, policy limit, self-insurance retention, or
retroactive or retrospective premium). Upon written request to GenCorp, OMNOVA
shall have the right, at its expense, to take exclusive control of the
prosecution and settlement of any Insurance Claim. GenCorp shall not settle any
Insurance Claim without the consent of OMNOVA, which consent shall not be
unreasonably withheld. GenCorp shall promptly pay to OMNOVA any amount received
by GenCorp in respect of any Insurance Claim. The party not controlling the
prosecution and settlement of an Insurance Claim shall reasonably cooperate with
the other party and shall have the right, at its expense, to participate in, but
not control the prosecution and settlement of any such Insurance Claim.. The
party controlling the prosecution and settlement of an Insurance Claim shall
keep the other party reasonably informed at all stages of the prosecution and/or
settlement of such Insurance Claim. GenCorp shall not release, disseminate,
commute or otherwise terminate (collectively,"Terminate") any policy of GenCorp
Insurance unless: (i) GenCorp gives OMNOVA reasonable advance written notice of
its intent to do so (which notice shall describe in reasonable detail the policy
to be Terminated and the terms of the Termination sought to be entered into by
GenCorp or any GenCorp Entity), (ii) GenCorp agrees in writing with OMNOVA to
assume any and all liability that the insurer would have had in respect of any
Loss which has or may be suffered by OMNOVA which but for such Termination would
have been covered by the Terminated policy, and (iii) GenCorp provides OMNOVA
with reasonable assurances of its ability to satisfy its obligations under (ii)
above.
<PAGE> 23
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(b) With respect to any Losses suffered by OMNOVA or the
OMNOVA Business relating to, resulting from or arising out of any events or
occurrences prior to the Distribution Date (including, without limitation, in
respect of the conduct of the OMNOVA Business or the ownership or operation of
the Contributed Assets) for which GenCorp, any GenCorp Entity or any OMNOVA
Entity would be entitled to assert, or cause any other Person to assert, a claim
for recovery under any first party property damage policy of insurance
maintained by or for the benefit of GenCorp, any GenCorp Entity or any OMNOVA
Entity ("Property Insurance") at the request of OMNOVA, GenCorp will, in good
faith, promptly assert and diligently prosecute one or more claims (a "Property
Insurance Claim") under the Property Insurance; provided that all of GenCorp's
and any GenCorp Entities reasonable out-of-pocket costs and expenses incurred in
connection with asserting and prosecuting such claim shall be promptly
reimbursed by OMNOVA (including, without limitation, costs and expenses
resulting from any deductible, policy limit, self-insurance retention, or
retroactive or retrospective premium). Upon written request to GenCorp, OMNOVA
shall have the right, at its expense, to take exclusive control of the
prosecution and settlement of any Property Insurance Claim. GenCorp shall not
settle any Property Insurance Claim without the consent of OMNOVA, which consent
shall not be unreasonably withheld. GenCorp shall promptly pay to OMNOVA any
amount received by GenCorp in respect of any Property Insurance Claim. The party
not controlling the prosecution and settlement of a Property Insurance Claim
shall reasonably cooperate with the other party shall have the right, at its
expense to participate in, but not control the prosecution or settlement of any
such Property Insurance Claim. The party controlling the prosecution and
settlement of a Property Insurance Claim shall keep the other party reasonably
informed at all stages of the prosecution and/or settlement of such Property
Insurance Claim. GenCorp shall not release, disseminate, commute or otherwise
terminate any Property Insurance without the consent of OMNOVA, which consent
shall not be unreasonably withheld.
(c) Each of GenCorp and OMNOVA shall acquire and maintain in
force for a period of three years (the "Initial Period") after the Distribution
Date directors and officers insurance coverage equivalent to the directors and
officers insurance coverage in force for GenCorp on the Distribution Date. If at
any time and for any reason during the six years following the Initial Period a
member of the GenCorp Group or OMNOVA Group decides to materially change,
terminate or chooses not to renew such directors and officers insurance coverage
in force at the end of the Initial Period, then the member deciding to
materially change, terminate or choosing not to renew such coverage shall, at
its expense, convert any such policy to a run-off policy that shall remain in
force for not less than six years after the conversion date. Each of GenCorp and
OMNOVA shall, upon the request of the other, from time to time, provide the
other with a certificate of insurance evidencing such insurance coverage.
(d) With respect to aircraft products produced by GenCorp
prior to the date hereof, GenCorp and the members of its Group will include and
maintain OMNOVA as a named insured under any Aircraft Products Liability Policy
of GenCorp or of any member
<PAGE> 24
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of its Group which is in force as of the date hereof or which is hereafter
obtained by GenCorp or any member of its Group. Upon OMNOVA's re quest, from
time to time, GenCorp will provide OMNOVA with a certificate of insurance
evidencing such insurance coverage. GenCorp will give OMNOVA reasonable advance
written notice if GenCorp or a member of its Group ceases to maintain Aircraft
Product Liability insurance which is substantially similar to the Aircraft
Products Liability insurance in force as of the date hereof.
ARTICLE V: INDEMNIFICATION
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Section 5.01. INDEMNIFICATION BY GENCORP. Subject to Sections 5.03 and
5.04 GenCorp shall indemnify, defend and hold harmless OMNOVA, each OMNOVA
Entity and each of their respective directors, officers, employees and agents,
and each of the heirs, successors and assigns of any of the foregoing from and
against all Losses arising out of, associated with, or resulting from:
(a) any failure to perform or breach of any covenant or
agreement made by GenCorp in this Agreement or in any Ancillary Agreement;
(b) any failure to pay, perform or otherwise promptly
discharge any Retained Liability;
(c) any Spin-Off Taxes excluding any Spin-Off Taxes described
in Section 5.02(c); or
(d) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated in GenCorp's proxy statement dated July 2, 1999 (as the same was
amended or modified, the "Proxy Statement") or necessary to make the statements
made in the Proxy Statement not misleading.
Section 5.02. INDEMNIFICATION BY OMNOVA. Subject to Sections 5.03 and
5.04, OMNOVA shall indemnify, defend and hold harmless GenCorp, each GenCorp
Entity and each of their respective directors, officers, employees and agents,
and each of the heirs, successors and assigns of any of the foregoing from and
against all Losses arising out of, associated with, or resulting from:
(a) any failure to perform or breach of any covenant or
agreement made by OMNOVA in this Agreement or in any Ancillary Agreement;
(b) any failure to pay, perform or otherwise promptly
discharge any Assumed Liability;
(c) any Spin-Off Taxes resulting from any member of the OMNOVA
Group or any employee, officer or director of such member acting in his or her
capacity as such, taking or failing to take any action following the Spin-Off
(including any actions specified in Section 4.09) or any change in ownership of
OMNOVA stock whether or not OMNOVA has acted or failed to
<PAGE> 25
22
act in connection with such change, if such action or failure to act or such
change in ownership causes the Spin-Off to fail to qualify as fully tax-free
under Sections 368(a)(1)(D), 355, and 361, or any other provisions of the Code;
or
(d) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated in the Form 10 (or any amendment thereof) or necessary to make the
statements made in the Form 10 (or any amendment thereof) not misleading.
Section 5.03. THIRD PARTY CLAIM PROCEDURES. If a party receives notice
of the assertion of any Third Party Claim in respect of which such party may
have a claim under Section 5.01 or 5.02 then the following shall apply:
(a) The party against whom any such Third Party Claim is made
(the "Indemnified Party"), shall promptly provide written notice (an "Indemnity
Notice") of such Third Party Claim to the other party (the "Indemnifying
Party"). Such Indemnity Notice shall describe in reasonable detail the nature of
the Third Party Claim and the basis for its claim under Section 5.01 or 5.02;
provided that the failure to provide such notice shall not affect a party's
rights under Section 5.01 or 5.02 except to the extent the other party is
actually prejudiced by the failure to give such notice and then only to the
extent of such actual prejudice. An Indemnity Notice by a party shall not
preclude such party from giving subsequent Indemnity Notices with respect to
other claims, whether arising before or after the claims for which prior notice
is given.
(b) Upon receipt of an Indemnity Notice, the Indemnifying
Party shall have the right to promptly assume, at its sole cost and expense, the
defense or settlement of such Third Party Claim with counsel reasonably
acceptable to the Indemnified Party, provided that the Indemnifying Party has
irrevocably agreed in writing to defend, indemnify and hold harmless the
Indemnified Party in respect of all Losses arising or resulting from such Third
Party Claim. The Indemnifying Party shall give prompt written notice to the
Indemnified Party of its intent to enter into such agreement and assume the
defense of any such Third Party Claim and shall conduct the defense and/or
settlement of such Third Party Claim diligently and in good faith. If the
Indemnifying Party enters into such agreement and assumes such defense then for
so long as the Indemnifying Party is defending such Third Party Claim in
accordance with its obligations hereunder then the Indemnified Party shall not
admit any liability with respect to, or settle, any said Third Party Claim
without the Indemnifying Party's prior written consent; provided, however, that
the Indemnified Party shall have the right to settle, compromise or discharge
such Third Party Claim without the consent of the Indemnifying Party if the
Indemnified Party releases the Indemnifying Party from its indemnification
obligation hereunder with respect to such Third Party Claim. If requested by the
Indemnifying Party, the Indemnified Party shall cooperate fully in the defense
or prosecution of any Third Party Claim the defense of which has been assumed by
the Indemnifying Party, and the Indemnified Party shall furnish such records,
information and testimony and attend all such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith, but if the Indemnified Party reasonably
<PAGE> 26
23
incurs more than nominal out-of-pocket costs in so cooperating or acting at the
request of the Indemnifying Party then the Indemnified Party may request, which
request shall not be unreasonably denied, reimbursement from the Indemnifying
Party for all reasonable out-of-pocket costs incurred by the Indemnified Party
in so cooperating or acting.
(c) Notwithstanding Section 5.03(b), if (i) an Indemnified
Party is obligated to permit an insurer or other Person having liability
therefore to assume the defense of a Third Party Claim, or (ii) an Indemnified
Party determines in good faith that there is a reasonable possibility that a
Third Party Claim may materially and adversely affect it or its assets or
business other than as a result of the payment of monetary damages, or (iii) the
Indemnifying Party and Indemnified Party are both named parties in a Third Party
Claim and in the reasonable judgment of the Indemnified Party a conflict of
interest (other than a dispute regarding the scope of the Indemnified Party's
right to indemnification under this Agreement) between the Indemnified Party and
the Indemnifying Party exists or (iv) if the Indemnifying Party fails, after
reasonable notice from the Indemnified Party, to diligently and in good faith
defend such Third Party Claim, then, at the option of the Indemnified Party, the
Indemnifying Party shall not have the right to assume the defense of such Third
Party Claim and the Indemnified Party may, by notice to the Indemnifying Party,
reassume the defense of any such Third Party Claim previously assumed by the
Indemnifying Party. No retention or reassumption of any such defense by the
Indemnified Party shall prejudice any rights of the Indemnified Party under
Section 5.01 or 5.02.
(d) If the Indemnifying Party does not give notice and assume
the defense of such Third Party Claim in accordance with Section 5.03(b) or is
not entitled to assume or retain the defense thereof, the Indemnified Party
shall have full authority to defend and/or settle any such Third Party Claim for
the account of and at the sole risk, cost and expense of the Indemnifying Party.
If the Indemnified Party undertakes the defense and/or settlement of any such
Third Party Claim it shall do so diligently and in good faith and the
Indemnifying Party shall from time to time upon the request of the Indemnified
Party reimburse the Indemnified Party for the costs incurred by the Indemnified
Party in defending and/or settling such Third Party Claim. The Indemnifying
Party shall be bound by any settlement entered into by the Indemnified Party to
the extent that such settlement is commercially reasonable measured in the
context of the matter settled and by any judgment resulting from such Third
Party Claim. If the Indemnifying Party had the right to assume the defense and
settlement of such Third Party Claim and did not do so then, in any dispute
between the Indemnifying Party and Indemnified Party regarding the defense or
settlement of such Third Party Claim the Indemnifying Party shall have the
burden to prove that the Indemnified Party did not defend such Third Party Claim
diligently and in good faith and/or settle such claim in a commercially
reasonable manner.
(e) The Indemnifying Party shall not admit any liability,
settle, compromise, pay or discharge, without the consent of the Indemnified
Party, any Third Party Claim being defended by it, unless with respect to any
settlement: (i) the Indemnified Party is not obligated to perform or to refrain
from performing any act under such settlement and there is no encumbrance on any
assets of the Indemnified Party; (ii) there is no finding or admission of any
<PAGE> 27
24
violation of any Legal Requirement, violation of the rights of any Person by the
Indemnified Party or any other liability or obligation of the Indemnified Party
to any Person; and (iii) the Indemnified Party receives, as a part of such
settlement, a complete release, in form and substance reasonably satisfactory to
the Indemnified Party.
(f) The party controlling the defense of a Third Party Claim
shall keep the other party reasonably informed at all stages of the defense
and/or settlement of such Third Party Claim. The party not controlling the
defense of any such Third Party Claim shall have the right, at its sole cost and
expense, to participate in, but not control, the defense of any such Third Party
Claim.
Section 5.04. INSURANCE RECOVERY. The amount that an Indemnifying Party
is or may be required to pay to an Indemnified Party pursuant to Section 5.01 or
5.02 shall be reduced by any Insurance Proceeds or other amounts actually
recovered by or on behalf of such Indemnified Party, in reduction of the related
Loss. If an Indemnified Party shall have received the payment required by this
Agreement from an Indemnifying Party in respect of any Loss and shall
subsequently actually receive Insurance Proceeds or other amounts in respect of
such Loss, then such Indemnified Party shall pay to such Indemnifying Party a
sum equal to the amount of such Insurance Proceeds or other amounts actually
received (up to but not in excess of the amount of any indemnity payment made
hereunder) less any costs reasonably incurred by the Indemnified Party to
collect such Insurance Proceeds. No insurer or other Person shall: (a) be
relieved of the responsibility to pay any claims which it would otherwise be
obligated to pay in the absence of the foregoing indemnification provisions; (b)
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect to any claims which it would otherwise be obligated to pay
or (c) be entitled to a benefit it would not be entitled to receive in the
absence of the foregoing indemnification provisions.
ARTICLE VI. MISCELLANEOUS PROVISIONS
Section 6.01. NOTICES. All notices, demands and other communications
which may or are required to be given to or made by either party to the other in
connection with this Agreement shall be in writing (including telex, fax or
other similar writing) and shall be deemed to have been duly given or made: (a)
if sent by registered or certified mail, five days after the posting thereof
with first class postage attached, (b) if sent by hand or overnight delivery,
upon the delivery thereof and (c) if sent by telex or fax, upon confirmation of
receipt of such telex or fax, in each case addressed to the respective parties
as follows:
GenCorp: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attn: Secretary
OMNOVA: OMNOVA Solutions Inc.
<PAGE> 28
25
175 Ghent Road
Fairlawn, Ohio 44333
Attn: Secretary
or to such other address and to the attention of such other persons as either
party hereto may specify from time to time by notice to the other party.
Section 6.02. ENTIRE AGREEMENT. This Agreement, the Schedules hereto
and the Ancillary Agreements embody the entire agreement of the parties hereto
with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements, oral or written, relative to said subject matter.
Section 6.03. ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned (other than by merger or pursuant to a sale of all or substantially all
of a party's assets to one Person) by either of the parties hereto without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that no such assignment shall relieve
the assigning party of any liabilities or obligations hereunder. Any transfer or
assignment of any of the rights, interests or obligations hereunder in violation
of the terms hereof shall be void and of no force or effect.
Section 6.04. CAPTIONS. The Table of Contents and Article and Section
headings of this Agreement are inserted for convenience only and shall not
constitute a part of this Agreement in construing or interpreting any provision
hereof.
Section 6.05. WAIVER; CONSENT. This Agreement may not be changed,
amended, terminated, augmented, rescinded or discharged (other than by
performance), in whole or in part, except by a writing executed by the parties
hereto, and no waiver of any of the provisions or conditions of this Agreement
or any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given such
waiver or consented thereto. Except to the extent that a party hereto may have
otherwise agreed in writing, no waiver by that party of any breach by the other
party of any of its obligations hereunder shall be deemed to be a waiver of any
other subsequent or prior breach of the same or any other obligation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
Section 6.06. NO THIRD PARTY BENEFICIARIES. Except as expressly
provided in this Agreement, nothing herein, expressed or implied, is intended or
shall be construed to confer upon or give to any Person any legal or equitable
right, remedy, claim or other benefit under or by reason of this Agreement.
<PAGE> 29
26
Section 6.07. SURVIVAL OF AGREEMENTS. All covenants and agreements of
the parties contained in this Agreement shall survive the Closing Time and the
Distribution Date.
Section 6.08. EXPENSES. Except as otherwise set forth in this Agreement
or any Ancillary Agreement, all costs and expenses incurred on or prior to the
Distribution Date (whether or not paid on or prior to the Distribution Date) in
connection with the preparation, execution, delivery and implementation of this
Agreement and any Ancillary Agreement, the Separation, the Distribution and the
consummation of the transactions contemplated hereby and thereby shall be
charged to and paid by GenCorp. Except as otherwise set forth in this Agreement
or any Ancillary Agreement, each party shall bear its own costs and expenses
incurred after the Distribution Date.
Section 6.09. GROUP PERFORMANCE. Each of the parties hereto shall cause
to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein or in the Ancillary Agreements to be
performed by a member of its Group.
Section 6.10. COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
Section 6.11. GENDER. Whenever the context requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be deemed to include and designate the masculine,
feminine or neuter gender.
Section 6.12. GOVERNING LAW. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of Ohio
exclusive of laws relating to conflicts of law.
Section 6.13. INTERPRETATION. It is acknowledged by OMNOVA and GenCorp
that this Agreement has undergone several drafts with the negotiated suggestions
of each and, therefore, no presumptions shall arise favoring either party by
virtue of the authorship of any provision of this Agreement.
Section 6.14. BLUE PENCIL. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the court making the determination of invalidity or
unenforceability shall have the power to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
<PAGE> 30
27
Section 6.15. CONFLICTS. Notwithstanding any other provision of this
Agreement, in the event of any conflict between this Agreement and the
Employment Matters Agreement or this Agreement and the Tax Matters Agreement,
the Employment Matters Agreement or the Tax Matters Agreement, as the case may
be, shall control. Any Dispute under this Agreement shall be resolved as
provided for in the Alternative Dispute Resolution Agreement, of even date,
between GenCorp and OMNOVA.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
OMNOVA SOLUTIONS INC. GENCORP INC.
By: /s/ James C. LeMay By: /s/ William R. Phillips
------------------------------- -----------------------------
Name: James C. LeMay Name: William R. Phillips
---------------------------- ----------------------
Title: Senior Vice President Title: Senior Vice President
---------------------------- ---------------------------
<PAGE> 31
Schedule 1.01(a)
Corporate Real Property
GenCorp Corporate Headquarters
175 Ghent Road
Fairlawn, Ohio 44333
GenCorp Technology Center
2990 Gilchrist Road
Akron, Ohio 44305-44720
GenCorp Flight Operations
Building #8 and lease of associated land
5430 Lauby Road
North Canton, Ohio 44720
<PAGE> 32
2
Schedule 1.01(b)
Certain Discontinued Operations
For the avoidance of doubt and notwithstanding Section 2.03, the following
matters and locations and all liabilities and obligations arising or resulting
therefrom shall be deemed to be, without limitation, Retained Liabilities:
(i) FORMER FACILITY LOCATIONS: The following former facility locations:
<TABLE>
<CAPTION>
<S> <C>
1. Lawrence, Massachusetts - including, without 10. Troy, Michigan
limitation, 70 General St. and 1 Marston St.
2. Ashtabula, Ohio 11. Montebello, California
3. Point Pleasant, West Virginia 12. Orange, California
4. Toledo, Ohio 13. Cranston, Rhode Island
5. Ada, Oklahoma 14. Compton, California
6. Cuba, Missouri 15. Southfield, Michigan
7. Shadeland, Texas 16. E. Rutherford, New Jersey
8. Reading, Massachusetts
9. Newman, Georgia
</TABLE>
(ii) OTHER LOCATIONS: The following other locations:
1. Auburn Road Landfill, Londonderry, New Hampshire
2. Solvents Recovery Services of New England, Inc., Southington, Connecticut
3. Old Southington Landfill, Southington, Connecticut
4. Ashtabula River, Ashtabula County, Ohio
5. Fields Brook, Ashtabula County, Ohio
6. New Lyme Landfill, Ashtabula County, Ohio
7. Big D Landfill, Ashtabula, Ohio
8. Olin plant in Ashtabula, Ohio
<PAGE> 33
3
9. Stickney/Tyler Road Landfills, Toledo, Ohio
10. Dura Avenue Landfill, Toledo, Ohio
11. Unnamed Tributary, Toledo, Ohio
12. King Road Landfill, East Sylvania Township, Lucas County, Ohio
13. Four County Landfill, Fulton County, Indiana
14. Industrial Excess Landfill, Uniontown, Ohio
15. Organic Chemical, Inc., Granville, Michigan
16. Diaz Refinery, Diaz, Arkansas
17. Chemical Recycling Inc., Wylie, Texas
18. Northside Sanitary Landfill, Marion, Indiana
19. PCB Treatment, Inc., Kansas City, Kansas and Kansas City, Missouri
20. Third Site, Zionsville, Indiana
21. Hardage/Criner Landfill, Criner, Oklahoma
22. Marion Bragg Dump, Marion, Indiana
23. Panasote, Pt. Pleasant, West Virginia
24. Randolph Dump Site, Columbus, Mississippi
25. Delta Chemical, North Buffalo Township, Pennsylvania
(iii) OTHER MATTERS: All of the matters described in the Litigation Report
(including the Appendices thereto) of W. R. Phillips to the Audit Committee
dated August 31, 1999, excluding claims for defective commercial roofing
described in Part 4.A., page 8 of Appendix B and page 2 of Appendix C of such
report.
<PAGE> 34
4
Schedule 1.01(c)
OMNOVA Real Property
--------------------
PERFORMANCE CHEMICALS
- ---------------------
Owned:
- -----
165 S. Cleveland Avenue 83 Authority Drive
Mogadore, Ohio 44260 Fitchburg, MA 01420
1601 Highway 41 SW 1701 Cornell Road
Calhoun, GA 30701-3651 Green Bay, WI 54313
One GenCorp Drive 6008 High Point Road
Chester, SC 29706 Greensboro, NC 27407
Leased:
- ------
235 Brickyard Road
Dalton, GA 30720
Wilson Street Warehouse
Compartment Nos. 1 & 2
Chester, SC
<PAGE> 35
5
DECORATIVE & BUILDING PRODUCTS
- ------------------------------
Owned:
- -----
Route 895 West, Hickory Drive Tonbridge Road, East Peckham
Auburn, PA 17922-0429 Tonbridge, Kent
England TN12 5JX
133 Yorkville Road East 5 Northeastern Blvd
Columbus, MS 39702 Salem, NH 03079
Chambers Avenue 2011 Rocky River Rd., North
Jeannette, PA 15644 Monroe, NC 28110
Leased:
- ------
14 Rue Des Parisiens Plejadenlaan 19
Anieres, France 19 Avenue des Pleiades
1200 Brussels, Belgium
2201 Coronation Boulevard 74-78 Wood Lane End
Charlotte, NC Hemel Hempstead,
Hertsfordshire England HP2 4 RF
PO Box 34625 170 Rue De Javel
Nr. GPO Umm Hureir Paris France 75015
Dubai, UAE
1359 Broadway 10 Bloomfield Avenue
New York, New York 10018 Pine Brook, NJ 07058
1722 Indian Wood Circle Suite A 1414 West Randol Mill Suite 200-3
Maumee, OH 43537-4060 Arlington, TX 76012
516 Main Street - Apt B 302 N. El Camino Real - Suite 200-Unit 19
Loveland, OH 45140 San Clemente, CA 92672
2722 Chambers Drive 7403 East 6th Avenue - Suite 4
Monroe, NC 28110 Scottsdale, AZ 85251
Branch Estates 2000 E Lamar Blvd - Suite 600 - Office 36
3121 Route 22 Suite 214 Arlington, TX 76006
Somerville, NJ 08876-3500
<PAGE> 36
6
20 Maylands Avenue 105-107 Dumbarton Road
Hemel Hempstead Glasgow, Scotland G11 6PW
Hertfordshire HP2 RF
Parking Lot
1030 South LaGrange Road - Suite 3 Chambers Avenue-adjacent to mfg building
LaGrange, IL 60525 Jeannette, PA
79/89 Pentonville Road Wira House Suite 4 Second Floor
London, England N1 9LW West Park Ring Road
Leeds, England LS16 6BD
Lakeside Office Park 2710 Chambers Drive
591 North Avenue - Suite 2/1st Monroe, NC 28111
Wakefield, MA 01880
545 Orchard Road #09-05
131 Bradford Street - Suite 214 Far East Shopping Centre
Bradford Court Singapore 238882
Birmingham, England B12 ONS
4/l Przy Bazantarni Street
Paddock Wood Distribution Center Warsaw, Poland 02-793
Tonbridge Road, East Peckham
Tonbridge, Kent
England TN12 5JX
<PAGE> 37
7
Schedule 1.01(d)
OMNOVA Entities
Decorative Products Thailand, Inc., an Ohio USA corporation
CPPC - Decorative Products Company Limited, a Thailand limited company
Decorative Products (Singapore) Pte, Ltd., a Singapore limited company
GenCorp do Brasil Ltd., a Brazilian limited liability partnership
GenCorp Services Inc., an Ohio USA corporation
GenCorp Wallcovering (USA), Inc., an Ohio USA corporation
GenCorp Wallcovering (UK) Limited, a United Kingdom limited company
Muraspec SARL, a French societe a responsabilite limitee
Muraspec Polska Sp. z.o.o., a Polish limited liability company
GenCorp Wallcovering LLC, Dubai, an Emirate of Dubai limited
liability company
GenCorp Performance Chemicals (U.K.) Ltd.
GenCorp Polymer Products SARL, a French societe a responsabilite limitee
GenCorp Performance Chemicals (Singapore) Pte, Ltd., a Singapore limited company
GenCorp Performance Chemicals Canada, a Canada corporation
Sequa Chemicals, S.A., a Spanish public limited company
Gen I Services, Inc., an Ohio USA corporation
<PAGE> 38
8
Schedule 1.01(e)
Discontinued OMNOVA Operations
Any terminated, divested or discontinued business or operation of GenCorp or any
OMNOVA Entity which: (i) is not a Known Liability AND (ii) is not included on
Schedule 1.01(b) AND (iii) was terminated, divested or discontinued by GenCorp
or an OMNOVA Entity on or after January 1, 1993 and prior to the Closing Time
AND (iv) was, at the time of such termination, divestiture or discontinuance,
engaged in the manufacture of specialty chemicals, coated fabrics, vinyl films,
wallcovering, commercial roofing or other products or operations of the OMNOVA
Business; provided, however, that the "Discontinued OMNOVA Operations" shall
only include liabilities or obligations to the extent arising from the
manufacture of specialty chemicals, coated fabrics, vinyl films, wallcovering,
commercial roofing or other products or operations of the OMNOVA Business. The
Discontinued OMNOVA Operations shall be deemed to include, without limitation,
the divested residential wallcovering product line, the divested urethane
adhesive product line and the divested Newcomerstown, Ohio facility. The
inclusion of the divested residential wallcovering product line, divested
urethane adhesive product line and the divested Newcomerstown, Ohio facility as
Discontinued OMNOVA Operations shall not be considered in determining whether or
not any other business or operation is included in or excluded from the
Discontinued OMNOVA Operations.
<PAGE> 39
9
Schedule 1.01(f)
OMNOVA Intellectual Property
<PAGE> 1
================================================================================
CREDIT AGREEMENT
by and among
OMNOVA SOLUTIONS INC.
as Borrower,
BANK OF AMERICA, N.A.,
as Agent and as Lender
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
and
BANC OF AMERICA SECURITIES, LLC
as Sole Lead Arranger and Sole Book Manager
and
BANK ONE, MICHIGAN
and
KEYBANK NATIONAL ASSOCIATION
as Co-Documentation Agents
and
THE BANK OF NEW YORK,
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
MELLON BANK, N.A.
and
COMERICA BANK
as Co-Agents
September 30, 1999
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Terms
<S> <C>
1.1. Definitions..................................................................................................2
1.2. Rules of Interpretation.....................................................................................27
ARTICLE II
The Credit Facilities
2.1. Revolving Loans.............................................................................................29
2.2. Use of Proceeds.............................................................................................32
2.3. Notes.......................................................................................................32
2.4. Swing Line..................................................................................................32
ARTICLE III
Letters of Credit
3.1. Letters of Credit...........................................................................................34
3.2. Reimbursement and Participations............................................................................34
ARTICLE IV
Eurodollar Funding, Fees, and Payment Conventions
4.1. Interest Rate Options.......................................................................................38
4.2. Conversions and Elections of Subsequent Interest Periods....................................................38
4.3. Payment of Interest.........................................................................................39
4.4. Prepayments of Eurodollar Rate Loans........................................................................39
4.5. Manner of Payment...........................................................................................39
4.6. Fees........................................................................................................40
4.7. Pro Rata Payments...........................................................................................41
4.8. Computation of Rates and Fees...............................................................................41
4.9. Deficiency Advances; Failure to Purchase Participations.....................................................41
4.10. Intraday Funding...........................................................................................42
ARTICLE V
Change in Circumstances
5.1. Increased Cost and Reduced Return...........................................................................43
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
5.2. Limitation on Types of Loans................................................................................44
5.3. Illegality..................................................................................................45
5.4. Treatment of Affected Loans.................................................................................45
5.5. Compensation................................................................................................45
5.6. Taxes.......................................................................................................46
ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
6.1. Conditions of Initial Advance...............................................................................48
6.2. Conditions of Revolving Loans and Letter of Credit..........................................................51
ARTICLE VII
Representations and Warranties
7.1. Organization and Authority..................................................................................53
7.2. Transaction Documents.......................................................................................53
7.3. Governmental Authorization..................................................................................54
7.4. Capitalization; Subsidiaries; Investments...................................................................54
7.5. Financial Condition.........................................................................................55
7.6. Title to Properties.........................................................................................55
7.7. Litigation; Loss Contingencies..............................................................................55
7.8. No Default or Breach........................................................................................56
7.9. Material Contracts..........................................................................................56
7.10. Related Party Agreements...................................................................................56
7.11. Environmental Matters......................................................................................56
7.12. Compliance with Law........................................................................................57
7.13. Taxes......................................................................................................57
7.14. Employee Benefit Plans.....................................................................................58
7.15. Employment Matters.........................................................................................59
7.16. Intellectual Property......................................................................................59
7.17. Insurance..................................................................................................59
7.18. Books and Records..........................................................................................59
7.19. Judgments and Other Restrictions...........................................................................60
Investment Company; Margin Stock........................................................................60
7.21. Disclosure.................................................................................................60
7.22. Hedging Arrangements.......................................................................................60
7.23. Solvency...................................................................................................61
7.24. No Consents, Etc...........................................................................................61
7.25. Year 2000 Compliance.......................................................................................61
7.26. Tax Treatment of Spinoff...................................................................................61
</TABLE>
ii
<PAGE> 4
ARTICLE VIII
Affirmative Covenants
---------------------
<TABLE>
<CAPTION>
<S> <C>
8.1. Financial Reports, Etc......................................................................................62
8.2. Maintain Properties.........................................................................................63
8.3. Existence, Qualification, Etc...............................................................................64
8.4. Regulations and Taxes.......................................................................................64
8.5. Insurance, Proceeds and Condemnation........................................................................64
8.6. True Books..................................................................................................64
8.7. Year 2000 Compliance........................................................................................64
8.8. Right of Inspection.........................................................................................65
8.9. Observe all Laws............................................................................................65
8.10. Governmental Licenses......................................................................................65
8.11. Covenants Extending to Other Persons.......................................................................65
8.12. Officer's Knowledge of Default.............................................................................65
8.13. Suits or Other Proceedings.................................................................................65
8.14. Environmental Laws.........................................................................................65
8.15. Further Assurances.........................................................................................66
8.16. Employee Benefit Plans.....................................................................................66
8.17. Continued Operations.......................................................................................67
8.18. New Subsidiaries...........................................................................................67
8.19. Compliance with Material Contracts.........................................................................68
ARTICLE IX
Negative Covenants
9.1. Financial Covenants.........................................................................................69
9.2. Acquisitions................................................................................................69
9.3. Capital Expenditures........................................................................................69
9.4. Liens.......................................................................................................69
9.5. Indebtedness................................................................................................71
9.6. Transfer of Assets..........................................................................................71
9.7. Investments.................................................................................................72
9.8. Merger or Consolidation.....................................................................................72
9.9. Transactions with Affiliates................................................................................73
9.10. Compliance with ERISA, the Code and Foreign Benefit Laws...................................................73
9.11. Fiscal Year................................................................................................74
9.12. Dissolution, etc...........................................................................................74
9.13. Limitations on Sales and Leasebacks........................................................................74
9.14. Rate Hedging Obligations...................................................................................74
9.15. Negative Pledge Clauses....................................................................................74
9.16. Restricted Payments........................................................................................75
9.17. Redemption, Prepayment, or Amendment of Senior Notes and Other Indebtedness................................75
9.18. Amendment of Line of Business Transfer Documents and Spinoff Documents.....................................75
</TABLE>
iii
<PAGE> 5
ARTICLE X
EVENTS OF DEFAULT AND ACCELERATION
<TABLE>
<CAPTION>
<S> <C>
10.1. Events of Default..........................................................................................76
10.2. Agent to Act...............................................................................................79
10.3. Cumulative Rights..........................................................................................79
10.4. No Waiver..................................................................................................80
10.5. Allocation of Proceeds.....................................................................................80
ARTICLE XI
THE AGENT
11.1. Appointment, Powers, and Immunities........................................................................81
11.2. Reliance by Agent..........................................................................................81
11.3. Defaults...................................................................................................82
11.4. Rights as Lender...........................................................................................82
11.5. Indemnification............................................................................................82
11.6. Non-Reliance on Agent and Other Lenders....................................................................83
11.7. Resignation of Agent.......................................................................................83
ARTICLE XII
Miscellaneous
12.1. Assignments and Participations.............................................................................84
12.2. Notices....................................................................................................86
12.3. Right of Set-off; Adjustments..............................................................................87
12.4. Survival...................................................................................................88
12.5. Expenses...................................................................................................88
12.6. Amendments and Waivers.....................................................................................88
12.7. Counterparts...............................................................................................89
12.8. Termination................................................................................................89
12.9. Indemnification; Limitation of Liability...................................................................90
12.10. Severability..............................................................................................90
12.11. Entire Agreement..........................................................................................91
12.12. Agreement Controls........................................................................................91
12.13. Usury Savings Clause......................................................................................91
12.14. Payments..................................................................................................91
12.15. Confidentiality...........................................................................................92
12.16. Governing Law; Waiver of Jury Trial.......................................................................92
12.17. Special Funding Option....................................................................................93
EXHIBIT A Applicable Commitment Percentages...................................................A-1
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT B Form of Assignment and Acceptance...................................................B-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative..................C-1
EXHIBIT D-1 Form of Borrowing Notice............................................................D-1-1
EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans..........................................D-2-1
EXHIBIT E Form of Interest Rate Selection Notice..............................................E-1
EXHIBIT F-1 Form of Revolving Note..............................................................F-1-1
EXHIBIT F-2 Form of Swing Line Note.............................................................F-2-1
EXHIBIT G Form of Opinion of Borrower's Counsel...............................................G-1
EXHIBIT H Compliance Certificate..............................................................H-1
EXHIBIT I Form of Facility Guaranty...........................................................I-1
EXHIBIT J Form of LC Account Agreement........................................................J-1
Schedule 7.4 Capital Stock, Subsidiaries and Investments in Other Persons........................S-1
Schedule 7.5 Indebtedness........................................................................S-2
Schedule 7.6 Liens and Real Property.............................................................S-3
Schedule 7.7 Litigation..........................................................................S-4
Schedule 7.8 Defaults............................................................................S-5
Schedule 7.10 Related Party Agreements............................................................S-6
Schedule 7.11 Environmental Matters...............................................................S-7
Schedule 7.14 Employee Benefit Plans..............................................................S-8
Schedule 7.15 Employment Matters..................................................................S-9
Schedule 7.16 Intellectual Property...............................................................S-10
Schedule 7.17 Insurance...........................................................................S-11
Schedule 7.22 Hedging Arrangements................................................................S-12
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of September 30, 1999 (the
"Agreement"), is made by and among OMNOVA SOLUTIONS INC., an Ohio corporation
having its principal place of business in Fairlawn, Ohio (the "Borrower"), BANK
OF AMERICA, N.A., a national banking association organized and existing under
the laws of the United States, in its capacity as a Lender ("Bank of America"),
and each other financial institution executing and delivering a signature page
hereto and each other financial institution which may hereafter execute and
deliver an instrument of assignment with respect to this Agreement pursuant to
SECTION 12.1 (hereinafter such financial institutions may be referred to
individually as a "Lender" or collectively as the "Lenders"), and BANK OF
AMERICA, N.A., a national banking association organized and existing under the
laws of the United States, in its capacity as agent for the Lenders (in such
capacity, and together with any successor agent appointed in accordance with the
terms of SECTION 11.7, the "Agent");
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower has requested that the Lenders make available to
the Borrower a revolving credit facility in the maximum aggregate principal
amount at any time outstanding of up to $300,000,000, the proceeds of which are
to be used for working capital, capital expenditures, the making of the Special
Distribution (as defined below), permitted acquisitions and other lawful general
corporate purposes and which shall include a letter of credit facility of up to
$25,000,000 for the issuance of standby and commercial letters of credit and a
swing line facility of up to $10,000,000; and
WHEREAS, the Lenders are willing to make such revolving credit, letter
of credit and swing line facilities available to the Borrower upon the terms and
conditions set forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
<PAGE> 8
ARTICLE I
Definitions and Terms
1.1. DEFINITIONS. For the purposes of this Agreement, in addition to
the definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling
equity interest in another Person (including the purchase of an option,
warrant or convertible or similar type security to acquire such a
controlling interest at the time it becomes exercisable by the holder
thereof), whether by purchase of such equity interest or upon exercise
of an option or warrant for, or conversion of securities into, such
equity interest, or (ii) assets of another Person which constitute all
or any material part of the assets of such Person or of a line or lines
of business conducted by such Person.
"Advance" means a borrowing under the Revolving Credit
Facility consisting of a Base Rate Loan or a Eurodollar Rate Loan.
"Affected Loans" and "Affected Type" have the meanings
therefor provided in SECTION 5.4.
"Affiliate" means any Person other than a wholly owned
Subsidiary or an Employee Benefit Plan (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is
under common control with the Borrower; or (ii) which beneficially owns
or holds 10% or more of any class of the outstanding voting stock
(calculated after giving effect pro forma to the conversion of all
issued and outstanding capital stock convertible into voting stock of
the Borrower) (or in the case of a Person which is not a corporation,
10% or more of the equity interest) of the Borrower; or (iii) 10% or
more of any class of the outstanding voting stock (or in the case of a
Person which is not a corporation, 10% or more of the equity interest)
of which is beneficially owned or held by the Borrower. The term
"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 ownership of voting stock, by contract or
otherwise.
"Applicable Commitment Percentage" means, for each Lender at
any time, a fraction, with respect to the Revolving Credit Facility and
the Letter of Credit Facility the numerator of which shall be such
Lender's Revolving Credit Commitment and the denominator of which shall
be the Total Revolving Credit Commitment, which Applicable Commitment
Percentage for each Lender as of the Closing Date is as set forth in
EXHIBIT A; PROVIDED that the Applicable Commitment Percentage of each
Lender shall be increased or decreased to reflect any assignments to or
by such Lender effected in accordance with SECTION 12.1.
"Applicable Lending Office" means, for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an
affiliate of such Lender) designated for
2
<PAGE> 9
such Type of Loan on the signature pages hereof or such other office of
such Lender (or an affiliate of such Lender) as such Lender may from
time to time specify to the Agent and the Borrower by written notice in
accordance with the terms hereof as the office by which its Loans of
such Type are to be made and maintained.
"Applicable Margin" means:
(i) except as otherwise selected by the Borrower pursuant to
clause (ii) below and applicable in accordance with the terms of clause
(ii), that percent per annum set forth below, which shall be based upon
the Consolidated Leverage Ratio for the Four-Quarter Period most
recently ended as specified below:
Applicable
Level Consolidated Leverage Ratio Margin
----- --------------------------- ------
I Greater than 2.25 to 1.00 1.50%
II Less than or equal to 2.25 to 1.00
but greater than 1.50 to 1.00 1.25%
III Less than or equal to 1.50 to 1.00
but greater than 0.75 to 1.00 1.00%
IV Less than or equal to 0.75 to 1.00 0.75%
The Applicable Margin shall be established at the end of each fiscal
quarter of the Borrower (each, a "Determination Date"). Any change in
the Applicable Margin following each Determination Date shall be
determined based upon the computations set forth in the certificate
furnished to the Agent pursuant to SECTION 8.1(a)(ii) and SECTION
8.1(b)(ii), subject to review and approval of such computations by the
Agent, and shall be effective commencing on the fifth Business Day
following the date such certificate is received until the fifth
Business Day following the date on which a new certificate is delivered
or is required to be delivered, whichever shall first occur; PROVIDED
HOWEVER, if the Borrower shall fail to deliver any such certificate
within the time period required by SECTION 8.1, then the Applicable
Margin shall be Level I for Eurodollar Rate Loans from the date such
certificate was due until the appropriate certificate is so delivered.
Subject to the proviso in the preceding sentence, from the Closing Date
to and including the Determination Date as to which the Borrower has
delivered the certificate described above demonstrating the Borrower's
Consolidated Leverage Ratio for two Complete Fiscal Quarters occurring
after the Spinoff (the "Fixed Margin Period"), the Applicable Margin
for Eurodollar Rate Loans shall be no lower than Level III; or
(ii) if the Borrower selects at any time after the Fixed
Margin Period that the Applicable Margin shall be determined based on
the Borrower's Debt Rating (as defined below), then at such time and at
all times thereafter until the Revolving Credit
3
<PAGE> 10
Termination Date, that percent per annum set forth below in the
applicable column, which shall be (a) determined based upon the rating
of each rated class of the Borrower's long-term, senior unsecured
Indebtedness for Money Borrowed (the "Rated Debt"), assigned by S&P and
Moody's (the "Debt Rating") as specified below and (b) applicable to
all Eurodollar Loans existing on and after the first date a specific
Debt Rating is effective and continuing until, but not including, the
date any change in such Debt Rating is effective (the "Debt Rating
Date"):
<TABLE>
<CAPTION>
Applicable
Level Debt Rating Margin
----- ----------- ------
<S> <C> <C>
I Less than or equal to BB by S&P and Ba2 by Moody's 1.50%
II BB+ by S&P and Ba1 by Moody's 1.25%
III BBB- by S&P and Baa3 by Moody's 1.00%
IV BBB by S&P and Baa2 by Moody's 0.875%
V Greater than or equal to BBB+ by S&P and Baa1 by
Moody's 0.75%
</TABLE>
In the event that the Debt Ratings assigned by S&P and Moody's
differ by one rating level, the Applicable Margin shall be determined
by reference to the rating level having the higher Debt Rating (and
lower Applicable Margin) without regard to the lower Debt Rating. In
the event that the Debt Ratings assigned by S&P and Moody's differ by
more than one rating level, the Applicable Margin shall be determined
by reference to the Debt Rating which is one rating level higher than
the lower assigned Debt Rating without regard to the higher assigned
Debt Rating. The final Debt Rating level by which the Applicable Margin
is determined is referred to herein as a "Level". By way of
illustration and not limitation, if S&P assigned a rating of BB+ (i.e.,
Level II) and Moody's assigns a rating of Baa3 (i.e., Level III), the
Applicable Margin will be 1.00% (i.e. Level III); however if S&P
assigns a rating of BB (i.e., Level I) and Moody's assigns a rating of
Baa1 (i.e., Level V), the Applicable Margin will be 1.25% (i.e. Level
II). In the event that both S&P and Moody's do not make a Debt Rating,
the Applicable Margin shall be determined based on the Consolidated
Leverage Ratio pursuant to clause (i) above.
"Applicable Unused Fee" means:
(i) except as otherwise selected by the Borrower pursuant to
clause (ii) below and applicable in accordance with the terms of clause
(ii), that percent per annum set forth below, which shall be based upon
the Consolidated Leverage Ratio for the Four-Quarter Period most
recently ended as specified below:
4
<PAGE> 11
Applicable
Unused
Level Consolidated Leverage Ratio Fee
----- --------------------------- ----------
I Greater than 2.25 to 1.00 0.35%
II Less than or equal to 2.25 to 1.00
but greater than 1.50 to 1.00 0.30%
III Less than or equal to 1.50 to 1.00
but greater than 0.75 to 1.00 0.25%
IV Less than or equal to 0.75 to 1.00 0.20%
The Applicable Unused Fee shall be established at each Determination
Date. Any change in the Applicable Unused Fee following each
Determination Date shall be determined based upon the computations set
forth in the certificate furnished to the Agent pursuant to SECTION
8.1(a)(ii) and SECTION 8.1(b)(ii), subject to review and approval of
such computations by the Agent and shall be effective commencing on the
fifth Business Day following the date such certificate is received
until the fifth Business Day following the date on which a new
certificate is delivered or is required to be delivered, whichever
shall first occur; PROVIDED HOWEVER, if the Borrower shall fail to
deliver any such certificate within the time period required by SECTION
8.1, then the Applicable Unused Fee shall be Level I from the date such
certificate was due until the appropriate certificate is so delivered.
Subject to the proviso in the preceding sentence, during the Fixed
Margin Period the Applicable Unused Fee shall be no lower than Level
III; or
(ii) if the Borrower selects at any time after the Fixed
Margin Period that the Applicable Margin shall be determined based on
the Borrower's Debt Rating, then at such time and at all times
thereafter until the Revolving Credit Termination Date, that percent
per annum set forth below in the applicable column, which shall be (a)
determined based upon the Debt Rating as specified below and (b)
applicable on and after the first date a specific Debt Rating is
effective and continuing until, but not including, the date any change
in such Debt Rating is effective:
<TABLE>
<CAPTION>
Applicable
Level Debt Rating Unused Fee
----- ----------- ----------
<S> <C> <C>
I Less than or equal to BB by S&P and Ba2 by Moody's 0.30%
II BB+ by S&P and Ba1 by Moody's 0.25%
III BBB- by S&P and Baa3 by Moody's 0.20%
IV BBB by S&P and Baa2 by Moody's 0.175%
</TABLE>
5
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C>
V Greater than or equal to BBB+ by S&P and Baa1 by
Moody's 0.15%
</TABLE>
In the event that the Debt Ratings assigned by S&P and Moody's
differ by one rating level, the Applicable Unused Fee shall be
determined by reference to the rating level having the higher Debt
Rating (and lower Applicable Unused Fee) without regard to the lower
Debt Rating. In the event that the Debt Ratings assigned by S&P and
Moody's differ by more than one rating level, the Applicable Unused Fee
shall be determined by reference to the Debt Rating which is one rating
level higher than the lower assigned Debt Rating without regard to the
higher assigned Debt Rating. The final Debt Rating level by which the
Applicable Unused Fee is determined is referred to herein as a "Level".
By way of illustration and not limitation, if S&P assigned a rating of
BB+ (i.e., Level II) and Moody's assigns a rating of Baa3 (i.e., Level
III), the Applicable Unused Fee will be 0.20% (i.e. Level III); however
if S&P assigns a rating of BB (i.e., Level I) and Moody's assigns a
rating of Baa1 (i.e., Level V), the Applicable Unused Fee will be 0.25%
(i.e. Level II). In the event that both S&P and Moody's do not make a
Debt Rating, the Applicable Unused Fee shall be determined based on the
Consolidated Leverage Ratio pursuant to clause (i) above.
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit, or
similar documentation, executed by the Borrower from time to time and
delivered to the Issuing Bank to support the issuance of Letters of
Credit.
"Assignment and Acceptance" shall mean an Assignment and
Acceptance in the form of EXHIBIT B (with blanks appropriately filled
in) delivered to the Agent in connection with an assignment of a
Lender's interest under this Agreement pursuant to SECTION 12.1.
"Authorized Representative" means the Chief Financial Officer
of the Borrower, or any other Person expressly designated by a
Responsible Officer or the Board of Directors of the Borrower (or the
appropriate committee thereof) as an Authorized Representative of the
Borrower, as set forth from time to time in a certificate in the form
of EXHIBIT C.
"Bank of America" means Bank of America, N.A.
"BAS" means Banc of America Securities LLC and its successors.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (i) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (ii) the Prime Rate for such day. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
6
<PAGE> 13
"Base Rate Loan" means a Loan for which the rate of interest
is determined by reference to the Base Rate.
"Base Rate Refunding Loan" means a Base Rate Loan or Swing
Line Loan made either to (i) satisfy Reimbursement Obligations arising
from a drawing under a Letter of Credit or (ii) pay Bank of America in
respect of Swing Line Outstandings.
"Board" means the Board of Governors of the Federal Reserve
System (or any successor body).
"Borrower's Account" means a demand deposit account number
3751372974 or any successor account with the Agent, which may be
maintained at one or more offices of the Agent or an agent of the
Agent.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit
Facility or a Swing Line Loan, in the forms of EXHIBITS D-1 AND D-2,
respectively.
"Business Day" means, (i) except as expressly provided in
clause (ii), any day which is not a Saturday, Sunday or a day on which
banks in the States of New York and North Carolina are authorized or
obligated by law, executive order or governmental decree to be closed
and, (ii) with respect to the selection, funding, interest rate,
payment, and Interest Period of any Eurodollar Rate Loan, any day which
is a Business Day, as described above, and on which the relevant
international financial markets are open for the transaction of
business contemplated by this Agreement in London, England, New York,
New York and Charlotte, North Carolina.
"Capital Expenditures" means, with respect to the Borrower and
its Subsidiaries, for any period the SUM of (without duplication) (i)
all expenditures (whether paid in cash or accrued as liabilities) by
the Borrower or any Subsidiary during such period for items that would
be classified as "property, plant or equipment" or comparable items on
the consolidated balance sheet of the Borrower and its Subsidiaries,
including without limitation all transactional costs incurred in
connection with such expenditures provided the same have been
capitalized, excluding, however, the amount of any Capital Expenditures
paid for with proceeds of casualty insurance as evidenced in writing
and submitted to the Agent together with any compliance certificate
delivered pursuant to SECTION 8.1(a) or (b), and (ii) with respect to
any Capital Lease entered into by the Borrower or its Subsidiaries
during such period, the present value of the lease payments due under
such Capital Lease over the term of such Capital Lease applying a
discount rate equal to the interest rate provided in such lease (or in
the absence of a stated interest rate, that rate used in the
preparation of the financial statements described in SECTION 8.1(a),
all the foregoing in accordance with GAAP applied on a Consistent
Basis.
7
<PAGE> 14
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof.
"Change of Control" means, at any time:
(i) any "person" or "group" (each as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) either (A) becomes
the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act ), directly or indirectly, of Voting Securities
of the Borrower (or securities convertible into or
exchangeable for such Voting Securities) representing thirty
percent (30%) or more of the combined voting power of all
Voting Securities of the Borrower (on a fully diluted basis)
or (B) otherwise has the ability, directly or indirectly, to
elect a majority of the board of directors of the Borrower; or
(ii) during any period of up to 24 consecutive months,
commencing on the Closing Date, individuals who at the
beginning of such 24-month period were directors of the
Borrower shall cease for any reason to constitute a majority
of the board of directors of the Borrower, unless the
nomination for election by the Borrower's stockholders of each
new director of the Borrower was approved by a vote of at
least two-thirds of the directors of the Borrower still in
office who were directors of the Borrower at the beginning of
any such period.
"Closing Date" means the date as of which this Agreement is
executed by the Borrower, the Lenders and the Agent and on which the
conditions set forth in SECTION 6.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
"Complete Fiscal Quarter" means a full fiscal quarter of the
Borrower including the first and last days of such fiscal quarter.
"Consistent Basis" in reference to the application of GAAP
means the accounting principles observed in the period referred to are
comparable in all material respects to those applied in the preparation
of the audited financial statements of the Borrower referred to as of
the Closing Date in SECTION 7.6(a).
"Consolidated Cash Interest Expense" means, with respect to
any period of computation thereof, the gross interest expense of the
Borrower and its Subsidiaries paid in cash, including without
limitation (i) all fees paid during such period and (ii) the portion of
any payments made in connection with Capital Leases allocable to
interest expense, all determined on a consolidated basis in accordance
with GAAP applied on Consistent Basis.
8
<PAGE> 15
"Consolidated EBITDA" means, with respect to the Borrower and
its Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the SUM of, without duplication, (i) Consolidated
Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income,
(iv) amortization, and (v) depreciation, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent
Basis.
"Consolidated Interest Coverage Ratio" means with respect to
the Borrower and its Subsidiaries, for any Four-Quarter Period ending
on the date of computation thereof, the ratio of (i) Consolidated
EBITDA for such period to (ii) Consolidated Cash Interest Expense for
such period.
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of the
Borrower and its Subsidiaries, including without limitation (i) the
current amortized portion of debt discounts to the extent included in
gross interest expense, (ii) the current amortized portion of all fees
(including fees payable in respect of any Swap Agreement) payable in
connection with the incurrence of Indebtedness to the extent included
in gross interest expense and (iii) the portion of any payments made in
connection with Capital Leases allocable to interest expense, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Leverage Ratio" means, as of the date of
computation thereof, the ratio of (i) Consolidated Total Funded Debt
(determined as at such date) to (ii) Consolidated EBITDA (for the
Four-Quarter Period ending on (or most recently ended prior to) such
date).
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Subsidiaries (including payments received by the Borrower and its
Subsidiaries of (i) interest income, and (ii) dividends and
distributions made in the ordinary course of their businesses by
Persons in which investment is permitted pursuant to this Agreement and
not related to an extraordinary event), less all operating and
non-operating expenses of the Borrower and its Subsidiaries including
taxes on income, all determined on a consolidated basis in accordance
with GAAP applied on a Consistent Basis; but excluding as income: (i)
net gains on the sale, conversion or other disposition of capital
assets, (ii) net gains on the acquisition, retirement, sale or other
disposition of capital stock and other securities of the Borrower or
its Subsidiaries, (iii) net gains on the collection of proceeds of life
insurance policies, (iv) any write-up of any asset, and (v) any other
net gain or credit of an extraordinary nature as determined in
accordance with GAAP applied on a Consistent Basis; PROVIDED FURTHER,
HOWEVER, that Consolidated Net Income shall be determined without
giving effect to FASB 133 Adjustments as may be required by GAAP.
"Consolidated Total Assets" means, as of any date on which the
amount thereof is to be determined, the net book value of all assets of
the Borrower and its Subsidiaries as
9
<PAGE> 16
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Total Funded Debt" means all Indebtedness for
Money Borrowed of the Borrower and its Subsidiaries, all determined on
a consolidated basis.
"Contingent Obligation" of any Person means all contingent
liabilities required to be included in the financial statements, or
disclosed in the footnotes thereto, of such Person in accordance with
GAAP applied on a Consistent Basis, including Statement No. 5 of the
Financial Accounting Standards Board, all Rate Hedging Obligations and
any obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including the obligations of such Person however incurred:
(1) to purchase such Indebtedness or other obligation or any
property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for the
purchase or payment of such Indebtedness or other obligation,
or (ii) to maintain a minimum working capital, net worth or
other balance sheet condition or any income statement
condition of the primary obligor;
(3) to grant or convey any Lien on any property or assets of
such Person to secure the payment of such Indebtedness or
other obligation;
(4) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the
owner or holder of such Indebtedness or obligation of the
ability of the primary obligor to make payment of such
Indebtedness or other obligation; or
(5) otherwise to assure the owner of such Indebtedness or such
obligation of the primary obligor against loss in respect
thereof.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to SECTION 4.2 hereof of a Eurodollar Rate Loan
of one Type as a Eurodollar Rate Loan of the same Type from one
Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to SECTION 4.2 of one Type of Loan into another
Type of Loan.
"Credit Parties" means, collectively, the Borrower and each
Guarantor.
"Debt Rating" and "Debt Rating Date" shall have the meanings
provided therefor in the definition of "Applicable Margin."
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"Default" means any event or condition which, with the giving
or receipt of notice or lapse of time or both, would constitute an
Event of Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate
Loan, until the end of the Interest Period applicable thereto, a rate
of two percent (2%) above the Eurodollar Rate applicable to such Loan,
and thereafter at a rate of interest per annum which shall be two
percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans,
Swing Line Loans, Reimbursement Obligations, fees, and other amounts
payable in respect of Obligations (other than Obligations arising under
or in connection with Swap Agreements) or (except as otherwise
expressly provided therein) the obligations of any other Credit Party
under any of the other Loan Documents, a rate of interest per annum
which shall be two percent (2%) above the Base Rate and (iii) in any
case, the maximum rate permitted by applicable law, if lower.
"Determination Date" has the meaning therefor provided in the
definition of "Applicable Margin."
"Distribution Agreement" means the Distribution Agreement
dated as of September 30, 1999 between GenCorp and the Borrower
providing for the Line of Business Transfer and other related matters.
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States
of America.
"Domestic Material Subsidiary" means any Domestic Subsidiary
which is also a Material Subsidiary.
"Domestic Subsidiary" means any Subsidiary of the Borrower
organized under the laws of the United States of America, any state or
territory thereof or the District of Columbia.
"Eligible Assignee" means (i) a Lender, (ii) an affiliate of a
Lender, and (iii) any other Person approved by the Agent and, unless an
Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with SECTION 12.1, the Borrower,
in each case, such approval not to be unreasonably withheld (provided
that the incurrence by the Borrower of additional costs pursuant to
SECTION 5.6 as a result of such assignment shall constitute a
reasonable basis for withholding such consent) or delayed by the
Borrower and such approval to be deemed given by the Borrower (in the
absence of notice to the contrary, effective upon receipt) within five
Business Days after notice of such proposed assignment has been
provided by the assigning Lender to the Borrower; PROVIDED, HOWEVER,
that neither the Borrower nor an affiliate of the Borrower shall
qualify as an Eligible Assignee.
"Eligible Securities" means the following obligations and any
other obligations previously approved in writing by the Agent:
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<PAGE> 18
(a) Government Securities;
(b) obligations of any corporation organized under
the laws of any state of the United States of America or under
the laws of any other nation, payable in the United States of
America, expressed to mature not later than 92 days following
the date of issuance thereof and rated in an investment grade
rating category by S&P and Moody's;
(c) interest bearing demand or time deposits issued
by any Lender or certificates of deposit maturing within one
year from the date of issuance thereof and issued by a bank or
trust company organized under the laws of the United States or
of any state thereof having capital surplus and undivided
profits aggregating at least $400,000,000 and being rated "A"
or better by S&P or "A" or better by Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations; or
(f) shares of mutual funds which invest in
obligations described in paragraphs (a) through (e) above, the
shares of which mutual funds are at all times rated "AAA" by
S&P.
"Employee Benefit Plan" means (i) any employee benefit plan,
including any Pension Plan, within the meaning of Section 3(3) of ERISA
which (A) is maintained for employees of the Borrower or any of its
ERISA Affiliates, or any Subsidiary or is assumed by the Borrower or
any of its ERISA Affiliates, or any Subsidiary in connection with any
Acquisition or (B) has at any time within the previous six (6) years
been maintained by the Borrower for the employees of the Borrower, any
current or former ERISA Affiliate, or any Subsidiary and (ii) any plan,
arrangement, understanding or scheme maintained by the Borrower or any
Subsidiary that provides retirement, deferred compensation, employee or
retiree medical or life insurance, severance benefits or any other
benefit covering any employee or former employee and which is
administered under any Foreign Benefit Law or regulated by any
Governmental Authority other than the United States of America.
"Employee Matters Agreement" means the Agreement on Employee
Matters dated as of September 30, 1999 between GenCorp and the Borrower
providing for the treatment of employee benefit matters and other
compensation arrangements for former and current employees of the
Borrower and its Subsidiaries.
"Environmental Laws" means, collectively, any (i) Federal,
state, local or foreign statute, law, ordinance, code, rule or
regulation, or (ii) order or decree issued to or against the Borrower
or any Subsidiary, in either case regulating, relating to, or imposing
liability
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or standards of conduct concerning, any environmental matters or
conditions, environmental protection or conservation, including without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; the Superfund Amendments and
Reauthorization Act of 1986, as amended; the Resource Conservation and
Recovery Act, as amended; the Toxic Substances Control Act, as amended;
the Clean Air Act, as amended; the Clean Water Act, as amended;
together with all regulations promulgated thereunder, and any other
"Superfund" or "Superlien" law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute and all
rules and regulations promulgated thereunder.
"ERISA Affiliate", as applied to the Borrower, means any
Person or trade or business which is a member of a group which is under
common control with the Borrower, who together with the Borrower, is
treated as a single employer within the meaning of Section 414(b) and
(c) of the Code.
"Eurodollar Rate Loan" means a Loan for which the rate of
interest is determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
------------------------
Rate 1- Reserve Requirement Margin
"Event of Default" means any of the occurrences set forth as
such in SECTION 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.
"Existing GenCorp Credit Agreement" means, collectively, (i)
that certain Credit Agreement dated as of May 17, 1996 among GenCorp,
NationsBank, N.A. (predecessor in interest to Bank of America)
("NationsBank") as agent and lender, and the other lenders party
thereto, as amended.
"Facility Guaranty" means each Guaranty Agreement
substantially in the form of EXHIBIT I between one or more Guarantors
and the Agent for the benefit of the Agent and the Lenders, delivered
as of the Closing Date and otherwise pursuant to SECTION 8.18, as the
same may be amended, modified or supplemented.
"Facility Termination Date" means such date as all of the
following shall have occurred: (a) the Borrower shall have permanently
terminated the Revolving Credit Facility and the Swing Line by payment
in full of all Revolving Credit Outstandings and Letter of Credit
Outstandings and Swing Line Outstandings, together with all accrued and
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<PAGE> 20
unpaid interest thereon, except for the undrawn portion of Letters of
Credit as have been fully cash collateralized in a manner consistent
with the terms of SECTION 10.1(B), (b) all Swap Agreements shall have
been terminated, expired or cash collateralized, (c) all Revolving
Credit Commitments and Letter of Credit Commitments shall have
terminated or expired and (d) the Borrower shall have fully, finally
and irrevocably paid and satisfied in full all Obligations (other than
Obligations consisting of continuing indemnities and other Contingent
Obligations of the Borrower or any Guarantor that may be owing to the
Lenders pursuant to the Loan Documents and expressly survive
termination of this Agreement);
"FASB 133 Adjustments" means entries on or adjustments to any
balance sheet or statement of income in respect of derivatives or
hedging instruments as required or permitted by Statement of Financial
Accounting Standards No. 133.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 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 such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Agent (in its individual capacity) on such day on such
transactions as determined by the Agent.
"Fiscal Year" means the twelve month fiscal period of the
Borrower and its Subsidiaries commencing on December 1 of each calendar
year and ending on November 30 of the subsequent calendar year.
"Fixed Margin Period" shall have the meaning therefor provided
in the definition of "Applicable Margin."
"Foreign Benefit Law" means any applicable statute, law,
ordinance, code, rule, regulation, order or decree of any foreign
nation or any province, state, territory, protectorate or other
political subdivision thereof regulating, relating to, or imposing
liability or standards of conduct concerning, any Employee Benefit
Plan.
"Four-Quarter Period" means a period of four full consecutive
fiscal quarters of the Borrower and its Subsidiaries, taken together as
one accounting period; PROVIDED, HOWEVER, (i) for each of the first
three fiscal quarters ending after the Closing Date, the Four-Quarter
Period ending on such date shall include so many of the most recent
fiscal quarterly periods of the Borrower reflected in the Historical
Unaudited Quarterly Statements as shall be necessary to result in a
period of four full consecutive fiscal quarters, (ii) to the extent the
first fiscal quarter ending after the Closing Date is included in any
Four-Quarter Period for the purposes of determining financial or
accounting
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matters hereunder, all calculations with respect to such fiscal quarter
shall be made on a pro forma basis giving effect to the Line of
Business Transfer and the Spinoff as of the first day of such fiscal
quarter, and (iii) the assets, liabilities and results of operations
reflected in such Historical Unaudited Quarterly Statements shall be
deemed to be the assets, liabilities and results of operations of the
Borrower and its Subsidiaries for the purpose of making any
determination or computation as to financial or accounting matters
hereunder that includes any period of operations covered by the
Historical Unaudited Quarterly Statements.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles, being those principles of
accounting set forth in pronouncements of the Financial Accounting
Standards Board, the American Institute of Certified Public
Accountants, or which have other substantial authoritative support and
are applicable in the circumstances as of the date of a report.
"GenCorp" means GenCorp Inc.
"GenCorp Prepayable Debt" means Indebtedness for Money
Borrowed of GenCorp in the aggregate principal amount of approximately
$188,000,000 and in no event to exceed $225,000,000 outstanding as of
the Closing Date under the Existing GenCorp Credit Agreement.
"Government Securities" means direct obligations of, or
obligations the timely payment of principal and interest on which are
fully and unconditionally guaranteed by, the United States of America.
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, court, agency or instrumentality or political
subdivision thereof or any entity or officer exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to any government or any court, in each case whether
associated with a state of the United States, the United States, or a
foreign entity or government.
"Guaranties" means all obligations of the Borrower or any
Subsidiary directly or indirectly guaranteeing, or in effect
guaranteeing, any Indebtedness for Money Borrowed of any other Person.
"Guarantors" means, at any date, the Domestic Subsidiaries in
existence at the Closing Date together with each additional Domestic
Material Subsidiary required to execute and deliver a Facility Guaranty
by such date pursuant to SECTION 8.18.
"Hazardous Material" means and includes any hazardous, toxic
or dangerous waste, substance or material the generation, handling,
storage, disposal, treatment, release, discharge or emission of which
is subject to any Environmental Law.
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"Historical Unaudited Quarterly Statements" means the
historical unaudited consolidated balance sheets and stockholders'
equity as at and for each of the fiscal quarters ended February 28,
1999, May 31, 1999 and August 31, 1999, statements of income as at and
or the fiscal quarter ended May 31, 1999 and cash flows as at and for
each of the fiscal quarters ended February 28, 1999 and May 31, 1999,
prepared by GenCorp and previously furnished to the Agent reflecting
the assets, liabilities and results of operations of the Transferred
Business.
"Indebtedness" means as to any Person, without duplication,
(a) all Indebtedness for Money Borrowed of such Person, (b) all Rate
Hedging Obligations of such Person, (c) all indebtedness secured by any
Lien on any property or asset owned or held by such Person regardless
or whether the indebtedness secured thereby shall have been assumed by
such Person or is non-recourse to the credit of such Person, and (d)
all Contingent Obligations of such Person.
"Indebtedness for Money Borrowed" means with respect to any
Person, without duplication, all indebtedness in respect of money
borrowed, including without limitation, all obligations under Capital
Leases, the deferred purchase price of any property or services, the
principal balance outstanding under any synthetic lease or tax
retention operating lease, and payment and reimbursement obligations in
respect of surety bonds, letters of credit, and bankers' acceptances,
whether or not matured, evidenced by a promissory note, bond, debenture
or similar written obligation for the payment of money (including
reimbursement agreements and conditional sales or similar title
retention agreements), other than trade payables and accrued expenses
incurred in the ordinary course of business.
"Intellectual Property" has the meaning therefor provided in
SECTION 7.16.
"Interbank Offered Rate" means, with respect to any
Eurodollar Rate Loan for the Interest Period applicable thereto, the
rate per annum (rounded upwards, if necessary), to the nearest 1/100 of
1% appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately
11:00 A.M. (London time) two Business Days prior to the first day of
such Interest Period for a term comparable to such Interest Period. If
for any reason such rate is not available, the term "Interbank Offered
Rate" shall mean, with respect to any Eurodollar Rate Loan for the
Interest Period applicable thereto, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 A.M. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period, PROVIDED, HOWEVER; if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to
the nearest 1/100 of 1%).
"Interest Period" means, for each Eurodollar Rate Loan, a
period commencing on the date such Eurodollar Rate Loan is made or
Converted or Continued and ending, at the
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<PAGE> 23
Borrower's option, on the date one, two, three or six months thereafter
as notified to the Agent by the Authorized Representative in accordance
with the terms hereof; PROVIDED that,
(i) if an Interest Period for a Eurodollar Rate Loan
would end on a day which is not a Business Day, such Interest
Period shall be extended to the next Business Day (unless such
extension would cause the applicable Interest Period to end in
the succeeding calendar month, in which case such Interest
Period shall end on the next preceding Business Day); and
(ii) any Interest Period which begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"Interest Rate Selection Notice" means the written notice
delivered by an Authorized Representative in connection with the
election of a subsequent Interest Period for any Eurodollar Rate Loan
or the Conversion of any Eurodollar Rate Loan into a Base Rate Loan or
the Conversion of any Base Rate Loan into a Eurodollar Rate Loan, in
the form of EXHIBIT E.
"IRS Ruling Letter" has the meaning provided therefor in
SECTION 6.1(a)(xix).
"Issuing Bank" means initially Bank of America and thereafter
any Lender which is successor to Bank of America as issuer of Letters
of Credit under ARTICLE III.
"LC Account Agreement" means the LC Account Agreement dated as
of the date hereof between the Borrower and the Agent, as amended,
modified or supplemented from time to time.
"Lending Party" means, collectively, the Agent and each
Lender.
"Letter of Credit" means a standby or commercial letter of
credit issued by the Issuing Bank pursuant to ARTICLE III hereof for
the account of the Borrower in favor of a Person advancing credit or
securing an obligation on behalf of the Borrower.
"Letter of Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to acquire Participations in
respect of Letters of Credit and Reimbursement Obligations up to an
aggregate amount at any one time outstanding equal to such Lender's
Applicable Commitment Percentage of the Total Letter of Credit
Commitment as the same may be increased or decreased from time to time
pursuant to this Agreement.
"Letter of Credit Facility" means the facility described in
ARTICLE III hereof providing for the issuance by the Issuing Bank for
the account of the Borrower of Letters
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<PAGE> 24
of Credit in an aggregate stated amount at any time outstanding not
exceeding the Total Letter of Credit Commitment minus outstanding
Reimbursement Obligations.
"Letter of Credit Outstandings" means, as of any date of
determination, the aggregate amount available to be drawn under all
Letters of Credit plus Reimbursement Obligations then outstanding.
"Lien" means any interest in property securing any obligation
owed to, or a claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract,
and including but not limited to the lien or security interest arising
from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. For the purposes of this Agreement, the Borrower and any
Subsidiary shall be deemed to be the owner of any property which it has
acquired or holds subject to a conditional sale agreement, financing
lease, or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.
"Line of Business Transfer" means the transfer of the
Transferred Business to Borrower by GenCorp on the Closing Date
immediately prior to the closing of the Revolving Credit Facility.
"Line of Business Transfer Documents" means all documentation
(including all schedules and exhibits thereto) relating to the Line of
Business Transfer, including without limitation the Distribution
Agreement.
"Loans" means, collectively, the Swing Line Loan and the
Revolving Loans.
"Loan Documents" means this Agreement, the Notes, the Facility
Guaranties, the LC Account Agreement, the Applications and Agreements
for Letter of Credit, and all other instruments and documents
heretofore or hereafter executed or delivered to or in favor of any
Lender or the Agent in connection with the Loans made and transactions
contemplated under this Agreement, as the same may be amended,
supplemented or replaced from time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business, properties, operations, or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole, (ii)
the ability of any Credit Party to pay or perform its respective
obligations, liabilities and indebtedness under the Loan Documents as
such payment or performance becomes due in accordance with the terms
thereof, or (iii) the rights, powers and remedies of the Agent or any
Lender under any Loan Document or the validity, legality or
enforceability thereof.
"Material Contracts" means, collectively, any contract, lease,
agreement or commitment of the Borrower or any Subsidiary the
expiration or termination of which could be reasonably likely to result
in a Material Adverse Effect.
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"Material Subsidiary" means, as of any date of determination,
any direct or indirect Subsidiary of the Borrower which has assets
equal to at least 10% of Consolidated Total Assets (calculated as of
the most recent fiscal period with respect to which the Agent shall
have received financial statements required to be delivered pursuant to
SECTIONS 8.1(a) or (b) hereof (or if such determination shall be made
prior to delivery of such financial statements, then calculated with
respect to the Fiscal Year end financial statements referenced in
SECTION 7.6(a) hereof)); provided, however, that notwithstanding the
foregoing, if the Borrower and the Domestic Subsidiaries, as defined
above, have less than 90% of domestic Consolidated Total Assets or have
net income of less than 90% of domestic Consolidated Net Income, then
the term "Material Subsidiaries" shall mean Domestic Subsidiaries of
the Borrower, as specified by the Borrower, that together with the
Borrower have assets equal to not less than 90% of domestic
Consolidated Total Assets and net income of not less than 90% of
domestic Consolidated Net Income.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make, contributions
within the preceding six (6) Fiscal Years.
"Municipal Obligations" means general obligations issued by,
and supported by the full taxing authority of, any state of the United
States of America or of any municipal corporation or other public body
organized under the laws of any such state which are rated in the
highest investment rating category by both S&P and Moody's.
"Notes" means, collectively, the Swing Line Note and the
Revolving Notes.
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrower with respect to (i) the principal and
interest on the Loans as evidenced by the Notes, (ii) the Reimbursement
Obligations and otherwise in respect of the Letters of Credit, (iii)
all liabilities of Borrower to any Lender (or any affiliate of any
Lender) which arise under a Swap Agreement, and (iv) the payment and
performance of all other obligations, liabilities and Indebtedness of
the Borrower to the Lenders, the Agent or BAS hereunder, under any one
or more of the other Loan Documents or with respect to the Loans.
"Operating Documents" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, the bylaws, operating agreement, partnership
agreement, limited partnership agreement or other applicable documents
relating to the operation, governance or management of such entity.
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<PAGE> 26
"Organizational Action" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, any corporate, organizational or partnership
action (including any required shareholder, member or partner action),
or other similar official action, as applicable, taken by such entity.
"Organizational Documents" means with respect to any
corporation, limited liability company, partnership, limited
partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, the articles of incorporation,
certificate of incorporation, articles of organization, certificate of
limited partnership or other applicable organizational or charter
documents relating to the creation of such entity.
"Outstandings" means, collectively, at any date, the Letter of
Credit Outstandings, Swing Line Outstandings and Revolving Credit
Outstandings on such date.
"Participation" means, (i) with respect to any Lender (other
than the Issuing Bank) and a Letter of Credit, the extension of credit
represented by the participation of such Lender hereunder in the
liability of the Issuing Bank in respect of a Letter of Credit issued
by the Issuing Bank in accordance with the terms hereof and (ii) with
respect to any Lender (other than Bank of America) and a Swing Line
Loan, the extension of credit represented by the participation of such
Lender hereunder in the liability of Bank of America in respect of a
Swing Line Loan made by Bank of America in accordance with the terms
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" means any employee pension benefit plan within
the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan,
which is subject to the provisions of Title IV of ERISA or Section 412
of the Code and which (i) is maintained for employees of the Borrower
or any of its ERISA Affiliates or is assumed by the Borrower or any of
its ERISA Affiliates in connection with any Acquisition or (ii) has at
any time within the previous six (6) years been maintained by the
Borrower for the employees of the Borrower or any current or former
ERISA Affiliate.
"Permitted Asset Securitization" means any securitization of
accounts receivable of the Borrower or its Subsidiaries having an
aggregate contract value not exceeding $75,000,000 when added to all
other securitization transactions consummated during the term of this
Agreement and upon such terms as are acceptable to and approved in
writing by the Required Lenders.
"Person" means an individual, partnership, corporation,
limited liability company, limited liability partnership, trust,
unincorporated organization, association, joint venture or a government
or agency or political subdivision thereof.
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"Prime Rate" means the per annum rate of interest established
from time to time by Bank of America as its prime rate, which rate may
not be the lowest rate of interest charged by Bank of America to its
customers.
"Principal Office" means the principal office of Bank of
America, presently located at 101 North Tryon Street, 15th Floor, NC1
001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services,
or such other office and address as the Agent may from time to time
designate.
"Proxy Statement" means the definitive proxy statement first
mailed by GenCorp to its shareholders on or about July 7, 1999
describing the Spinoff and soliciting such shareholder vote to proceed
therewith.
"Rate Hedging Obligations" means, without duplication, any and
all obligations of the Borrower or any Subsidiary, whether absolute or
contingent and howsoever and whensoever created, arising, evidenced or
acquired (including all renewals, extensions and modifications thereof
and substitutions therefor), under (i) any and all agreements, devices
or arrangements designed to protect at least one of the parties thereto
from the fluctuations of interest rates, exchange rates or forward
rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, Dollar-denominated or
cross-currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts, warrants and
those commonly known as interest rate "swap" agreements; (ii) all other
"derivative instruments" as defined in FASB 133 and which are subject
to the reporting requirements of FASB 133; and (iii) any and all
cancellations, buybacks, reversals, terminations or assignments of any
of the foregoing.
"Rated Debt" has the meaning therefor provided in the
definition of "Applicable Margin."
"Regulation D" means Regulation D of the Board as the same may
be amended or supplemented from time to time.
"Reimbursement Obligation" shall mean at any time, the
obligation of the Borrower with respect to any Letter of Credit to
reimburse the Issuing Bank and the Lenders to the extent of their
respective Participations (including by the receipt by the Issuing Bank
of proceeds of Loans pursuant to SECTION 2.1(c)(iii)) for amounts
theretofore paid by the Issuing Bank pursuant to a drawing under such
Letter of Credit.
"Related LC Documents" has the meaning therefor provided in
SECTION 3.2(i)(i).
"Repurchase Agreement" means a repurchase agreement entered
into with any financial institution whose debt obligations or
commercial paper are rated "A" by either of S&P or Moody's or "A-1" by
S&P or "P-1" by Moody's.
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"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating greater than 50%
of the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "CREDIT EXPOSURE"
of each Lender shall be equal at all times (a) other than following the
occurrence and during the continuance of an Event of Default, to its
Revolving Credit Commitment, and (b) following the occurrence and
during the continuance of an Event of Default, to the sum of (i) the
aggregate principal amount of such Lender's Applicable Commitment
Percentage of Revolving Credit Outstandings plus (ii) the amount of
such Lender's Applicable Commitment Percentage of Letter of Credit
Outstandings and Swing Line Outstandings; PROVIDED that, for the
purpose of this definition only, (A) if any Lender shall have failed to
fund its Applicable Commitment Percentage of any Advance, then the
Revolving Credit Commitment of such Lender shall be deemed reduced by
the amount it so failed to fund for so long as such failure shall
continue and such Lender's Credit Exposure attributable to such failure
shall be deemed held by any Lender making more than its Applicable
Commitment Percentage of such Advance to the extent it covers such
failure, (B) if any Lender shall have failed to pay to the Issuing Bank
upon demand its Applicable Commitment Percentage of any drawing under
any Letter of Credit resulting in an outstanding Reimbursement
Obligation (whether by funding its Participation therein or otherwise),
such Lender's Credit Exposure attributable to all Letter of Credit
Outstandings shall be deemed to be held by the Issuing Bank until such
Lender shall pay such deficiency amount to the Issuing Bank together
with interest thereon as provided in SECTION 4.9 and (C) if any Lender
shall have failed to pay to Bank of America on demand its Applicable
Commitment Percentage of any Swing Line Loan (whether by funding its
Participation therein or otherwise), such Lender's Credit Exposure
attributable to all Swing Line Outstandings shall be deemed to be held
by Bank of America until such Lender shall pay such deficiency amount
to Bank of America together with interest thereon as provided in
SECTION 4.9.
"Requirements of Law" means, with respect to a Person, the
charter and bylaws or other organizational or governing documents of
such Person, and any law, treaty, rule, regulation, right, privilege,
qualification, license or franchise or final and nonappealable
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or to
which any of its property is subject or pertaining to any or all of the
transactions contemplated or referred to herein.
"Reserve Requirement" means, at any time, the maximum rate at
which reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained
under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) by member banks of the
Federal Reserve System against "Eurocurrency liabilities" (as such term
is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (i) any category of
liabilities which includes deposits by reference to which the
Eurodollar Rate is to be determined, or (ii) any category of extensions
of credit or other
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assets which include Eurodollar Rate Loans. The Eurodollar Rate shall
be adjusted automatically on and as of the effective date of any change
in the Reserve Requirement.
"Responsible Officer" means the Chief Executive Officer, the
Chief Financial Officer, any Senior Vice President, the Secretary or
the Treasurer of the Borrower.
"Restricted Payment" means (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock of Borrower or any of its Subsidiaries (other than those
payable or distributable solely to the Borrower) now or hereafter
outstanding, except a dividend payable solely in shares of a class of
stock to the holders of that class; (b) any redemption, conversion,
exchange, retirement or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of stock of
Borrower or any of its Subsidiaries (other than those payable or
distributable solely to the Borrower) now or hereafter outstanding; (c)
any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any
class of stock of Borrower or any of its Subsidiaries now or hereafter
outstanding.
"Revolving Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to make Revolving Loans to the
Borrower up to an aggregate principal amount at any one time
outstanding equal to such Lender's Applicable Commitment Percentage of
the Total Revolving Credit Commitment.
"Revolving Credit Facility" means the facility described in
SECTION 2.1 hereof providing for Loans to the Borrower by the Lenders
in the aggregate principal amount of the Total Revolving Credit
Commitment.
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans
then outstanding.
"Revolving Credit Termination Date" means (i) the Stated
Termination Date or (ii) such earlier date of termination of Lenders'
obligations pursuant to SECTION 10.1 upon the occurrence of an Event of
Default, or (iii) such date as the Borrower may voluntarily and
permanently terminate the Revolving Credit Facility by payment in full
of all Revolving Credit Outstandings, Swing Line Outstandings and
Letter of Credit Outstandings and cancellation of all Letters of
Credit, together with all accrued and unpaid interest thereon.
"Revolving Loan" means any borrowing pursuant to an Advance
under the Revolving Credit Facility in accordance with SECTION 2.1.
"Revolving Notes" means, collectively, the promissory notes of
the Borrower evidencing Revolving Loans executed and delivered to the
Lenders as provided in SECTION 2.3 substantially in the form of EXHIBIT
F-1, with appropriate insertions as to amounts, dates and names of
Lenders.
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"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill.
"Senior Notes" means the senior notes of the Borrower to be
issued in the aggregate principal amount not to exceed $150,000,000.
"Solvent" means, when used with respect to any Person, that at
the time of determination:
(i) the fair value of its assets (both at fair
valuation and at present fair saleable value on an orderly
basis) is in excess of the total amount of its liabilities,
including Contingent Obligations; and
(ii) it is then able and expects to be able to pay
its debts as they mature; and
(iii) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
"Special Distribution" means the cash dividend of
approximately $188,000,000 and in no event to exceed $225,000,000 paid
on the Closing Date, immediately following the Line of Business
Transfer and the effectiveness of this Agreement and immediately
preceding the Spinoff, by the Borrower to GenCorp, the proceeds of
which are to be used by GenCorp to repay the GenCorp Prepayable Debt
substantially simultaneously with the receipt thereof by GenCorp.
"Spinoff" means the special dividend of all outstanding shares
of capital stock of the Borrower to the holders of the outstanding
shares of GenCorp Common Stock on a pro rata basis and on the basis of
one share of common stock of the Borrower for each share of common
stock of GenCorp, all as described in the Proxy Statement.
"Spinoff Documents" means (i) the Proxy Statement, (ii) the
Registration Statement of the Borrower on Form 10, including all
amendments thereto, initially filed on July 9, 1999 with the Securities
and Exchange Commission and (iii) all other documentation (including
all schedules and exhibits thereto) relating to the Spinoff, including
without limitation the Tax Matters Agreement, the Employee Matters
Agreement and the Transition Services Agreement.
"Stated Termination Date" means September 30, 2004.
"Subsidiary" means any corporation or other entity in which
more than 50% of its outstanding Voting Securities or more than 50% of
all equity interests is owned directly or indirectly by the Borrower
and/or by one or more of the Borrower's Subsidiaries.
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"Swap Agreement" means one or more agreements between the
Borrower and any Lender or any affiliate of any Lender with respect to
Indebtedness evidenced by any or all of the Notes, on terms mutually
acceptable to Borrower and such Person, which agreements create Rate
Hedging Obligations.
"Swing Line" means the revolving line of credit established by
Bank of America in favor of the Borrower pursuant to SECTION 2.4.
"Swing Line Loans" means loans made by Bank of America to the
Borrower pursuant to SECTION 2.4.
"Swing Line Note" means the promissory note of the Borrower
evidencing the Swing Line executed and delivered to Bank of America as
provided in SECTION 2.3 substantially in the form of EXHIBIT F-2.
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal amount of all Swing Line Loans
then outstanding.
"Tax Matters Agreement" means the Tax Sharing Agreement dated
as of September 30, 1999 between GenCorp and the Borrower providing for
matters regarding Federal, state, local and foreign tax liabilities for
periods prior to and including the effective date of the Spinoff.
"Taxes" has the meaning therefor provided in SECTION 5.6(a).
"Termination Event" means, other than the reorganization of
any Employee Benefit Plan in connection with the Spinoff or Line of
Business Transfer, (i) a "Reportable Event" described in Section 4043
of ERISA and the regulations issued thereunder (unless the notice
requirement has been waived by applicable regulation); or (ii) the
withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan
during a plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA or was deemed such under Section 4062(e)
of ERISA; or (iii) the termination of a Pension Plan, the filing of a
notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA; or
(iv) the institution of proceedings to terminate a Pension Plan by the
PBGC; or (v) any other event or condition which would constitute
grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; or (vi) the
partial or complete withdrawal of the Borrower or any ERISA Affiliate
from a Multiemployer Plan; or (vii) the imposition of a Lien pursuant
to Section 412 of the Code or Section 302 of ERISA; or (viii) any event
or condition which results in the reorganization or insolvency of a
Multiemployer Plan under Section 4241 or Section 4245 of ERISA,
respectively; or (ix) any event or condition which results in the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by the PBGC of proceedings to terminate a Multiemployer
Plan under Section 4042 of ERISA; or (x) any event or condition with
respect to any Employee Benefit Plan which is
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regulated by any Foreign Benefit Law that results in the termination of
such Employee Benefit Plan or the revocation of such Employee Benefit
Plan's authority to operate under the applicable Foreign Benefit Law.
"Total Letter of Credit Commitment" means an amount not to
exceed $25,000,000.
"Total Revolving Credit Commitment" means a principal amount
equal to $300,000,000, as reduced from time to time in accordance with
SECTION 2.1(e).
"Transaction Documents" means, collectively, or individually
as the context may dictate, the Loan Documents, the Spinoff Documents
and the Line of Business Transfer Documents.
"Transferred Business" means the assets, liabilities and
operations of the Performance Chemicals and Decorative & Building
Products businesses of GenCorp immediately prior to the Line of
Business Transfer and includes the GenCorp Technology Center, corporate
flight operations of GenCorp, the GenCorp corporate headquarters
building in Fairlawn, Ohio and the tangible and intangible assets owned
and leased for such businesses.
"Transition Services Agreement" means the Services and Support
Agreement dated as of September 30, 1999 between GenCorp and the
Borrower providing for certain transitional administrative services and
for reimbursement of all direct and indirect costs of providing such
services.
"Type" shall mean any type of Loan (i.e., a Base Rate Loan or
a Eurodollar Rate Loan).
"Voting Securities" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"Year 2000 Compliant" means all computer applications and
other systems and operations of the Borrower and all of its
Subsidiaries that are material to the Borrower's or any of its
Subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions involving all dates on and
after January 1, 2000;
"Year 2000 Problem" means the risk that computer applications
or other systems or operations used by the Borrower or any of its
Subsidiaries, suppliers, vendors or customers may be unable to
recognize and perform properly date-sensitive functions involving
certain dates on and after January 1, 2000.
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1.2. RULES OF INTERPRETATION.
(a) All accounting terms not specifically defined herein shall
have the meanings assigned to such terms and shall be interpreted in
accordance with GAAP applied on a Consistent Basis.
(b) Each term defined in Articles 1, 8 or 9 of the New York
Uniform Commercial Code shall have the meaning given therein unless
otherwise defined herein, except to the extent that the Uniform
Commercial Code of another jurisdiction is controlling, in which case
such terms shall have the meaning given in the Uniform Commercial Code
of the applicable jurisdiction.
(c) The headings, subheadings and table of contents used
herein or in any other Loan Document are solely for convenience of
reference and shall not constitute a part of any such document or
affect the meaning, construction or effect of any provision thereof.
(d) Except as otherwise expressly provided, references in any
Loan Document to articles, sections, paragraphs, clauses, annexes,
appendices, exhibits and schedules are references to articles,
sections, paragraphs, clauses, annexes, appendices, exhibits and
schedules in or to such Loan Document.
(e) All definitions set forth herein or in any other Loan
Document shall apply to the singular as well as the plural form of such
defined term, and all references to the masculine gender shall include
reference to the feminine or neuter gender, and vice versa, as the
context may require.
(f) When used herein or in any other Loan Document, words such
as "hereunder", "hereto", "hereof" and "herein" and other words of like
import shall, unless the context clearly indicates to the contrary,
refer to the whole of the applicable document and not to any particular
article, section, subsection, paragraph or clause thereof.
(g) References to "including" means including without limiting
the generality of any description preceding such term, and for purposes
hereof the rule of ejusdem generis shall not be applicable to limit a
general statement, followed by or referable to an enumeration of
specific matters, to matters similar to those specifically mentioned.
(h) Except as otherwise expressly provided, all dates and
times of day specified herein shall refer to such dates and times at
Charlotte, North Carolina.
(i) Whenever interest rates or fees are established in whole
or in part by reference to a numerical percentage expressed as "___%",
such arithmetic expression shall be interpreted in accordance with the
convention that 1% = 100 basis points.
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(j) Any reference to an officer of the Borrower or any other
Person by reference to the title of such officer shall be deemed to
refer to each other officer of such Person, however titled, exercising
the same or substantially similar functions.
(k) All references to any agreement or document as amended,
modified or supplemented, or words of similar effect, shall mean such
document or agreement, as the case may be, as amended, modified or
supplemented from time to time only as and to the extent permitted
therein and in the Loan Documents.
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ARTICLE II
The Credit Facilities
---------------------
2.1. REVOLVING LOANS.
(a) COMMITMENT. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Advances to the
Borrower under the Revolving Credit Facility from time to time from the
Closing Date until the Revolving Credit Termination Date on a pro rata
basis as to the total borrowing requested by the Borrower on any day
determined by such Lender's Applicable Commitment Percentage up to but
not exceeding the Revolving Credit Commitment of such Lender, PROVIDED,
however, that the Lenders will not be required and shall have no
obligation to make any such Advance (i) so long as a Default or an
Event of Default has occurred and is continuing or (ii) if the Agent
has accelerated the maturity of any of the Notes as a result of an
Event of Default; PROVIDED further, however, that immediately after
giving effect to each such Advance, the amount of Revolving Credit
Outstandings plus Letter of Credit Outstandings plus Swing Line
Outstandings shall not exceed the Total Revolving Credit Commitment.
Within such limits and subject to the other terms and conditions of
this Agreement, the Borrower may borrow, repay and reborrow under the
Revolving Credit Facility on a Business Day from the Closing Date
until, but (as to borrowings and reborrowings) not including, the
Revolving Credit Termination Date.
(b) AMOUNTS. Except as otherwise permitted by the Lenders from
time to time, the amount of Revolving Credit Outstandings plus Letter
of Credit Outstandings plus Swing Line Outstandings shall not exceed at
any time the Total Revolving Credit Commitment, and, in the event there
shall be outstanding any such excess, the Borrower shall immediately
make such payments and prepayments as shall be necessary to comply with
this restriction. Each Advance under the Revolving Credit Facility,
other than Base Rate Refunding Loans, shall be in an amount of at least
$5,000,000, and, if greater than $5,000,000, an integral multiple of
$1,000,000.
(c) ADVANCES.
(i) An Authorized Representative shall give the Agent
(1) at least three (3) Business Days' irrevocable telephonic
notice of each Eurodollar Rate Loan (whether representing an
additional borrowing or the Continuation of a borrowing
hereunder or the Conversion of a borrowing hereunder from a
Base Rate Loan to a Eurodollar Rate Loan) prior to 11:00 A.M.
and (2) irrevocable telephonic notice of each Base Rate Loan
(other than Base Rate Refunding Loans to the extent the same
are effected without notice pursuant to SECTION 2.1(c)(iii)
and whether representing an additional borrowing hereunder or
the Conversion of borrowing hereunder from Eurodollar Rate
Loans to Base Rate Loans) prior to 11:00 A.M. on the day of
such proposed Revolving Loan. Each such notice shall be
effective upon receipt by the Agent, shall specify the amount
of the borrowing,
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the type of Revolving Loan (Base Rate or Eurodollar Rate), the
date of borrowing and, if a Eurodollar Rate Loan, the Interest
Period to be used in the computation of interest. The
Authorized Representative shall provide the Agent written
confirmation of each such telephonic notice in the form of a
Borrowing Notice or Interest Rate Selection Notice (as
applicable) with appropriate insertions but failure to provide
such confirmation shall not affect the validity of such
telephonic notice. Notice of receipt of such Borrowing Notice
or Interest Rate Selection Notice, as the case may be,
together with the amount of each Lender's portion of an
Advance requested thereunder, shall be provided by the Agent
to each Lender by telefacsimile transmission with reasonable
promptness, but (provided the Agent shall have received such
notice by 10:30 A.M.) not later than 1:00 P.M. on the same day
as the Agent's receipt of such notice.
(ii) Not later than 2:00 P.M. on the date specified
for each borrowing under this SECTION 2.1, each Lender shall,
pursuant to the terms and subject to the conditions of this
Agreement, make the amount of the Advance or Advances to be
made by it on such day available by wire transfer to the Agent
in the amount of its pro rata share, determined according to
such Lender's Applicable Commitment Percentage of the
Revolving Loan or Revolving Loans to be made on such day. Such
wire transfer shall be directed to the Agent at the Principal
Office and shall be in the form of Dollars constituting
immediately available funds. The amount so received by the
Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower by delivery of
the proceeds thereof to the Borrower's Account or otherwise as
shall be directed in the applicable Borrowing Notice by the
Authorized Representative and reasonably acceptable to the
Agent.
(iii) Notwithstanding the foregoing, if a drawing is
made under any Letter of Credit, such drawing is honored by
the Issuing Bank, and the Borrower shall not immediately fully
reimburse the Issuing Bank in respect of such drawing from
other funds available to the Borrower, (A) provided that the
conditions to making a Revolving Loan as herein provided shall
then be satisfied, the Reimbursement Obligation arising from
such drawing shall be paid to the Issuing Bank by the Agent
without the requirement of notice to or from the Borrower from
immediately available funds which shall be advanced as a Base
Rate Refunding Loan to the Agent at its Principal Office by
each Lender under the Revolving Credit Facility in an amount
equal to such Lender's Applicable Commitment Percentage of
such Reimbursement Obligation, and (B) if the conditions to
making a Revolving Loan as herein provided shall not then be
satisfied, each of the Lenders shall fund by payment to the
Agent (for the benefit of the Issuing Bank) at its Principal
Office in immediately available funds the purchase from the
Issuing Bank of their respective Participations in the related
Reimbursement Obligation based on their respective Applicable
Commitment Percentages of the Total Letter of Credit
Commitment. If a drawing is presented under any Letter of
Credit in accordance with the terms thereof and the Borrower
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shall not immediately reimburse the Issuing Bank in respect
thereof, then notice of such drawing or payment shall be
provided promptly by the Issuing Bank to the Agent and the
Agent shall provide notice to each Lender by telephone or
telefacsimile transmission. If notice to the Lenders of a
drawing under any Letter of Credit is given by the Agent at or
before 12:00 noon on any Business Day, each Lender shall
either make a Base Rate Refunding Loan or fund the purchase of
its Participation as specified above in the amount of such
Lender's Applicable Commitment Percentage of such drawing or
payment and shall pay such amount to the Agent for the account
of the Issuing Bank at the Principal Office in Dollars and in
immediately available funds before 2:30 P.M. on the same
Business Day. If such notice to the Lenders is given by the
Agent after 12:00 noon on any Business Day, each Lender shall
either make such Base Rate Refunding Loan or fund such
purchase before 12:00 noon on the next following Business Day.
(d) REPAYMENT OF REVOLVING LOANS. The principal amount of each
Revolving Loan shall be due and payable to the Agent for the benefit of
each Lender in full on the Revolving Credit Termination Date, or
earlier as specifically provided herein. The principal amount of any
Revolving Loan may be prepaid in whole or in part on any Business Day,
upon (A) at least three (3) Business Days' irrevocable telephonic
notice, in the case of each Revolving Loan that is a Eurodollar Rate
Loan, from an Authorized Representative (effective upon receipt) to the
Agent prior to 10:30 A.M. and (B) irrevocable telephonic notice, in the
case of each Revolving Loan that is a Base Rate Loan, from an
Authorized Representative (effective upon receipt) to the Agent prior
to 10:30 A.M. on the day of such proposed repayment. The Authorized
Representative shall provide the Agent written confirmation of each
such telephonic notice but failure to provide such confirmation shall
not effect the validity of such telephonic notice. All prepayments of
Revolving Loans made by the Borrower shall be in the amount of
$10,000,000 or such greater amount which is an integral multiple of
$5,000,000, or the amount equal to all Revolving Credit Outstandings,
or such other amount as necessary to comply with SECTION 2.1(b).
(e) REDUCTIONS. The Borrower shall, by notice from an
Authorized Representative, have the right from time to time but not
more frequently than once each calendar month, upon not less than three
(3) Business Days' written notice to the Agent, effective upon receipt,
to reduce the Total Revolving Credit Commitment. The Agent shall give
each Lender, within one (1) Business Day of receipt of such notice,
telefacsimile notice, or telephonic notice (confirmed in writing), of
such reduction. Each such reduction shall be in the aggregate amount of
$10,000,000 or such greater amount which is in an integral multiple of
$5,000,000, or the entire remaining Total Revolving Credit Commitment,
and shall permanently reduce the Total Revolving Credit Commitment.
Each reduction of the Total Revolving Credit Commitment shall be
accompanied by payment of the Revolving Loans to the extent that the
principal amount of Revolving Credit Outstandings plus Letter of Credit
Outstandings plus Swing Line Outstandings exceeds the Total Revolving
Credit Commitment after giving effect to such reduction, together with
accrued and unpaid interest on the amounts prepaid.
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2.2. USE OF PROCEEDS. The proceeds of the Loans made pursuant to the
Revolving Credit Facility hereunder shall be used by the Borrower for general
working capital needs and other corporate purposes, including the payment of the
Special Distribution and the making of Acquisitions and Capital Expenditures
permitted hereunder.
2.3. NOTES.
(a) REVOLVING NOTES. Revolving Loans made by each Lender shall
be evidenced by the Revolving Note payable to the order of such Lender
in the respective amount of its Applicable Commitment Percentage of the
Total Revolving Credit Commitment, which Revolving Note shall be dated
the Closing Date or a later date pursuant to an Assignment and
Acceptance and shall be duly completed, executed and delivered by the
Borrower.
(b) SWING LINE NOTE. The Swing Line Outstandings shall be
evidenced by a separate Swing Line Note payable to the order of the
Bank of America in the amount of the Swing Line, which Note shall be
dated the Closing Date and shall be duly completed, executed and
delivered by the Borrower.
2.4. SWING LINE.
(a) Notwithstanding any other provision of this Agreement to
the contrary, in order to administer the Revolving Credit Facility in
an efficient manner and to minimize the transfer of funds between the
Agent and the Lenders, Bank of America shall make available Swing Line
Loans to the Borrower prior to the Revolving Credit Termination Date.
Bank of America shall not be obligated to make any Swing Line Loan
pursuant hereto (i) if to the actual knowledge of Bank of America the
Borrower is not in compliance with all the conditions to the making of
Revolving Loans set forth in this Agreement, (ii) if after giving
effect to such Swing Line Loan, the Swing Line Outstandings exceed
$10,000,000, or (iii) if after giving effect to such Swing Line Loan,
the sum of the Swing Line Outstandings, Revolving Credit Outstandings
and Letter of Credit Outstandings exceeds the Total Revolving Credit
Commitment. The Borrower may, subject to the conditions set forth in
the preceding sentence, borrow, repay and reborrow under this SECTION
2.4. Unless notified to the contrary by Bank of America, borrowings
under the Swing Line shall be made in the minimum amount of $1,000,000
or, if greater, in amounts which are integral multiples of $100,000, or
in the amount necessary to effect a Base Rate Refunding Loan, upon
written request by telefacsimile transmission, effective upon receipt,
by an Authorized Representative of the Borrower made to Bank of America
not later than 12:30 P.M. on the Business Day of the requested
borrowing. Each such Borrowing Notice shall specify the amount of the
borrowing and the date of borrowing, and shall be in the form of
EXHIBIT D-2, with appropriate insertions. Unless notified to the
contrary by Bank of America, each repayment of a Swing Line Loan shall
be in an amount which is an integral multiple of $100,000 or the
aggregate amount of all Swing Line Outstandings.
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(b) The interest payable on Swing Line Loans is solely for the
account of Bank of America. Swing Line Loans shall bear interest solely
at the Base Rate or, if applicable, the Default Rate. All accrued and
unpaid interest on Swing Line Loans shall be payable, on the dates and
in the manner provided in SECTION 4.3 with respect to interest on Base
Rate Loans.
(c) Upon the making of a Swing Line Loan, each Lender shall be
deemed to have purchased from Bank of America a Participation therein
in an amount equal to that Lender's Applicable Commitment Percentage of
such Swing Line Loan. Upon demand made by Bank of America, each Lender
shall, according to its Applicable Commitment Percentage of such Swing
Line Loan, promptly provide to Bank of America its purchase price
therefor in an amount equal to its Participation therein. Any Advance
made by a Lender pursuant to demand of Bank of America of the purchase
price of its Participation shall when made be deemed to be (i) provided
that the conditions to making Revolving Loans shall be satisfied, a
Base Rate Refunding Loan under SECTION 2.1, and (ii) in all other
cases, the funding by each Lender of the purchase price of its
Participation in such Swing Line Loan. The obligation of each Lender to
so provide its purchase price to Bank of America shall be absolute and
unconditional and shall not be affected by the occurrence of an Event
of Default or any other occurrence or event.
The Borrower, at its option and subject to the terms hereof, may
request an Advance pursuant to SECTION 2.1 in an amount sufficient to repay
Swing Line Outstandings on any date and the Agent shall provide from the
proceeds of such Advance to Bank of America the amount necessary to repay such
Swing Line Outstandings (which Bank of America shall then apply to such
repayment) and credit any balance of the Advance in immediately available funds
in the manner directed by the Borrower pursuant to SECTION 2.1(c)(ii). The
proceeds of such Advances shall be paid to Bank of America for application to
the Swing Line Outstandings and the Lenders shall then be deemed to have made
Loans in the amount of such Advances. The Swing Line shall continue in effect
until the Revolving Credit Termination Date, at which time all Swing Line
Outstandings and accrued interest thereon shall be due and payable in full.
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ARTICLE III
Letters of Credit
-----------------
3.1. LETTERS OF CREDIT. The Issuing Bank agrees, subject to the terms
and conditions of this Agreement, upon request of the Borrower to issue from
time to time for the account of the Borrower Letters of Credit upon delivery to
the Issuing Bank of an Application and Agreement for Letter of Credit relating
thereto in form and content acceptable to the Issuing Bank; PROVIDED, that (i)
the Issuing Bank shall not be obligated to issue any Letter of Credit if it has
been notified by the Agent or has actual knowledge that a Default or Event of
Default has occurred and is continuing, (ii) the Letter of Credit Outstandings
shall not exceed the Total Letter of Credit Commitment and (iii) no Letter of
Credit shall be issued if, after giving effect thereto, Letter of Credit
Outstandings plus Revolving Credit Outstandings plus Swing Line Outstandings
shall exceed the Total Revolving Credit Commitment. No Letter of Credit shall
have an expiry date (including all rights of the Borrower or any beneficiary
named in such Letter of Credit to require renewal) or payment date occurring
later than the seventh Business Day prior to the Stated Termination Date.
3.2. REIMBURSEMENT AND PARTICIPATIONS.
(a) The Borrower hereby unconditionally agrees to pay to the
Issuing Bank immediately on demand at the Principal Office all amounts
required to pay all drafts drawn or purporting to be drawn under the
Letters of Credit and all reasonable expenses incurred by the Issuing
Bank in connection with the Letters of Credit, and in any event and
without demand to place in possession of the Issuing Bank (which shall
include Advances under the Revolving Credit Facility if permitted by
SECTION 2.1 and Swing Line Loans if permitted by SECTION 2.4)
sufficient funds to pay all debts and liabilities arising under any
Letter of Credit. The Issuing Bank agrees to give the Borrower prompt
notice of any request for a draw under a Letter of Credit. The Issuing
Bank may charge any account the Borrower may have with it for any and
all amounts the Issuing Bank pays under a Letter of Credit, plus
charges and reasonable expenses as from time to time agreed to by the
Issuing Bank and the Borrower; provided that to the extent permitted by
SECTION 2.1(c)(iii) and SECTION 2.4, amounts shall be paid pursuant to
Advances under the Revolving Credit Facility or, if the Borrower shall
elect, by Swing Line Loans. The Borrower agrees to pay the Issuing Bank
interest on any Reimbursement Obligations not paid when due hereunder
at the Default Rate.
(b) In accordance with the provisions of SECTION 2.1(c), the
Issuing Bank shall notify the Agent of any drawing under any Letter of
Credit promptly following the receipt by the Issuing Bank of such
drawing.
(c) Each Lender (other than the Issuing Bank) shall
automatically acquire on the date of issuance thereof, a Participation
in the liability of the Issuing Bank in respect of each Letter of
Credit in an amount equal to such Lender's Applicable Commitment
Percentage of such liability, and to the extent that the Borrower is
obligated to pay the
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Issuing Bank under SECTION 3.2(a), each Lender (other than the Issuing
Bank) thereby shall absolutely, unconditionally and irrevocably assume,
and shall be unconditionally obligated to pay to the Issuing Bank, its
Applicable Commitment Percentage of the liability of the Issuing Bank
under such Letter of Credit in the manner and with the effect provided
in SECTION 2.1(c)(iii).
(d) Simultaneously with the making of each payment by a Lender
to the Issuing Bank pursuant to SECTION 2.1(c)(iii)(B), such Lender
shall, automatically and without any further action on the part of the
Issuing Bank or such Lender, acquire a Participation in an amount equal
to such payment (excluding the portion thereof constituting interest
accrued prior to the date the Lender made its payment) in the related
Reimbursement Obligation of the Borrower. Each Lender's obligation to
make payment to the Agent for the account of the Issuing Bank pursuant
to SECTION 2.1(c)(iii) and SECTION 3.2(c), and the right of the Issuing
Bank to receive the same, shall be absolute and unconditional, shall
not be affected by any circumstance whatsoever and shall be made
without any offset, abatement, withholding or reduction whatsoever. In
the event the Lenders have purchased Participations in any
Reimbursement Obligation as set forth above, then at any time payment
(in fully collected, immediately available funds) of such Reimbursement
Obligation, in whole or in part, is received by the Issuing Bank from
the Borrower, the Issuing Bank shall promptly pay to each Lender an
amount equal to its Applicable Commitment Percentage of such payment
from the Borrower.
(e) Promptly following the end of each calendar quarter, the
Issuing Bank shall deliver to the Agent a notice describing the
aggregate undrawn amount of all Letters of Credit at the end of such
quarter. Upon the request of any Lender from time to time, the Issuing
Bank shall deliver to the Agent, and the Agent shall deliver to such
Lender, any other information reasonably requested by such Lender with
respect to each Letter of Credit outstanding.
(f) The issuance by the Issuing Bank of each Letter of Credit
shall, in addition to the conditions precedent set forth in ARTICLE VI,
be subject to the conditions that such Letter of Credit be in such form
and contain such terms as shall be reasonably satisfactory to the
Issuing Bank consistent with the then current practices and procedures
of the Issuing Bank with respect to similar letters of credit, and the
Borrower shall have executed and delivered such other instruments and
agreements relating to such Letters of Credit as the Issuing Bank shall
have reasonably requested consistent with such practices and
procedures. All Letters of Credit shall be issued pursuant to and
subject to the Uniform Customs and Practice for Documentary Credits,
1993 revision, International Chamber of Commerce Publication No. 500
or, if the Issuing Bank shall elect by express reference in an affected
Letter of Credit, the International Chamber of Commerce International
Standby Practices commonly referred to as "ISP98", or any subsequent
amendment or revision of either thereof.
(g) The Borrower agrees that the Issuing Bank may, in its sole
discretion, accept or pay, as complying with the terms of any Letter of
Credit, any drafts or other
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documents otherwise in order which may be signed or issued by an
administrator, executor, trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, liquidator, receiver, attorney
in fact or other legal representative of a party who is authorized
under such Letter of Credit to draw or issue any drafts or other
documents.
(h) Without limiting the generality of the provisions of
SECTION 12.9, the Borrower hereby agrees to indemnify and hold harmless
the Issuing Bank, each other Lender and the Agent from and against any
and all claims and damages, losses, liabilities, reasonable costs and
expenses which the Issuing Bank, such other Lender or the Agent may
incur (or which may be claimed against the Issuing Bank, such other
Lender or the Agent) by any Person by reason of or in connection with
the issuance or transfer of or payment or failure to pay under any
Letter of Credit; provided that the Borrower shall not be required to
indemnify the Issuing Bank, any other Lender or the Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, (i) caused by the willful misconduct or gross
negligence of the party to be indemnified or (ii) caused by the failure
of the Issuing Bank to pay under any Letter of Credit after the
presentation to it of a request for payment strictly complying with the
terms and conditions of such Letter of Credit, unless such payment is
prohibited by any law, regulation, court order or decree. The
indemnification and hold harmless provisions of this SECTION 3.2(h)
shall survive repayment of the Obligations, occurrence of the Revolving
Credit Termination Date, the Facility Termination Date and expiration
or termination of this Agreement.
(i) Without limiting Borrower's rights as set forth in SECTION
3.2(h), the obligation of the Borrower to immediately reimburse the
Issuing Bank for drawings made under Letters of Credit and the Issuing
Bank's right to receive such payment shall be absolute, unconditional
and irrevocable, and such obligations of the Borrower shall be
performed strictly in accordance with the terms of this Agreement and
such Letters of Credit and the related Application and Agreement for
any Letter of Credit, under all circumstances whatsoever, including the
following circumstances:
(i) any lack of validity or enforceability of the
Letter of Credit, the obligation supported by the Letter of
Credit or any other agreement or instrument relating thereto
(collectively, the "Related LC Documents");
(ii) any amendment or waiver of or any consent to or
departure from all or any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense
(other than the defense of payment in accordance with the
terms of this Agreement) or other rights which the Borrower
may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), the
Agent, the Lenders or any other Person, whether in connection
with the Loan Documents, the Related LC Documents or any
unrelated transaction;
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(iv) any breach of contract or other dispute between
the Borrower and any beneficiary or any transferee of a Letter
of Credit (or any persons or entities for whom such
beneficiary or any such transferee may be acting), the Agent,
the Lenders or any other Person;
(v) any draft, statement or any other document
presented under the Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
whatsoever;
(vi) any delay, extension of time, renewal, compromise
or other indulgence or modification granted or agreed to by
the Agent, with or without notice to or approval by the
Borrower in respect of any of Borrower's Obligations under
this Agreement; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing;
provided, however, that nothing contained herein shall be deemed to
release the Issuing Bank or any other Lender of any liability for
actual loss arising as a result of its gross negligence or willful
misconduct; and provided further, however, that to the extent any
conflict exists between this Agreement and any Application and
Agreement for Letters of Credit or other document or agreement required
by the Issuing Bank in connection with the issuance of Letters of
Credit, the terms of this Agreement shall control.
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ARTICLE IV
EURODOLLAR FUNDING, FEES, AND PAYMENT CONVENTIONS
4.1. INTEREST RATE OPTIONS. Eurodollar Rate Loans and Base Rate Loans
may be outstanding at the same time and, so long as no Default or Event of
Default shall have occurred and be continuing, the Borrower shall have the
option to elect the Type of Loan and the duration of the initial and any
subsequent Interest Periods and to Convert Revolving Loans in accordance with
SECTIONS 2.1(c)(i) AND 4.2, as applicable; PROVIDED, HOWEVER, (a) there shall
not be outstanding at any one time Eurodollar Rate Loans having more than eight
(8) different Interest Periods, (b) each Eurodollar Rate Loan (including each
Conversion into and each Continuation as a Eurodollar Rate Loan) shall be in an
amount of $5,000,000 or, if greater than $5,000,000 an integral multiple of
$1,000,000 and (c) no Eurodollar Rate Loan shall have an Interest Period that
extends beyond the Stated Termination Date. If the Agent does not receive a
Borrowing Notice or an Interest Rate Selection Notice giving notice of election
of the duration of an Interest Period or of Conversion of any Loan to or
Continuation of a Loan as a Eurodollar Rate Loan by the time prescribed by
SECTIONS 2.1(c)(i) AND 4.2, as applicable, the Borrower shall be deemed to have
elected to obtain or Convert such Loan to (or Continue such Loan as) a Base Rate
Loan until the Borrower notifies the Agent in accordance with SECTION 4.2. The
Borrower shall not be entitled to elect to Continue any Loan as or Convert any
Loan into a Eurodollar Rate Loan if a Default or Event of Default shall have
occurred and be continuing.
4.2. CONVERSIONS AND ELECTIONS OF SUBSEQUENT INTEREST PERIODS. Subject
to the limitations set forth in the definition of "Interest Period" and in
SECTION 4.1 and ARTICLE V, the Borrower may:
(a) upon delivery of telephonic notice to the Agent (which
shall be irrevocable) on or before 10:30 A.M. on any Business Day,
Convert any Eurodollar Rate Loan to a Base Rate Loan on the last day of
the Interest Period for such Eurodollar Rate Loan; and
(b) provided that no Default or Event of Default shall have
occurred and be continuing, upon delivery of telephonic notice to the
Agent (which shall be irrevocable) on or before 10:30 A.M. three (3)
Business Days' prior to the date of such Conversion or Continuation:
(i) elect a subsequent Interest Period for any
Eurodollar Rate Loan to begin on the last day of the then
current Interest Period for such Eurodollar Rate Loan; or
(ii) Convert any Base Rate Loan to a Eurodollar Rate
Loan on any Business Day.
Each such notice shall be effective upon receipt by the Agent, shall
specify the amount of the Eurodollar Rate Loan affected, and, if a
Continuation as or Conversion into a
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Eurodollar Rate Loan, the Interest Period to be used in the computation
of interest. The Authorized Representative shall provide the Agent
written confirmation of each such telephonic notice in the form of a
Borrowing Notice or Interest Rate Selection Notice (as applicable) with
appropriate insertions but failure to provide such confirmation shall
not affect the validity of such telephonic notice. Notice of receipt of
such Borrowing Notice or Interest Rate Selection Notice, as the case
may be, shall be provided by the Agent to each Lender by telefacsimile
transmission with reasonable promptness, but (provided the Agent shall
have received such notice by 10:30 A.M.) not later than 3:00 P.M. on
the same day as the Agent's receipt of such notice. All such
Continuations or Conversions of Loans shall be effected pro rata based
on the Applicable Commitment Percentages of the Lenders.
4.3. PAYMENT OF INTEREST. The Borrower shall pay interest on the
outstanding and unpaid principal amount of each Revolving Loan, commencing on
the first date of such Revolving Loan until such Revolving Loan shall be repaid,
at the applicable Base Rate or Eurodollar Rate as designated by the Borrower in
the related Borrowing Notice or Interest Rate Selection Notice or as otherwise
provided hereunder. Interest on each Revolving Loan shall be paid on the earlier
of (a) in the case of any Base Rate Loan, quarterly in arrears of the last
Business Day of each November, February, May and August, commencing on November
30, 1999, until the Revolving Credit Termination Date, at which date the entire
principal amount of and all accrued interest on the Revolving Loans shall be
paid in full, (b) in the case of any Eurodollar Rate Loan, on last day of the
applicable Interest Period for such Eurodollar Rate Loan and if such Interest
Period extends for more than three (3) months, at intervals of three (3) months
after the first day of such Interest Period, and (c) upon payment in full of the
related Revolving Loan; PROVIDED, HOWEVER, that if any Event of Default shall
occur and be continuing, all amounts outstanding hereunder shall bear interest
thereafter until paid in full at the Default Rate.
4.4. PREPAYMENTS OF EURODOLLAR RATE LOANS. Whenever any payment of
principal shall be made in respect of any Loan hereunder, whether at maturity,
on acceleration, by optional or mandatory prepayment or as otherwise required or
permitted hereunder, with the effect that any Eurodollar Rate Loan shall be
prepaid in whole or in part prior to the last day of the Interest Period
applicable to such Eurodollar Rate Loan, such payment of principal shall be
accompanied by the additional payment, if any, required by SECTION 5.5.
4.5. MANNER OF PAYMENT.
(a) Each payment of principal (including any prepayment) and
payment of interest and fees, and any other amount required to be paid
by or on behalf of the Borrower to the Lenders, the Issuing Bank, the
Agent, or Bank of America with respect to any Loan, Letter of Credit,
Reimbursement Obligation, or Swing Line Loan, shall be made to the
Agent at the Principal Office in Dollars in immediately available funds
without condition or deduction or for any setoff, recoupment, deduction
or counterclaim on or before 12:30 P.M. on the date such payment is
due. The Agent may, but shall not
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be obligated to, debit the amount of such payment from any one or more
ordinary deposit accounts of the Borrower with the Agent.
(b) Any payment made by or on behalf of the Borrower that is
not made both in Dollars in immediately available funds and prior to
12:30 P.M. on the date such payment is to be made shall constitute a
non-conforming payment. Any such non-conforming payment shall not be
deemed to be received until the later of (i) the time such funds become
available funds and (ii) the next Business Day. Any non-conforming
payment may constitute or become a Default or Event of Default as
otherwise provided herein. Interest shall continue to accrue at the
Default Rate on any principal or fees as to which no payment or a
non-conforming payment is made from the date such amount was due and
payable until the later of (i) the date such funds become available
funds or (ii) the next Business Day.
(c) In the event that any payment hereunder or under any of
the Notes becomes due and payable on a day other than a Business Day,
then such due date shall be extended to the next succeeding Business
Day unless provided otherwise under the definition of "Interest
Period"; PROVIDED, however, that interest shall continue to accrue
during the period of any such extension; and PROVIDED further, however,
that in no event shall any such due date be extended beyond the
Revolving Credit Termination Date.
4.6. FEES.
(a) UNUSED FEE. For the period beginning on the Closing Date
and ending on the Revolving Credit Termination Date, the Borrower
agrees to pay to the Agent, for the pro rata benefit of the Lenders
based on their Applicable Commitment Percentages, a commitment fee
equal to the Applicable Unused Fee multiplied by the average daily
amount by which the Total Revolving Credit Commitment exceeds the sum
of (i) Revolving Credit Outstandings without giving effect to Swing
Line Outstandings plus (ii) Letter of Credit Outstandings. Such fees
shall be due in arrears on the last Business Day of each November,
February, May and August, commencing November 30, 1999 to and on the
Revolving Credit Termination Date. Notwithstanding the foregoing, so
long as any Lender fails to make available any portion of its Revolving
Credit Commitment when required to do so in accordance with the terms
hereof, such Lender shall not be entitled to receive payment of its pro
rata share of such fee until such Lender shall make available such
portion.
(b) LETTER OF CREDIT FACILITY FEES. The Borrower shall pay to
the Agent, for the pro rata benefit of the Lenders based on their
Applicable Commitment Percentages, a fee on the aggregate amount
available to be drawn on each outstanding Letter of Credit at a rate
equal to the Applicable Margin for Eurodollar Rate Loans. Such fees
shall be due with respect to each Letter of Credit quarterly in arrears
on the last day of each December, March, June and September, the first
such payment to be made on the first such date occurring after the date
of issuance of a Letter of Credit.
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(c) LETTER OF CREDIT FRONTING AND ADMINISTRATIVE FEES. From
and after the date on which there is more than one Lender, the Borrower
shall pay to the Issuing Bank a fronting fee of one-eighth of one
percent per annum (.125%) on the aggregate amount available to be
drawn on each outstanding Letter of Credit, such fee to be payable
quarterly in arrears with respect to each Letter of Credit on the dates
established in SECTION 4.6(b) for the payment of Letter of Credit
facility fees with respect to such Letter of Credit. The Borrower shall
also pay to the Issuing Bank such administrative fee and other fees, if
any, in connection with the Letters of Credit in such amounts and at
such times as the Issuing Bank and the Borrower shall agree from time
to time.
(d) AGENCY ADMINISTRATIVE FEES. The Borrower agrees to pay to
the Agent, for the Agent's individual account, an annual administrative
fee, such fee to be payable in such amounts and on such dates as from
time to time agreed to by the Borrower and Agent in writing.
4.7. PRO RATA PAYMENTS. Except as otherwise specified herein, (a) each
payment on account of the principal of and interest on Loans, the fees described
in SECTION 4.6(a) AND (b), and Swing Line Loans and Reimbursement Obligations as
to which the Lenders have funded their respective Participations which remain
outstanding, shall be made to the Agent for the account of the Lenders pro rata
based on their Applicable Commitment Percentages, and (b) the Agent will
promptly distribute to the Lenders in immediately available funds payments
received in fully collected, immediately available funds from the Borrower.
4.8. COMPUTATION OF RATES AND FEES. Except as may be otherwise
expressly provided, (i) the Base Rate shall be computed on the basis of the
365/366 day year and calculated for actual days elapsed, and (ii) all other
interest rates (including each Eurodollar Rate, and the Default Rate) and fees
shall be computed on the basis of a year of 360 days and calculated for actual
days elapsed.
4.9. DEFICIENCY ADVANCES; FAILURE TO PURCHASE PARTICIPATIONS. No Lender
shall be responsible for any default of any other Lender in respect to such
other Lender's obligation to make any Loan or Advance hereunder or to fund its
purchase of any Participation hereunder nor shall the Revolving Credit
Commitment or Letter of Credit Commitment of any Lender hereunder be increased
as a result of such default of any other Lender. Without limiting the generality
of the foregoing or the provisions of SECTION 4.10, in the event any Lender
shall fail to advance funds to the Borrower as herein provided, the Agent may in
its discretion, but shall not be obligated to, advance under the applicable Note
in its favor as a Lender all or any portion of such amount or amounts (each, a
"deficiency advance") and shall thereafter be entitled to payments of principal
of and interest on such deficiency advance in the same manner and at the same
interest rate or rates to which such other Lender would have been entitled had
it made such Advance under its Note; provided that, (i) such defaulting Lender
shall not be entitled to receive payments of principal, interest or fees with
respect to such deficiency advance until such deficiency advance (together with
interest thereon as provided in clause (ii)) shall be paid by such Lender and
(ii) upon payment to the Agent from such other Lender of the entire outstanding
amount of each such deficiency advance, together with accrued and unpaid
interest thereon, from
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the most recent date or dates interest was paid to the Agent by a Borrower on
each Loan comprising the deficiency advance at the Federal Funds Rate, then such
payment shall be credited against the applicable Note of the Agent in full
payment of such deficiency advance and such Borrower shall be deemed to have
borrowed the amount of such deficiency advance from such other Lender as of the
most recent date or dates, as the case may be, upon which any payments of
interest were made by such Borrower thereon. In the event any Lender shall fail
to fund its purchase of a Participation after notice from the Issuing Bank or
Bank of America as the Swing Line lender, as applicable, such Lender shall pay
to the Issuing Bank or Bank of America as the Swing Line lender, as applicable,
such amount on demand, together with interest on the amount so due from the date
of such notice at the Federal Funds Rate to the date such purchase price is
received by the Issuing Bank or Bank of America as the Swing Line lender, as
applicable.
4.10. INTRADAY FUNDING. Without limiting the provisions of SECTION 4.9,
unless the Borrower or any Lender has notified the Agent not later than 12:00
Noon of the Business Day before the date any payment (including in the case of
Lenders any Advance) to be made by it is due, that it does not intend to remit
such payment, the Agent may, in its discretion, assume that Borrower or each
Lender, as the case may be, has timely remitted such payment in the manner
required hereunder and may, in its discretion and in reliance thereon, make
available such payment (or portion thereof) to the Person entitled thereto as
otherwise provided herein. If such payment was not in fact remitted to the Agent
in the manner required hereunder, then:
(i) if Borrower failed to make such payment, each Lender shall
forthwith on demand repay to the Agent the amount of such assumed
payment made available to such Lender, together with interest thereon
in respect of each day from and including the date such amount was made
available by the Agent to such Lender to the date such amount is repaid
to the Agent at the Federal Funds Rate; and
(ii) if any Lender failed to make such payment, the Agent
shall be entitled to recover such corresponding amount forthwith upon
the Agent's demand therefor, the Agent promptly shall notify the
Borrower, and the Borrower shall promptly pay such corresponding amount
to the Agent in immediately available funds upon receipt of such
demand. The Agent also shall be entitled to recover interest on such
corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to
the date such corresponding amount is recovered by the Agent, (A) from
such Lender at a rate per annum equal to the daily Federal Funds Rate
or (B) from the Borrower, at a rate per annum equal to the interest
rate applicable to the Loan which includes such corresponding amount.
Until the Agent shall recover such corresponding amount together with
interest thereon, such corresponding amount shall constitute a
deficiency advance within the meaning of SECTION 4.9. Nothing herein
shall be deemed to relieve any Lender from its obligation to fulfill
its commitments hereunder or to prejudice any rights which the Agent or
the Borrower may have against any Lender as a result of any default by
such Lender hereunder.
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ARTICLE V
Change in Circumstances
-----------------------
5.1. INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any applicable
law, rule, or regulation, or any change in any applicable law, rule, or
regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank, or comparable
agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any
such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable
Lending Office) to any tax, duty, or other charge with respect
to any Eurodollar Rate Loans, its Note, or its obligation to
make Eurodollar Rate Loans, or change the basis of taxation of
any amounts payable to such Lender (or its Applicable Lending
Office) under this Agreement or its Note in respect of any
Eurodollar Rate Loans (other than taxes imposed on the overall
net income of such Lender by the jurisdiction in which such
Lender has its principal office or such Applicable Lending
Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate) relating to any
extensions of credit or other assets of, or any deposits with
or other liabilities or commitments of, such Lender (or its
Applicable Lending Office), including the Revolving Credit
Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable
Lending Office) or on the London interbank market any other
condition affecting this Agreement or its Note or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing, or maintaining any Loans or to reduce any sum received or
receivable by such Lender (or its Applicable Lending Office) under this
Agreement or its Note with respect to any Eurodollar Rate Loans, then
the Borrower shall pay to such Lender on demand such amount or amounts
as will compensate such Lender for such increased cost or reduction. If
any Lender requests compensation by the Borrower under this SECTION
5.1(a), the Borrower may, by notice to such Lender (with a copy to the
Agent), suspend the obligation of such Lender to make or Continue Loans
of the Type with respect to which such compensation is requested, or to
Convert Loans of any other Type into Loans of such Type, until the
event or condition giving rise to such request ceases to be in effect
(in which case the provisions of SECTION
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5.4 shall be applicable); PROVIDED that such suspension shall not
affect the right of such Lender to receive the compensation so
requested.
(b) If, after the date hereof, any Lender shall have
determined that the adoption of any applicable law, rule, or regulation
regarding capital adequacy or any change therein or in the
interpretation or administration thereof by any governmental authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of
such Lender or any corporation controlling such Lender as a consequence
of such Lender's obligations hereunder to a level below that which such
Lender or such corporation could have achieved but for such adoption,
change, request, or directive (taking into consideration its policies
with respect to capital adequacy), then from time to time upon demand
the Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender for such reduction.
(c) Each Lender shall promptly notify the Borrower and the
Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender to compensation pursuant to this
SECTION 5.1 and will designate a different Applicable Lending Office if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender, be otherwise
disadvantageous to it. Any Lender claiming compensation under this
SECTION 5.1 shall furnish to the Borrower and the Agent a statement
setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error.
In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
5.2. LIMITATION ON TYPES OF LOANS. If on or prior to the first day of
any Interest Period for any Eurodollar Rate Loan:
(a) the Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination shall
be conclusive) and notify the Agent that the Eurodollar Rate will not
adequately and fairly reflect the cost to the Lenders of funding
Eurodollar Rate Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Type of Loans and the relevant amounts or periods, and so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Loans of such Type, Continue Loans of such Type, or to Convert Loans
of any other Type into Loans of such Type and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Loans of the
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affected Type, either prepay such Loans or Convert such Loans into another Type
of Loan in accordance with the terms of this Agreement.
5.3. ILLEGALITY. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such
Lender shall promptly notify the Borrower thereof and such Lender's obligation
to make or Continue Eurodollar Rate Loans and to Convert other Types of Loans
into Eurodollar Rate Loans shall be suspended until such time as such Lender may
again make, maintain, and fund Eurodollar Rate Loans (in which case the
provisions of SECTION 5.4 shall be applicable).
5.4. TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make a Eurodollar Rate Loan or to Continue, or to Convert Loans of any other
Type into, Loans of a particular Type shall be suspended pursuant TO SECTION 5.1
OR 5.3 hereof (Loans of such Type being herein called "Affected Loans" and such
Type being herein called the "Affected Type"), such Lender's Affected Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of the
then current Interest Period(s) for Affected Loans (or, in the case of a
Conversion required by SECTION 5.3 hereof, on such earlier date as such Lender
may specify to the Borrower with a copy to the Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
SECTION 5.1 OR 5.3 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Loans of the Affected Type shall be made or Continued
instead as Base Rate Loans, and all Loans of such Lender that would
otherwise be Converted into Loans of the Affected Type shall be
Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in SECTION 5.1 OR 5.3 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this SECTION 5.4 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by the Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their respective Revolving
Credit Commitments.
5.5. COMPENSATION. Upon the request of any Lender, the Borrower shall
pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender)
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to compensate it for any loss, cost, or expense (including loss of anticipated
profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar
Rate Loan for any reason (including, without limitation, the
acceleration of the Loans pursuant to SECTION 10.1) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any condition precedent specified in
ARTICLE VI to be satisfied) to borrow, Convert, Continue, or prepay a
Eurodollar Rate Loan on the date for such borrowing, Conversion,
Continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation, or Conversion under this
Agreement.
5.6. TAXES.
(a) Any and all payments by the Borrower to or for the account
of any Lender or the Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, EXCLUDING,
in the case of each Lender and the Agent, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction under the laws
of which such Lender (or its Applicable Lending Office) or the Agent
(as the case may be) is organized or any political subdivision thereof
(all such non-excluded taxes, duties, 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 under this Agreement or any other
Loan Document to any Lender or the Agent, (i) the sum payable shall be
increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
SECTION 5.6) such Lender 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, (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law, and (iv) the Borrower
shall furnish to the Agent, at its address referred to in SECTION 12.2,
the original or a certified copy of a receipt evidencing payment
thereof.
(b) In addition, the Borrower agrees to pay any and all
present or future stamp or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any
payment made under this Agreement or any other Loan Document or from
the execution or delivery of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other
Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent
for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this SECTION 5.6)
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paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, interest, and expenses) arising therefrom or with
respect thereto.
(d) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Lender listed on the
signature pages hereof and on or prior to the date on which it becomes
a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by the Borrower or the Agent (but
only so long as such Lender remains lawfully able to do so), shall
provide the Borrower and the Agent with (i) Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is entitled
to benefits under an income tax treaty to which the United States is a
party which reduces the rate of withholding tax on payments of interest
or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the
United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue
Service, and (iii) any other form or certificate required by any taxing
authority (including any certificate required by Sections 871(h) and
881(c) of the Internal Revenue Code), certifying that such Lender is
entitled to an exemption from or a reduced rate of tax on payments
pursuant to this Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed
to provide the Borrower and the Agent with the appropriate form
pursuant to SECTION 5.6(d) (unless such failure is due to a change in
treaty, law, or regulation occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under SECTION 5.6(a) OR 5.6(b) with respect
to Taxes imposed by the United States; PROVIDED, HOWEVER, that should a
Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps
as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
(f) If the Borrower is required to pay additional amounts to
or for the account of any Lender pursuant to this SECTION 5.6, then
such Lender will agree to use reasonable efforts to change the
jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of
Taxes, the Borrower shall furnish to the Agent the original or a
certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this SECTION 5.6 shall survive the termination of
the Revolving Credit Commitments, the payment in full of the Notes and
the Facility Termination Date.
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ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
--------------------------------------------------------
6.1. CONDITIONS OF INITIAL ADVANCE. The obligation of the Lenders to
make the initial Advance under the Revolving Credit Facility, and of the Issuing
Bank to issue any Letter of Credit, and of Bank of America to make any Swing
Line Loan, is subject to the conditions precedent that:
(a) the Agent shall have received on the Closing Date, in form
and substance satisfactory to the Agent and Lenders, the following:
(i) executed originals of each of this Agreement, the
Notes, the initial Facility Guaranties, the LC Account
Agreement and the other Loan Documents, together with all
schedules and exhibits thereto;
(ii) the favorable written opinion or opinions with
respect to the Loan Documents and the transactions
contemplated thereby of General Counsel to the Credit Parties
dated the Closing Date, addressed to the Agent and the Lenders
and satisfactory to Smith Helms Mulliss & Moore, L.L.P.,
special counsel to the Agent, substantially in the form of
EXHIBIT G;
(iii) resolutions of the boards of directors or other
appropriate governing body (or of the appropriate committee
thereof) of each Credit Party certified by its secretary or
assistant secretary as of the Closing Date, (x) approving and
adopting the Loan Documents to be executed by such Person, and
authorizing the execution and delivery thereof, (y) declaring
and authorizing the Special Distribution and (z) approving and
adopting the Line of Business Transfer Documents and the
Spinoff Documents, and authorizing the execution and delivery
thereof;
(iv) specimen signatures of officers or other
appropriate representatives executing the Loan Documents on
behalf of each of the Credit Parties, certified by the
secretary or assistant secretary of such Credit Party;
(v) the Organizational Documents of each of the
Credit Parties certified as of a recent date by the Secretary
of State of its state of organization;
(vi) Operating Documents of each of the Credit
Parties certified as of the Closing Date as true and correct
by its secretary or assistant secretary;
(vii) certificates issued as of a recent date by the
Secretaries of State of the respective jurisdictions of
formation of each of the Credit Parties as to the due
existence and good standing of such Person;
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(viii) appropriate certificates of qualification to do
business, good standing and, where appropriate, authority to
conduct business under assumed name, issued in respect of the
Borrower as of a recent date by the Secretary of State or
comparable official of each of Pennsylvania, Ohio,
Mississippi, North Carolina, South Carolina, New Hampshire,
Wisconsin and Massachussetts, and in respect of each of the
Guarantors as of a recent date by the Secretary of State or
comparable official of Ohio, in each case constituting all of
the jurisdictions in which the failure to be qualified to do
business or authorized so to conduct business could have a
Material Adverse Effect;
(ix) notice of appointment of the initial Authorized
Representative(s);
(x) certificate of an Authorized Representative dated
the Closing Date demonstrating compliance with the financial
covenants contained in SECTIONS 9.1(a) and 9.1(b) as of the
end of the fiscal quarter of GenCorp and its subsidiaries most
recently ended prior to the Closing Date and based on the
historical pro forma financial statements furnished to the
Agent reflecting the Transferred Business as at and for the
four fiscal quarter period ended on such date, substantially
in the form of EXHIBIT H;
(xi) the Historical Unaudited Quarterly Statements
and all other financial statements and projections referred to
in SECTION 7.6(a);
(xii) evidence that all notices required to be given to
effect on the Closing Date the repayment of the GenCorp
Prepayable Debt and termination of the Existing GenCorp Credit
Agreement substantially simultaneously with payment of the
Special Distribution shall have been given;
(xiii) a certificate of an officer of the Borrower
reasonably satisfactory to the Agent and the Lenders as to the
matters set forth in SECTIONS 6.1(b)(i)(x) and 6.1(b)(ii) and
6.1(b)(iii) and, with respect to the operations, assets and
affairs of the Borrower and its Subsidiaries only, SECTIONS
6.1(c)(i) through 6.1(c)(iii);
(xiv) a certificate of an officer of GenCorp reasonably
satisfactory to the Agent and the Lenders as to the matters
set forth in SECTIONS 6.1(b)(i)(y), 6.1(b)(i)(z) and
6.1(b)(ii) and, with respect to the operations, assets and
affairs of GenCorp and its subsidiaries only, SECTIONS
6.1(c)(i) through 6.1(c)(iii);
(xv) evidence of all insurance required by the Loan
Documents;
(xvi) an initial Borrowing Notice, if any, and, if
elected by the Borrower, Interest Rate Selection Notice;
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(xvii) copies of the executed Line of Business
Transfer Documents and Spinoff Documents certified by the
secretary or an assistant secretary of the Borrower, which
shall be satisfactory in form and substance to the Agent;
(xviii) copies certified by an Authorized
Representative of executed employment contracts by the
Borrower with key executives of the Transferred Business,
including Messrs. Yasinsky, McMullen and Mass;
(xix) a copy, certified by a Responsible Officer of
the Borrower, of the ruling letter dated June 30, 1999 from
the Internal Revenue Service ("IRS") to the effect that
Section 335 of the Code would apply to the Spinoff such that
the Spinoff will constitute a tax-free distribution by GenCorp
for U.S. Federal income tax purposes (the "IRS Ruling
Letter");
(xx) such other documents, instruments, certificates
and opinions as the Agent or any Lender may reasonably request
on or prior to the Closing Date in connection with the
consummation of the transactions contemplated hereby; and
(xxi) evidence that all fees payable by the Borrower
on the Closing Date to the Agent, BAS and the Lenders have
been paid in full;
(b) Each of the following shall have occurred or be true:
(i) substantially simultaneously with the making of
the initial Advance hereunder (x) the Borrower shall make the
Special Distribution, (y) GenCorp shall prepay in full the
GenCorp Prepayable Debt and terminate and cancel the Existing
GenCorp Credit Agreement, and (z) the Spinoff and the Line of
Business Transfer shall be effected in accordance with, and
upon satisfaction of, each of the conditions to effectiveness
thereof without any waiver thereof as set forth in the Spinoff
Documents and the Line of Business Transfer Documents,
respectively;
(ii) there is no material asset or interest of
GenCorp scheduled or described in the Distribution Agreement
to be contributed to the Borrower in the Line of Business
Transfer which has not been assigned or transferred by GenCorp
to the Borrower as permitted pursuant to the Distribution
Agreement; and
(iii) there shall not have been any material
amendment, revision, alteration or supplement to any of the
Spinoff Documents or any of the Line of Business Transfer
Documents from the forms thereof from time to time delivered
to and reviewed by the Lenders without the written consent of
the Agent.
(c) In the good faith judgment of the Agent and the Lenders:
(i) there shall not have occurred or become known to
the Agent or the Lenders any event, condition, situation or
status since the date of the information
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contained in the financial and business projections, budgets,
pro forma data and forecasts concerning the Borrower and its
Subsidiaries delivered to the Agent prior to the Closing Date
that has had or could reasonably be expected to result in a
Material Adverse Effect or adversely affect the consummation
of the Spinoff or the Line of Business Transfer in accordance
with the terms of the Spinoff Documents or the Line of
Business Transfer Documents, respectively;
(ii) no order, decree, judgment, ruling, injunction,
litigation, action, suit, investigation or other arbitral,
administrative or judicial proceeding shall be pending or
threatened, and there shall exist no order, decree, judgment,
injunction or arbitral award or ruling, which could reasonably
be likely to result in a Material Adverse Effect, or restrain
or otherwise adversely affect the consummation of the Spinoff
or the Line of Business Transfer in accordance with the terms
of the Spinoff Documents or the Line of Business Transfer
Documents, respectively;
(iii) in connection with the Line of Business
Transfer, the Spinoff and the transactions contemplated
thereby, (A) each of GenCorp (or its applicable subsidiary)
and the Credit Parties shall have received all approvals,
consents and waivers, and shall have made or given all
necessary filings and notices as shall be required to
consummate the transactions contemplated hereby (including the
Spinoff and the Line of Business Transfer) without the
occurrence of any default under, conflict with or violation of
(I) any applicable law, rule, regulation, order or decree of
any Governmental Authority or arbitral authority or (II) any
agreement, document or instrument to which GenCorp, any of its
subsidiaries, or any of the Credit Parties is a party or by
which any of them or their properties is bound; and (B) such
approvals, consents and waivers shall be in force and effect,
(C) all waiting periods shall have expired without any action
being taken to restrain or prevent or impose any adverse
material conditions on the Line of Business Transfer, the
Spinoff and the transactions contemplated thereby, and (D) no
law or regulation shall be applicable which, in the sole
judgment of the Agent, could restrain or prevent or impose any
adverse material conditions on the Line of Business Transfer,
the Spinoff and the transactions contemplated thereby or be
violated by the consummation of any thereof;
6.2. CONDITIONS OF REVOLVING LOANS AND LETTER OF CREDIT. The
obligations of the Lenders to make any Revolving Loans, and the Issuing Bank to
issue Letters of Credit and Bank of America to make Swing Line Loans, hereunder
on or subsequent to the Closing Date are subject to the satisfaction of the
following conditions:
(a) the Agent or, in the case of Swing Line Loans, Bank of
America shall have received a Borrowing Notice if required by ARTICLE
II;
(b) the representations and warranties of the Credit Parties
set forth in ARTICLE VII and in each of the other Loan Documents shall
be true and correct in all material respects on and as of the date of
such Advance, Swing Line Loan or Letter of Credit
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issuance or renewal, with the same effect as though such
representations and warranties had been made on and as of such date,
except to the extent that such representations and warranties expressly
relate to an earlier date (specifically, as to SECTION 7.4, Borrower
agrees to provide an updated SCHEDULE 7.4 annually, and further
specifically excepting the last sentence of SECTION 7.6 , all of
Sections 7.7(b), 7.10, 7.11 AND 7.14(a), and the last sentence of
SECTION 7.17) and except that the financial statements referred to in
SECTION 7.5(a) shall be deemed (solely for the purpose of the
representation and warranty contained in such SECTION 7.5(a) but not
for the purpose of any cross reference to such SECTION 7.5(a) or to the
financial statements described therein contained in any other provision
of SECTION 7.5 or elsewhere in ARTICLE 7) to be those financial
statements most recently delivered to the Agent and the Lenders
pursuant to SECTION 8.1 from the date financial statements are
delivered to the Agent and the Lenders in accordance with such Section;
(c) in the case of the issuance of a Letter of Credit, the
Borrower shall have executed and delivered to the Issuing Bank an
Application and Agreement for Letter of Credit in form and content
acceptable to the Issuing Bank together with such other instruments and
documents as it shall request;
(d) at the time of (and after giving effect to) each Advance,
Swing Line Loan or the issuance of a Letter of Credit, no Default or
Event of Default specified in ARTICLE X shall have occurred and be
continuing; and
(e) immediately after giving effect to:
(i) a Revolving Loan, the aggregate principal balance
of all outstanding Revolving Loans for each Lender shall not
exceed such Lender's Revolving Credit Commitment;
(ii) a Letter of Credit or renewal thereof, the
aggregate principal balance of all outstanding Participations
in Letters of Credit and Reimbursement Obligations (or in the
case of the Issuing Bank, its remaining interest after
deduction of all Participations in Letters of Credit and
Reimbursement Obligations of other Lenders) for each Lender
and in the aggregate shall not exceed, respectively, (X) such
Lender's Letter of Credit Commitment or (Y) the Total Letter
of Credit Commitment;
(iii) a Swing Line Loan, the Swing Line Outstandings
shall not exceed $10,000,000; and
(iv) a Revolving Loan, Swing Line Loan or a Letter of
Credit or renewal thereof, the sum of Letter of Credit
Outstandings plus Revolving Credit Outstandings plus Swing
Line Outstandings shall not exceed the Total Revolving Credit
Commitment.
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ARTICLE VII
Representations and Warranties
------------------------------
The Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery of
the documents mentioned herein and the making of Loans), that:
7.1. ORGANIZATION AND AUTHORITY.
(a) The Borrower and each Subsidiary is a corporation duly
organized and validly existing under the laws of the jurisdiction of
its formation;
(b) The Borrower and each Subsidiary (i) has the requisite
power and authority to own its properties and assets and to carry on
its business as now being conducted and as contemplated in the
Transaction Documents, and (ii) is qualified to do business in every
jurisdiction in which failure so to qualify would have a Material
Adverse Effect;
(c) The Borrower has the power and authority to execute,
deliver and perform this Agreement and the Notes, and to borrow
hereunder, and to execute, deliver and perform each of the other
Transaction Documents to which it is a party;
(d) Each Guarantor has the power and authority to execute,
deliver and perform the Facility Guaranty and each of the other
Transaction Documents to which it is a party; and
(e) When executed and delivered, each of the Transaction
Documents to which any Credit Party is a party will be the legal, valid
and binding obligation or agreement, as the case may be, of such Credit
Party, enforceable against such Credit Party in accordance with its
respective terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law affecting
the enforceability of creditors' rights generally and to the effect of
general principles of equity which may limit the availability of
remedies (whether considered in a proceeding at law or in equity).
7.2. TRANSACTION DOCUMENTS. The execution, delivery and performance by
each Credit Party of each of the Transaction Documents to which it is a party:
(a) have been duly authorized by all requisite Organizational
Action of such Credit Party required for the lawful execution, delivery
and performance thereof;
(b) do not violate any provisions of (i) any applicable law,
rule or regulation (ii) any judgment, writ, order, determination,
decree or arbitral award of any Governmental Authority or arbitral
authority binding on such Credit Party or its properties, (iii) the
Organizational Documents or Operating Documents of such Credit
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Party, in each case in clauses (i) and (ii) hereof, which violation
could reasonably be expected to have a Material Adverse Effect;
(c) does not and will not be in conflict with, result in a
breach of or constitute an event of default, or an event which, with
notice or lapse of time or both, would constitute an event of default,
under any contract, indenture, agreement or other instrument or
document to which such Credit Party or GenCorp or any of its
subsidiaries is a party, or by which the properties or assets of such
Credit Party or GenCorp or any of its subsidiaries are bound which
conflict, breach or event of default could reasonably be expected to
have a Material Adverse Effect; and
(d) does not and will not result in the creation or imposition
of any Lien upon any of the properties or assets of such Credit Party
except any Liens in favor of the Agent and the Lenders created by the
Loan Documents.
7.3. GOVERNMENTAL AUTHORIZATION. Except as set forth in SCHEDULE 7.3,
neither the respective businesses or properties of the Borrower or any
Subsidiary, nor any relationship between the Borrower or any Subsidiary and any
other Person, nor the execution, delivery and performance of the Transaction
Documents and the transactions contemplated hereby, is such as to require a
consent, approval or authorization of, or filing, registration or qualification
with, any Governmental Authority or other authority or any other Person on the
part of the Borrower or any Subsidiary as a condition to the execution, delivery
and performance of, or consummation of the transactions contemplated by, this
Agreement or the other Transaction Documents, or if so, such consent, approval,
authorization, filing, registration or qualification has been obtained or
effected, as the case may be.
7.4. CAPITALIZATION; SUBSIDIARIES; INVESTMENTS. All outstanding shares
of capital stock of the Borrower have been duly authorized and are listed on
SCHEDULE 7.4. Except as set forth on SCHEDULE 7.4, there are no outstanding
subscriptions, warrants, options, calls, commitments or other rights (preemptive
or otherwise) or agreements to which the Borrower or, to the knowledge of the
Borrower, any shareholder is bound relating to the issuance, sale or redemption
of shares of common stock of the Borrower. The Borrower has no Subsidiaries
other than those Persons listed as Subsidiaries in SCHEDULE 7.4 and such
schedule states the authorized and issued capitalization of each Subsidiary
listed thereon, the number of shares or other equity interests of each class of
capital stock or interest issued and outstanding of each such Subsidiary and the
number and percentage of outstanding shares or other equity interest (including
options, warrants and other rights to acquire any interest) of each such class
of capital stock or other equity interest owned by the Borrower or by any such
Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable; and the Borrower and each such Subsidiary owns beneficially and
of record all the shares and other interests it is listed as owning in SCHEDULE
7.4, free and clear of any Lien other than Liens permitted under SECTION 9.4.
The Borrower has no investments and owns no interest in any other Person
(excluding Subsidiaries) other than as listed in SCHEDULE 7.4.
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7.5. FINANCIAL CONDITION.
(a) The Borrower has heretofore furnished to the Agent and
each Lender (i) audited consolidated financial statements of the
Borrower and its Subsidiaries for the Fiscal Years ending November 30,
1997 and November 30, 1998, consisting of a consolidated balance sheet
and the notes thereto and the related consolidated statements of
income, divisional equity and cash flows for the fiscal periods then
ended as examined and certified by Ernst & Young, LLP, and (ii)
Historical Unaudited Quarterly Statements, and (iii) pro forma
five-year projections, beginning with the Fiscal Year ending November
30, 1999, including pro forma balance sheets and income and cash flow
statements. Except as set forth therein, the financial statements
described in (i) and (ii) above (including the notes thereto) present
fairly after giving effect to the Business Transfer and the Spinoff,
the financial condition of the Borrower and its Subsidiaries as of the
end of such Fiscal Years and such quarterly periods and results of
their operations, cash flows and the changes in its divisional equity
for the Fiscal Years and interim period then ended, all in conformity
with GAAP applied on a Consistent Basis, subject however, in the case
of unaudited interim statements to year end audit adjustments and the
absence or reduced scope of footnote disclosures;
(b) since the later of (i) the date of the audited financial
statements delivered pursuant to SECTION 7.5(a)(i) hereof or (ii) the
date of the audited financial statements most recently delivered
pursuant TO SECTION 8.1(a) hereof, there has been no material adverse
change in the condition, financial or otherwise, of the Borrower, any
of its Subsidiaries or, in respect of clause (i), the Transferred
Business or in the businesses, properties, performance or operations of
the Borrower or any of its Subsidiaries, nor have such businesses or
properties been materially adversely affected as a result of any fire,
explosion, earthquake, accident, strike, lockout, combination of
workers, flood, embargo or act of God;
(c) except as set forth in the financial statements referred
to in SECTION 7.5(a) or in SCHEDULE 7.5 or permitted by SECTION 9.5,
neither Borrower nor any Subsidiary has incurred any material
Indebtedness which remains outstanding or unsatisfied.
7.6. TITLE TO PROPERTIES. The Borrower and each of its Subsidiaries has
good and marketable title to all its real and personal properties, subject to no
transfer restrictions or Liens of any kind, except for (i) the transfer
restrictions and Liens described in SCHEDULE 7.6, (ii) Liens permitted by
SECTION 9.4, (iii) with respect to any personal property that constitutes a
security, transfer restrictions imposed under Federal and state securities laws
and regulations, and (iv) the lack of title or the presence of such transfer
restrictions that could not reasonably be expected to have a Material Adverse
Effect. All real property owned or leased by the Borrower and its Subsidiaries
are described on SCHEDULE 7.6 hereto.
7.7. LITIGATION; LOSS CONTINGENCIES. Except as set forth in SCHEDULE
7.7 hereto, there are no legal actions, suits, proceedings, claims or disputes
pending, or to the knowledge of the Borrower threatened, at law, in equity, in
arbitration or before any Governmental Authority
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against or, to the Borrower's knowledge, directly affecting the Borrower or any
of its Subsidiaries (a) with respect to this Agreement or any of the other
Transaction Documents, or any of the transactions contemplated hereby, or (b)
which, in the opinion of management, after reviewing the information which is
currently available with respect to such matters and consulting with the
Borrower's counsel, could reasonably be expected to have a Material Adverse
Effect. No injunction, writ, temporary restraining order, decree or order of any
nature has been issued by any court or other Governmental Authority purporting
to enjoin or restrain the execution, delivery or performance of this Agreement
or any of the other Transaction Documents. Except as set forth in SCHEDULE 7.7
hereto, there are no material Contingent Obligations which are not, or are not
in effect, Guaranties or "loss contingencies" (as defined in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975 ("FAS 5")), which would be required by FAS 5 to be
disclosed or accrued in consolidated financial statements of the Borrower were
such financial statements prepared at the time this representation and warranty
is made or deemed made.
7.8. NO DEFAULT OR BREACH. No default or event has occurred and is
continuing or would result from the consummation of the transactions
contemplated hereunder and under the other Transaction Documents which
constitutes or, with the giving of notice or passage of time or both, would
constitute an Event of Default. Except as set forth on SCHEDULE 7.8 hereto,
after giving effect to the transactions contemplated hereby and by the other
Transaction Documents, neither the Borrower nor any of its Subsidiaries nor, to
the best of the Borrower's knowledge, with respect to any Material Contract, any
other party thereto, is or will be in default under or with respect to any
contractual obligation in any respect, which, individually or together with all
such defaults, could reasonably be expected to have a Material Adverse Effect.
7.9. MATERIAL CONTRACTS. Each Material Contract is, and after giving
effect to the consummation of the transactions contemplated hereby and by the
other Transaction Documents will be, in full force and effect in accordance with
the terms thereof, except to the extent any such Material Contract expires or
terminates in accordance with its terms as in effect on the Closing Date.
7.10. RELATED PARTY AGREEMENTS. Except with respect to the Line of
Business Transfer Documents and the Spinoff Documents or as set forth on
SCHEDULE 7.10, neither the Borrower nor any of its Subsidiaries is a party to
any material contract, agreement or commitment (a) with any director, officer or
shareholder of the Borrower (both before and after giving effect to the
transactions contemplated hereby and by the other Transaction Documents), or,
(b) to the Borrower's knowledge, with any Person in which any such director,
officer or shareholder has any direct or indirect interest.
7.11. ENVIRONMENTAL MATTERS. Based upon currently available information
and reasonable investigation and inquiry, to the best of management's knowledge,
except as set forth in SCHEDULE 7.11 hereto:
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(a) The Borrower and its Subsidiaries are in compliance with
all Environmental Laws, except to the extent that any non-compliance
would not reasonably be expected to have a Material Adverse Effect.
(b) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws that would reasonably be expected to
have a Material Adverse Effect, nor does the Borrower have knowledge or
reason to believe that any such notice will be received or is being
threatened.
(c) No judicial, governmental or administrative proceedings
are pending or are threatened against the Borrower or any of its
Subsidiaries under any Environmental Law, nor are there any consent
decrees or court decrees, consent orders, or administrative orders
outstanding under any Environmental Law with respect to the Borrower or
any of its Subsidiaries that would reasonably be expected to have a
Material Adverse Effect.
(d) There has been no release of Hazardous Materials arising
from, generated by or related to the operations of the Borrower or any
of its Subsidiaries, or for which the Borrower or any of its
Subsidiaries has retained or assumed liability in amounts or in a
manner that would reasonably be expected to result in a Material
Adverse Effect.
(e) Environmental liabilities with respect to continued and
discontinued operations of GenCorp other than the Transferred Business
have not been assumed by the Borrower, will remain the obligations of
GenCorp after the Spinoff, and GenCorp has agreed to indemnify the
Borrower for any such environmental liabilities pursuant to the terms
of the Distribution Agreement.
7.12. COMPLIANCE WITH LAW.
(a) CONDUCT OF BUSINESS. The Borrower and its Subsidiaries
have conducted their business so as to comply with, and are in
compliance with, all Requirements of Law, except where the failure to
so comply could not reasonably be expected to have a Material Adverse
Effect.
(b) LICENSES. The Borrower and its Subsidiaries have all
permits, certificates, licenses, approvals and other authorizations
required by any Governmental Authority in connection with the operation
of their business, except where the failure to obtain such requirements
could not reasonably be expected to have a Material Adverse Effect.
7.13. TAXES. The Borrower and each of its Subsidiaries has filed or
caused to be filed all Federal, state, local and foreign tax returns which are
required to be filed by it and which the failure to file could reasonably be
expected to have a Material Adverse Effect and, except for taxes and assessments
being contested in good faith by appropriate proceedings diligently conducted
and against which reserves reflected in the financial statements described in
SECTION 7.5(a) or more recently delivered pursuant to SECTION 8.1(a) and as
required by GAAP have been
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established, have paid or caused to be paid all taxes as shown on said returns
or on any assessment received by it, to the extent that such taxes have become
due unless the failure to pay the same could not reasonably be expected to have
a Material Adverse Effect.
7.14. EMPLOYEE BENEFIT PLANS. Except as set forth in SCHEDULE 7.14
hereto:
(a) Neither the Borrower nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit Plans
other than those identified on SCHEDULE 7.14 hereto;
(b) The Borrower and each ERISA Affiliate is in compliance
with all applicable provisions of ERISA and the regulations and
published interpretations thereunder and in compliance with all Foreign
Benefit Laws with respect to all Employee Benefit Plans except where
failure to comply could not reasonably be expected to have a Material
Adverse Effect and except for any required amendments for which the
remedial amendment period as defined in Section 401(b) of the Code has
not yet expired. Each Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified (or an application for such
a determination by the Internal Revenue Service has been submitted to
the Internal Revenue Service on a timely basis so as to preserve the
remedial amendment period), and each trust related to such plan has
been determined to be exempt under Section 501(a) of the Code. No
material liability has been incurred by the Borrower or any ERISA
Affiliate which remains unsatisfied for any taxes or penalties with
respect to any Employee Benefit Plan or any Multiemployer Plan;
(c) No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code)
been incurred (without regard to any waiver granted under Section 412
of the Code), nor has any funding waiver from the IRS been received or
requested with respect to any Pension Plan, nor has the Borrower or any
ERISA Affiliate failed to make any contributions or to pay any amounts
due and owing as required by Section 412 of the Code, Section 302 of
ERISA or the terms of any Pension Plan prior to the due dates of such
contributions under Section 412 of the Code or Section 302 of ERISA,
nor has there been any event requiring any disclosure under Section
4041(c)(3)(C), 4063(a) or 4068(f) of ERISA with respect to any Pension
Plan;
(d) Neither the Borrower nor any ERISA Affiliate has: (i)
engaged in a nonexempt prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code, (ii) incurred any liability to
the PBGC which remains outstanding other than the payment of premiums
and there are no premium payments which are due and unpaid, (iii)
failed to make a required contribution or payment to a Multiemployer
Plan or (iv) failed to make a required installment or other required
payment under Section 412 of the Code, unless such action or failure to
act could not reasonably be expected to have a Material Adverse Effect;
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(e) No Termination Event has occurred or is reasonably
expected to occur with respect to any Pension Plan or Multiemployer
Plan;
(f) No material proceeding, claim, lawsuit and/or
investigation exists or, to the best knowledge of the Borrower after
due inquiry, is threatened concerning or involving any Employee Benefit
Plan.
7.15. EMPLOYMENT MATTERS. Except as disclosed on SCHEDULE 7.15 hereto,
the Borrower and all Subsidiaries are in compliance with all applicable laws,
rules and regulations pertaining to labor or employment matters, including
without limitation those pertaining to wages, hours, occupational safety and
taxation, the noncompliance with which could reasonably be expected to have a
Material Adverse Effect, and there is neither pending nor, to the knowledge of
the Borrower, any threatened litigation, administrative proceeding or
investigation in respect of such matters an adverse ruling or determination in
which could reasonably be expected to have a Material Adverse Effect. Except as
disclosed on SCHEDULE 7.15 hereto, neither the Borrower nor any of its
Subsidiaries is party to any collective bargaining agreement with any labor
union or similar organization.
7.16. INTELLECTUAL PROPERTY. The Borrower and its Subsidiaries own, or
have a license or otherwise have the right to continue to use, without violating
the rights of any other Person, in all jurisdictions in which they carry on
business, all patents (including all applications, renewals, reissues,
extensions, divisions, continuations and extensions thereof), trademarks
(including both registered and unregistered trademarks and applications
therefor), service marks, trade names, copyrights (including all registrations,
renewals, modifications and extensions thereof), and know-how and trade secrets
(collectively, the "Intellectual Property"), currently in use but, to the extent
there is a failure to so own, license or possess the right to use such
Intellectual Property, such failure could not reasonably be expected to have a
Material Adverse Effect. Except as set forth on SCHEDULE 7.16 hereto, none of
the Intellectual Property is subject to any Lien other than Liens permitted
under SECTION 9.4. To the knowledge of the Borrower, no claim which could
reasonably be expected to have a Material Adverse Effect of any Person is
pending or threatened to the effect that any current use or ownership of the
Intellectual Property infringes upon or conflicts with any such rights of any
Person.
7.17. INSURANCE. The Borrower and its Subsidiaries maintain, to the
extent that reasonable commercial efforts permit them to, insurance with
financially sound and reputable insurance companies, or self-insure where the
Borrower deems appropriate, on all their properties in at least such amounts and
against at least such risks (but, including in any event, public liability,
product liability and business interruption) as are usually insured against or
self-insured in the same general area by companies engaged in the same or a
similar business. All policies of insurance owned or maintained by the Borrower
and its Subsidiaries and the coverages provided thereby are described on
SCHEDULE 7.17 hereto.
7.18. BOOKS AND RECORDS. The books and records of the Borrower and its
Subsidiaries, including the minutes of director and shareholder meetings,
consents or actions, are accurate, current and complete in all material
respects.
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7.19. JUDGMENTS AND OTHER RESTRICTIONS. Neither the Borrower nor any
Subsidiary is a party to any judgment, order, decree or any agreement or
instrument or subject to restrictions which could reasonably be likely to have a
Material Adverse Effect or to materially adversely affect the ability of the
Borrower or any Guarantor to observe the covenants and agreements contained
herein.
7.20 INVESTMENT COMPANY; MARGIN STOCK. Neither the Borrower nor any
Subsidiary is an "investment company," or an "affiliated person" of, or
"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.
ss. 80a-1, et seq.). The application of the proceeds of the Loans and repayment
thereof by the Borrower and the performance by the Borrower of the transactions
contemplated by this Agreement will not violate any provision of said Act, or
any rule, regulation or order issued by the Securities and Exchange Commission
thereunder, in each case as in effect on the date hereof. Neither the Borrower
nor any Subsidiary owns any "margin stock" as such term is defined in Regulation
U, as amended (12 C.F.R. Part 221), of the Board. The proceeds of the borrowings
made pursuant to ARTICLES II hereof will be used by the Borrower and its
Subsidiaries only for the purposes set forth in SECTION 2.2 hereof. None of such
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin stock or
for any other purpose which might constitute any of the Loans under this
Agreement a "purpose credit" within the meaning of said Regulation U or
Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrower nor any
agent acting on its behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant hereto
to violate any regulation of the Board or to violate the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended, or any state
securities laws, in each case as in effect on the date hereof.
7.21. DISCLOSURE.
(a) THIS AGREEMENT AND OTHER TRANSACTION DOCUMENTS. This
Agreement and the other Transaction Documents (including any and all
schedules and exhibits thereto), and all other documents and
certificates furnished to the Agent by the Borrower or its Subsidiaries
on or prior to the Closing Date did not and do not contain any untrue
statement of a material fact or omit, to the extent such agreements,
documents and certificates are taken as a whole, to state a material
fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made,
not misleading.
(b) MATERIAL ADVERSE EFFECT. There is no fact known to the
Borrower or any of its Subsidiaries which the Borrower has not
disclosed to the Agent in writing that has had or could be reasonably
expected to have a Material Adverse Effect.
7.22. HEDGING ARRANGEMENTS. The Borrower and its Subsidiaries have no
interest rate or currency swap arrangements nor is the Borrower or any of its
Subsidiaries party to any
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transaction involving derivatives or other hedging arrangements, except as set
forth on SCHEDULE 7.22 hereto and permitted under SECTION 9.14 hereof.
7.23. SOLVENCY. Each Credit Party is Solvent after giving effect to the
transactions contemplated by the Transaction Documents.
7.24. NO CONSENTS, ETC. Neither the respective businesses or properties
of the Credit Parties or any Subsidiary, nor any relationship among the Credit
Parties or any Subsidiary and any other Person, nor any circumstance in
connection with the execution, delivery and performance of the Transaction
Documents and the transactions contemplated thereby, is such as to require a
consent, approval or authorization of, or filing, registration or qualification
with, any Governmental Authority or any other Person on the part of any Credit
Party as a condition to the execution, delivery and performance of, or
consummation of the transactions contemplated by the Transaction Documents,
which, if not obtained or effected, would be reasonably likely to have a
Material Adverse Effect, or if so, such consent, approval, authorization,
filing, registration or qualification has been duly obtained or effected, as the
case may be.
7.25. YEAR 2000 COMPLIANCE. The Borrower and its Subsidiaries have (i)
initiated a review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by information
received from suppliers and vendors) that could reasonably be expected to be
adversely affected by the Year 2000 Problem, (ii) developed a plan and timeline
for addressing the Year 2000 Problem affecting material computer applications
and other systems and operations of the Borrower and its Subsidiaries and their
key vendors and customers not later September 30, 1999, with the exception of
GenCorp Wallcoverings (UK) Limited, whose Year 2000 Problem will be addressed
not later than October 31, 1999, and (iii) to date, implemented that plan
substantially in accordance with that timetable. The Borrower reasonably
believes that all computer applications and other systems and operations that
are material to its or any of its Subsidiaries' business and operations will on
a timely basis be Year 2000 Compliant, except to the extent that a failure to do
so could not reasonably be expected to have Material Adverse Effect.
7.26. TAX TREATMENT OF SPINOFF. The Spinoff has been accomplished
substantially simultaneously with the making of the initial advance hereunder
consistent with the factual representations and assumptions presented to the IRS
by GenCorp in its request for the IRS Ruling Letter.
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ARTICLE VIII
Affirmative Covenants
---------------------
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will, and where applicable will cause
each Subsidiary to:
8.1. FINANCIAL REPORTS, ETC.
(a) As soon as practical and in any event within 95 days after
the end of each Fiscal Year of the Borrower, deliver or cause to be
delivered to the Agent and each Lender (i) consolidated and, if there
are any Material Subsidiaries, consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year, and
the notes thereto, and the related consolidated and, if there are any
Material Subsidiaries, consolidating statements of income,
stockholders' equity and cash flows, and the respective notes thereto,
for such Fiscal Year, setting forth (other than for consolidating
statements) comparative financial statements for the preceding Fiscal
Year, all prepared in accordance with GAAP applied on a Consistent
Basis and containing, with respect to the consolidated financial
statements, opinions of Ernst & Young, LLP or other such independent
certified public accountants selected by the Borrower and approved by
the Agent, which are unqualified as to the scope of the audit performed
and as to the "going concern" status of the Borrower and without any
exception not acceptable to the Lenders, and (ii) a certificate of a
Responsible Officer demonstrating compliance with SECTIONS 9.1(a) and
9.1(b) and 9.3, which certificate shall be in the form of EXHIBIT H;
(b) as soon as practical and in any event within 50 days after
the end of each fiscal quarter (except the last fiscal quarter of any
Fiscal Year), deliver to the Agent and each Lender (i) consolidated
and, if there are any Material Subsidiaries, consolidating balance
sheets of the Borrower and its Subsidiaries as at the end of such
fiscal quarter, and the related consolidated and, if there are any
Material Subsidiaries, consolidating statements of income,
stockholders' equity and cash flows for such fiscal quarter and for the
period from the beginning of the then current Fiscal Year through the
end of such reporting period, and accompanied by a certificate of a
Responsible Officer to the effect that such financial statements
present fairly the financial position of the Borrower and its
Subsidiaries as of the end of such fiscal period and the results of
their operations and the changes in their financial position for such
fiscal period, in conformity with the standards set forth in SECTION
7.5(a) with respect to interim financial statements, and (ii) a
certificate of a Responsible Officer containing computations for such
quarter comparable to that required pursuant to SECTION 8.1(a)(ii);
(c) together with each delivery of the financial statements
required by SECTION 8.1(a)(i), deliver to the Agent and each Lender a
letter from the Borrower's accountants specified in SECTION 8.1(a)(i)
stating that in performing the audit necessary to render an opinion on
the financial statements delivered under SECTION 8.1(a)(i), they
obtained no knowledge of any Default or Event of Default by the
Borrower in the fulfillment of the
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terms and provisions of this Agreement insofar as they relate to
financial matters (which at the date of such statement remains
uncured); or if the accountants have obtained knowledge of such Default
or Event of Default, a statement specifying the nature and period of
existence thereof;
(d) promptly upon their becoming available to the Borrower,
deliver to the Agent and each Lender a copy of (i) all regular or
special reports or effective registration statements which Borrower or
any Subsidiary shall file with the Securities and Exchange Commission
(or any successor thereto) or any securities exchange and (ii) any
proxy statement distributed by the Borrower or any Subsidiary to its
shareholders, bondholders or the financial community in general;
(e) concurrently with the delivery of the financial statements
referred to in SECTION 8.1(a) and the delivery of the financial
statements required to be delivered under SECTION 8.1(b) at the end of
the second quarterly period of each Fiscal Year of the Borrower,
deliver or cause to be delivered to the Agent and each Lender a report
of the Borrower with respect to the environmental matters affecting the
Borrower and the Subsidiaries in the same level of detail and of the
same scope as that furnished to the lenders under the Existing GenCorp
Credit Agreement;
(f) concurrently with the delivery of the financial statements
required to be delivered under SECTION 8.1(a) OR (b), deliver or cause
to be delivered to the Agent and each Lender notice of any request for
indemnity under the terms of the Spinoff Documents and the Line of
Business Transfer Documents either delivered to, or received from,
GenCorp which, when aggregated with all other such requests would
exceed $10,000,000 and, with respect to such requests from GenCorp, the
position of the Borrower in response to such request; and
(g) promptly, from time to time, deliver or cause to be
delivered to the Agent and each Lender such other information regarding
Borrower's and any Subsidiary's operations, business affairs and
financial condition as the Agent or such Lender may reasonably request.
Subject to the provisions of SECTION 12.1(h), the Agent and the Lenders
are hereby authorized to deliver a copy of any such financial or other
information delivered hereunder to the Lenders (or any affiliate of any Lender
as necessary or beneficial to fulfill the obligations of any Lender hereunder)
or to the Agent, to any Governmental Authority having jurisdiction over the
Agent or any of the Lenders pursuant to any written request therefor or in the
ordinary course of examination of loan files, or to any other Person who shall
acquire or consider the assignment of, or acquisition of any participation
interest in, any Obligation permitted by this Agreement.
8.2. MAINTAIN PROPERTIES. Maintain all properties necessary to its
operations in good working order and condition and make all needed repairs,
replacements and renewals to such properties, in each case as are reasonably
necessary to conduct its business as currently conducted or as contemplated
hereby, all in accordance with customary and prudent business practices.
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8.3. EXISTENCE, QUALIFICATION, ETC. Except as otherwise expressly
permitted under SECTION 9.8, do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and all material rights
and franchises, and maintain its qualification to do business as a foreign
corporation and good standing in each jurisdiction in which its ownership or
lease of property or the nature of its business makes such license or
qualification necessary except where the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect.
8.4. REGULATIONS AND TAXES. Comply in all material respects with all
statutes and governmental regulations and pay all taxes, assessments,
governmental charges, claims for labor, supplies, rent and any other obligation
which, if unpaid, would become a Lien against any of its properties except any
thereof being contested in good faith by appropriate proceedings diligently
conducted, as to which no Lien has attached to and is enforceable against any of
its properties and against which adequate reserves as required by GAAP have been
established.
8.5. INSURANCE, PROCEEDS AND CONDEMNATION. (a) Keep all of its
insurable properties adequately insured at all times with responsible insurance
carriers against loss or damage by fire and other hazards to the extent and in
the manner as are currently maintained and are prudent when considered in light
of the Borrower's properties and businesses, (b) maintain general public
liability insurance at all times with responsible insurance carriers against
liability on account of damage to persons and property having such limits,
deductibles, exclusions, co-insurance and other provisions providing coverages
that are currently maintained and are prudent when considered in light of the
Borrower's properties and businesses, and (c) maintain existing insurance under
all applicable workers' compensation laws (or in the alternative, maintain
required reserves if self-insured for workers' compensation purposes). Each of
the policies of insurance described in this SECTION 8.5(a) and (b) shall provide
that the insurer shall give the Agent not less than thirty (30) days' prior
written notice before any such policy shall lapse or be terminated or cancelled.
8.6. TRUE BOOKS. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and transactions,
and set up on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements.
8.7. YEAR 2000 COMPLIANCE. The Borrower will (i) promptly notify the
Agent and the Lenders in the event the Borrower discovers or determines that any
computer application or other system or operation (including those affected by
information received from its suppliers and vendors) that is material to its or
any of its Subsidiaries' business and operations will not be Year 2000 Compliant
on a timely basis, and (ii) take all actions reasonably necessary to make such
computer applications or other systems or operations Year 2000 Compliant, except
to the extent that such failure could not reasonably be expected to have a
Material Adverse Effect.
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8.8. RIGHT OF INSPECTION. Permit any Person designated by any Lender or
the Agent to visit and inspect any of the properties, corporate books and
financial reports of the Borrower or any Subsidiary and to discuss its affairs,
finances and accounts with its principal officers and independent certified
public accountants, all at reasonable times, at reasonable intervals and with
reasonable prior notice to a Responsible Officer; PROVIDED, HOWEVER, that prior
to the occurrence and continuance of an Event of Default, the costs associated
with all such visits and inspections by a Lender shall be borne by such Lender
and the costs associated with such visits and inspections by the Agent, in
excess of one visit and inspection each calendar year (the reasonable costs with
respect to which shall be borne by the Borrower) shall be borne by the Agent.
After the occurrence and during the continuation of an Event of Default, all
costs associated with such visits and inspections by the Agent or any Lender
shall be borne by the Borrower.
8.9. OBSERVE ALL LAWS. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of any
Governmental Authority applicable to the Borrower or any of its Subsidiaries
with respect to the conduct of its business.
8.10. GOVERNMENTAL LICENSES. Obtain and maintain all licenses, permits,
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted, except where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
8.11. COVENANTS EXTENDING TO OTHER PERSONS. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Borrower in SECTIONS 8.2 through 8.10, and 8.14
through 8.19 inclusive.
8.12. OFFICER'S KNOWLEDGE OF DEFAULT. Upon any senior executive officer
of the Borrower obtaining knowledge of any Default or Event of Default hereunder
or under any other obligation of the Borrower or any Subsidiary to any Lender,
cause such officer or a Responsible Officer to promptly notify the Agent of the
nature thereof, the period of existence thereof, and what action the Borrower or
such Subsidiary proposes to take with respect thereto.
8.13. SUITS OR OTHER PROCEEDINGS. Upon any Responsible Officer of the
Borrower obtaining knowledge of any litigation or other proceedings being
instituted against the Borrower or any Subsidiary by any Person, including
without limitation any Governmental Authority, or any attachment, levy,
execution or other process being instituted against any assets of the Borrower
or any Subsidiary, making a claim or claims in an aggregate amount greater than
$10,000,000 not otherwise covered by insurance, reasonably promptly deliver to
the Agent written notice thereof stating the nature and status of such
litigation, dispute, proceeding, levy, execution or other process.
8.14. ENVIRONMENTAL LAWS.
(a) Comply with Environmental Laws, or contest in good faith
the applicability of any such Environmental Laws or liability
thereunder, except to the extent that failure to do so would not
reasonably be expected to have a Material Adverse Effect.
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(b) Promptly give notice to the Agent if the Borrower or any
of its Subsidiaries is in violation of or is not in compliance with or
has incurred liability or potential liability under Environmental Laws,
unless such violation or noncompliance could not reasonably be expected
to have a Material Adverse Effect, and promptly provide to the Agent
accurate and complete copies of any and all letters, notices,
complaints, orders, directives, claims or citations received by the
Borrower or any of its Subsidiaries relating to (i) violation or
alleged violation by the Borrower or any of its Subsidiaries of any
applicable Environmental Laws; (ii) release or threatened release into
the environment by the Borrower or any of its Subsidiaries, or by any
person handling, transporting or disposing of any Hazardous Materials
on behalf of the Borrower or any of its Subsidiaries, or any facility
or property owned or leased or operated by the Borrower or any of its
Subsidiaries, of any Hazardous Material, except where occurring
legally; or (iii) liability or alleged liability of the Borrower or any
of its Subsidiaries for the costs of cleaning up, removing, remediating
or responding to a release of Hazardous Materials, unless such
violation, release or liability could not reasonably be expected to
have a Material Adverse Effect.
(c) Defend, indemnify and hold harmless the Agent and the
Lenders, and their respective employees, agents, officers and
directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind
or nature known or unknown, contingent or otherwise, arising out of, or
in any way relating to the violation of or noncompliance with or
liability under any Environmental Laws applicable to the operations of,
liabilities assumed by, or real property owned or operated by the
Borrower or any of its Subsidiaries, or any orders, requirements or
demands of Governmental Authorities related thereto, including, without
limitation, attorneys' and consultants' fees, investigation and
laboratory fees, court costs and litigation expenses, except to the
extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. The
provisions of this SECTION 8.14(c) shall survive repayment of the
Obligations and occurrence of the Facility Termination Date.
8.15. FURTHER ASSURANCES. At the Borrower's cost and expense, upon
request of the Agent, duly execute and deliver or cause to be duly executed and
delivered, to the Agent such further instruments, documents, certificates,
financing and continuation statements, and do and cause to be done such further
acts that may be reasonably necessary or advisable in the reasonable opinion of
the Agent to carry out more effectively the provisions and purposes of this
Agreement and the other Loan Documents.
8.16. EMPLOYEE BENEFIT PLANS.
(a) With reasonable promptness, and in any event within thirty
(30) days after the end of the Fiscal Year in which such event occurs,
give notice to the Agent of (i) the establishment of any new Employee
Benefit Plan (which notice shall include a copy of such plan), (ii) the
commencement of contributions to any Employee Benefit Plan to
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which the Borrower or any of its ERISA Affiliates was not previously
contributing, (iii) any material increase in the benefits of any
existing Employee Benefit Plan, (iv) each funding waiver request filed
with respect to any Employee Benefit Plan and all communications
received or sent by the Borrower or any ERISA Affiliate with respect to
such request and (v) the failure of the Borrower or any ERISA Affiliate
to make a required installment or payment under Section 302 of ERISA or
Section 412 of the Code (in the case of Employee Benefit Plans
regulated by the Code or ERISA) or under any Foreign Benefit Law (in
the case of Employee Benefit Plans regulated by any Foreign Benefit
Law) by the due date;
(b) Promptly and in any event within thirty (30) days of
becoming aware of the occurrence or forthcoming occurrence of any (i)
Termination Event or (ii) nonexempt "prohibited transaction," as such
term is defined in Section 406 of ERISA or Section 4975 of the Code, in
connection with any Pension Plan or any trust created thereunder, and
unless such occurrence could not reasonably be expected to have a
Material Adverse Effect, deliver to the Agent a notice specifying the
nature thereof, what action the Borrower or any ERISA Affiliate has
taken, is taking or proposes to take with respect thereto and, when
known, any action taken or threatened by the Internal Revenue Service,
the Department of Labor or the PBGC with respect thereto; and
(c) With reasonable promptness but in any event within fifteen
(15) days deliver to the Agent copies of (i) any unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of an Employee Benefit Plan under Section 401(a) of the
Code, (ii) all notices received by the Borrower or any ERISA Affiliate
of the PBGC's or any Governmental Authority's intent to terminate any
Pension Plan or to have a trustee appointed to administer any Pension
Plan, (iii) each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate
with the Internal Revenue Service with respect to each Pension Plan and
(iv) all notices received by the Borrower or any ERISA Affiliate from a
Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA unless any such
notice relates to an event or condition that could not reasonably be
expected to have a Material Adverse Effect. The Borrower will notify
the Agent in writing within five (5) Business Days of the Borrower or
any ERISA Affiliate obtaining knowledge or reason to know that the
Borrower or any ERISA Affiliate has filed or intends to file a notice
of intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA.
8.17. CONTINUED OPERATIONS. Continue at all times to conduct its
business and engage principally in the same line or lines of business
substantially as heretofore conducted.
8.18. NEW SUBSIDIARIES. Within thirty (30) days after (i) the
acquisition or creation of any new Subsidiary which is a Domestic Material
Subsidiary, or (ii) an existing Domestic Subsidiary becoming a Material Domestic
Subsidiary, cause to be delivered to the Agent for the benefit of the Lenders
each of the following:
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(a) a Facility Guaranty executed by such Domestic Material
Subsidiary substantially in the form of EXHIBIT I;
(b) an opinion of counsel to the Domestic Material Subsidiary
dated as of the date of delivery of the Facility Guaranty provided for
in this SECTION 8.18 and addressed to the Agent and the Lenders, in
form and substance reasonably acceptable to the Agent (which opinion
may include assumptions and qualifications of similar effect and in the
form of and addressing the matters relating to Guarantors set forth in
the opinions delivered pursuant to SECTION 6.1(a)(ii) hereof, where
applicable); and
(c) current copies of the Organizational Documents and
Operating Documents of such Domestic Material Subsidiary, certified
resolutions (or duly effected consent actions) of the Board of
Directors, partners, or appropriate committees thereof (and, if
required by such Organizational Documents, Operating Documents or
applicable law, of the shareholders, members or partners) of such
Domestic Material Subsidiary authorizing the actions and the execution
and delivery of documents described in this SECTION 8.18.
8.19. COMPLIANCE WITH MATERIAL CONTRACTS. Comply with the terms of all
Material Contracts and maintain the terms of such Material Contracts as in
effect on the Closing Date, except to the extent such noncompliance or failure
to maintain could not reasonably be expected to have and does not have a
Material Adverse Effect.
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ARTICLE IX
Negative Covenants
------------------
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, nor will it permit any
Subsidiary to:
9.1. FINANCIAL COVENANTS.
(a) CONSOLIDATED LEVERAGE RATIO. Permit the Consolidated
Leverage Ratio as of the end of any Four-Quarter Period to be greater
than 3.25 to 1.00.
(b) CONSOLIDATED INTEREST COVERAGE RATIO. Permit the
Consolidated Interest Coverage Ratio as of the end of any Four-Quarter
Period to be less than 3.50 to 1.00.
9.2. ACQUISITIONS. Enter into any agreement, contract, binding
commitment or other arrangement providing for any Acquisition, or take any
action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition, unless (i) the Person to be (or whose assets
are to be) acquired does not oppose such Acquisition and the line or lines of
business of the Person to be acquired are substantially the same as one or more
line or lines of business conducted by the Borrower and its Subsidiaries, (ii)
no Default or Event of Default shall have occurred and be continuing either
immediately prior to or immediately after giving effect to such Acquisition,
(iii) the Borrower shall have furnished to the Agent (A) pro forma historical
financial statements as of the end of the most recently completed Fiscal Year of
the Borrower and most recent interim fiscal quarter, if applicable, giving
effect to such Acquisition and (B) a certificate in the form of EXHIBIT H
prepared on a historical pro forma basis as of the most recent date for which
financial statements have been furnished pursuant to SECTION 7.5(a) or SECTION
8.1(a) OR (b) giving effect to such Acquisition, which certificate shall
demonstrate that no Default or Event of Default would exist immediately after
giving effect thereto, and (iv) the Person acquired shall be a wholly-owned
Subsidiary, or be merged into the Borrower or a wholly-owned Subsidiary,
immediately upon consummation of the Acquisition (or if assets are being
acquired, the acquiror shall be the Borrower or a wholly-owned Subsidiary).
9.3. CAPITAL EXPENDITURES. Make or become committed to make Capital
Expenditures, which exceed $75,000,000 in the aggregate in any Fiscal Year of
the Borrower (on a noncumulative basis, with the effect that amounts not
expended in any Fiscal Year may not be carried forward to a subsequent period).
9.4. LIENS. Incur, create or permit to exist any Lien, charge or other
encumbrance of any nature whatsoever with respect to any property or assets now
owned or hereafter acquired by the Borrower or any Subsidiary, other than the
following (all of which shall be collectively referred to as "Permitted Liens"):
(a) Liens existing as of the date hereof and as set forth in
SCHEDULE 7.6;
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(b) Liens imposed by law for taxes, assessments or charges of
any Governmental Authority for claims not yet due or which are being
contested in good faith by appropriate proceedings diligently conducted
and with respect to which adequate reserves or other appropriate
provisions are being maintained as required by GAAP;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than
30 days from the date of creation thereof for amounts not yet due or
which are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves or
other appropriate provisions are being maintained as required by GAAP;
(d) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds)
in connection with workers' compensation, unemployment insurance and
other types of social security benefits or to secure the performance of
tenders, bids, leases, contracts (other than for the repayment of
Indebtedness), statutory obligations and other similar obligations or
arising as a result of progress payments under government contracts;
(e) easements (including reciprocal easement agreements and
utility agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions, charges or
encumbrances (whether or not recorded), which do not interfere
materially with the ordinary conduct of the business of the Borrower or
any Subsidiary and which do not materially detract from the value of
the property to which they attach or materially impair the use thereof
to the Borrower or any Subsidiary;
(f) purchase money Liens to secure Indebtedness on any real
property or equipment otherwise permitted hereunder and incurred to
purchase such fixed assets, provided such Indebtedness represents not
more than 75% of the purchase price of such fixed assets as of the date
of purchase thereof and no property other than the assets so purchased
is subject to such Liens;
(g) Liens incurred in connection with Capital Leases otherwise
permitted hereunder provided that no other property other than the
property subject to such Capital Leases is subject to such Liens;
(h) Liens on assets acquired in an Acquisition permitted under
SECTION 9.2 so long as such Liens (i) are not incurred in contemplation
of such Acquisition and (ii) do not extend to any assets other than the
assets being acquired in such Acquisition; and
(i) other Liens securing Indebtedness in de minimis amounts,
but in no event securing Indebtedness in an aggregate amount in excess
of $5,000,000.
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9.5. INDEBTEDNESS.
(a) Incur, create, assume or permit to exist any Indebtedness
or any Guaranties, other than the following to the extent that an Event
of Default does not exist at the time of or occurs as a result of the
incurrence of such Indebtedness:
(i) the Senior Notes, subject to their issuance
pursuant to documentation and upon terms acceptable to the
Agent, which terms shall be no more restrictive than the terms
of this Agreement;
(ii) Rate Hedging Obligations not in excess of the
amounts permitted under SECTION 9.14;
(iii) Incurrence of indemnification obligations under
the terms of the Spinoff Documents or the Line of Business
Transfer Documents not to exceed $35,000,000, which
obligations have been either agreed to by the Borrower or
finally determined by appropriate judicial or alternate
dispute resolution proceedings without further appeal or
action available to or pursued by the Borrower; and
(iv) other Indebtedness in an aggregate principal
amount at any time outstanding not to exceed $50,000,000;
(b) Prepay, redeem or repurchase any Indebtedness or any
Guaranties prior to the stated maturity thereof or make any payment in
violation of any subordination terms or agreements applicable thereto,
other than prepayments of the Revolving Credit Facility in accordance
with the terms of this Agreement; and
(c) Amend, modify or supplement any of the instruments and
agreements evidencing or governing any Indebtedness or any Guaranties
to add or change any terms of subordination, events of default,
repayment or interest payable thereon or rights of conversion, put,
exchange or other rights from such terms and rights as in effect on the
Closing Date, except to the extent any such amendment, modification or
supplement could not be reasonably expected to have a Material Adverse
Effect or materially impair the position or interests of the Agent and
the Lenders.
9.6. TRANSFER OF ASSETS. Sell, lease, transfer or otherwise dispose of
any assets of Borrower or any Subsidiary other than (a) dispositions of
inventory in the ordinary course of business, (b) dispositions of assets of the
Borrower or any Subsidiary to a wholly owned Domestic Subsidiary which has
delivered all documents required under SECTION 8.18, or by any Subsidiary to the
Borrower, (c) dispositions of equipment, inventory or other assets (in addition
to dispositions thereof permitted under clause (a) above) which, in the
aggregate during any calendar year, have a fair market value or book value,
whichever is greater, of (i) less than 7.5% of Consolidated Total Assets as
calculated as of the Determination Date immediately prior to such disposition
and set forth on the corresponding balance sheet delivered pursuant to SECTION
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8.1(b) and (ii) when aggregated with the fair market value or book value,
whichever is greater, of all other asset dispositions during the term of this
Agreement, does not exceed 20% of Consolidated Total Assets as calculated on
November 30, 1998, (d) dispositions of equipment which is replaced by equipment
of equal or greater utility and value within thirty (30) days of the date of
disposition thereof, (e) dispositions of property that is substantially worn,
damaged, obsolete or, in the judgment of the Borrower, no longer best used or
useful in its business or that of any Subsidiary, (f) transfers of assets
necessary to give effect to merger or consolidation transactions permitted by
SECTION 9.8, (g) the disposition of Eligible Securities in the ordinary course
of management of the investment portfolio of the Borrower and its Subsidiaries,
(h) sales of accounts receivable in connection with any Permitted Asset
Securitization and (i) the disposition of corporate flight operations
transferred to the Borrower by GenCorp in the Line of Business Transfer.
9.7. INVESTMENTS. Purchase, own, invest in or otherwise acquire,
directly or indirectly, any stock or other securities, or make or permit to
exist any interest whatsoever in any other Person or permit to exist any loans
or advances to any Person, except that Borrower may maintain investments or
invest in:
(a) securities of any Person acquired in an Acquisition
permitted hereunder;
(b) Eligible Securities;
(c) investments existing as of the date hereof and as set
forth in SCHEDULE 7.4;
(d) accounts receivable arising and trade credit granted in
the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof in connection with
accounts of financially troubled Persons to the extent reasonably
necessary in order to prevent or limit loss;
(e) loans and advances to and investments in Subsidiaries
which are Guarantors;
(f) investments, loans and advances to Persons who are not
Guarantors provided the aggregate outstanding principal amount of such
loans and advances shall not at any time exceed $25,000,000;
(g) loans and advances to employees of the Borrower for
travel, entertainment and relocation expenses in the ordinary course of
business;
(h) required investments in or contributions to (i) Employee
Benefit Plans, (ii) executive compensation plans, and (iii) stock or
option purchase or bonus plans or as required under ERISA or the Code
or the fiduciary standards thereunder.
9.8. MERGER OR CONSOLIDATION. (a) Consolidate with or merge into any
other Person, or (b) permit any other Person to merge into it, or (c) sell,
transfer or lease or otherwise dispose of
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all or a substantial part of its assets (other than sales permitted under
SECTION 9.6; PROVIDED, HOWEVER, if no Default or Event of Default shall have
occurred and be continuing or otherwise result therefrom, (i) any Subsidiary of
the Borrower may merge or transfer all or substantially all of its assets into
or consolidate with the Borrower or any wholly owned domestic Material
Subsidiary of the Borrower which has delivered all documents required under
SECTION 8.18, and (ii) any other Person may merge into the Borrower or any
Subsidiary, and any Subsidiary may merge into any other Person in order to
consummate an Acquisition permitted by SECTION 9.2 provided (A) such Person
shall assume all obligations of such Subsidiary under any Loan Document and
deliver such agreements and other documents, including a Facility Guaranty, and
take such other action as the Agent may require to evidence or confirm its
express assumption of the obligations and liabilities of its predecessor
entities under the Loan Documents and shall be engaged in substantially the same
or similar lines of business of such Subsidiary and (B) the Borrower shall be
the surviving corporation if a party to any merger.
9.9. TRANSACTIONS WITH AFFILIATES. Enter into any transaction after the
Closing Date, including, without limitation, the purchase, sale, lease or
exchange of property, real or personal, or the rendering of any service, with
any Affiliate of the Borrower, except (a) that such Persons may render services
to the Borrower or its Subsidiaries for compensation at the same rates generally
paid by Persons engaged in the same or similar businesses for the same or
similar services, (b) that the Borrower or any Subsidiary may render services to
such Persons for compensation at the same rates generally charged by the
Borrower or such Subsidiary and (c) in either case in the ordinary course of
business and upon terms no less favorable to the Borrower (or any Subsidiary)
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate of the Borrower.
9.10. COMPLIANCE WITH ERISA, THE CODE AND FOREIGN BENEFIT LAWS. With
respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would
result in a liability on the part of the Borrower or any ERISA
Affiliate to the PBGC or to any Governmental Authority; or
(b) permit for a period of thirty (30) or more consecutive
days the aggregate present value of all benefit liabilities under all
Pension Plans to exceed the current value of the assets of such Pension
Plans allocable to such benefit liabilities; or
(c) permit any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code) to exist with respect
to any Pension Plan, whether or not waived for a period in excess of
twelve (12) consecutive months; or
(d) fail to make any contribution or payment to any
Multiemployer Plan which the Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto; or
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(e) engage, or permit any Borrower or any ERISA Affiliate to
engage, in any prohibited transaction under Section 406 of ERISA or
Sections 4975 of the Code for which a civil penalty pursuant to Section
502(I) of ERISA or a tax pursuant to Section 4975 of the Code may be
imposed unless such occurrence could not reasonably be expected to have
a Material Adverse Effect; or
(f) permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any
Employee Benefit Plan which establishment or amendment could result in
liability to the Borrower or any ERISA Affiliate or increase the
obligation of the Borrower or any ERISA Affiliate to a Multiemployer
Plan which liability or increase, individually or together with all
similar liabilities and increases, could reasonably be expected to have
a Material Adverse Effect; or
(g) fail, or permit the Borrower or any ERISA Affiliate to
fail, to establish, maintain and operate each Employee Benefit Plan in
compliance in all respects with the provisions of ERISA, the Code, all
applicable Foreign Benefit Laws and all other applicable laws and the
regulations and interpretations thereof except where the failure to do
so would not have a Material Adverse Effect.
9.11. FISCAL YEAR. Change its Fiscal Year.
9.12. DISSOLUTION, ETC. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with (a) the dissolution or
liquidation of a Subsidiary in which all proceeds thereof are paid to the
Borrower or (b) a merger or consolidation permitted pursuant to SECTION 9.8.
9.13. LIMITATIONS ON SALES AND LEASEBACKS. Enter into any arrangement
or arrangements with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal property with an aggregate value in excess of
$15,000,000, whether now owned or hereafter acquired in a single transaction or
series of transactions, which has been or is to be sold or transferred by the
Borrower or any Subsidiary to the Person leasing such property to the Borrower
or any Subsidiary or to any other Person to whom funds have been or are to be
advanced by such Person on the security of such property or rental obligations
of the Borrower or any Subsidiary.
9.14. RATE HEDGING OBLIGATIONS. Incur any Rate Hedging Obligations or
enter into any agreements, arrangements, devices or instruments relating to Rate
Hedging Obligations, except (a) pursuant to Swap Agreements in an aggregate
notional amount not to exceed at any time $375,000,000 and (b) forward currency
exchange agreements; PROVIDED, HOWEVER, that no Rate Hedging Obligations shall
be incurred for speculative purposes.
9.15. NEGATIVE PLEDGE CLAUSES. Enter into any agreement with any Person
other than the Agent and the Lenders pursuant to this Agreement or any other
Loan Documents which
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prohibits or limits the ability of any of the Borrower or any Subsidiary to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, PROVIDED that the
Borrower and any Subsidiary may enter into such an agreement in connection with,
and that applies only to, property acquired with the proceeds of purchase money
Indebtedness permitted hereunder.
9.16. RESTRICTED PAYMENTS. Make any Restricted Payment, issue or sell
capital stock of any Subsidiary of the Borrower (or any option, warrant or right
to acquire such stock) other than to the Borrower, or apply or set apart any of
their assets therefor or agree to do any of the foregoing other than (a) cash
dividends payable in the ordinary course of business on its capital stock and
(b) open-market or negotiated purchases of its common stock in an aggregate
amount of up to $25,000,000 during the term of this Agreement; PROVIDED,
HOWEVER, no such Restricted Payments under clause (a) or (b) above shall be made
if an Event of Default exists at the time of or occurs as a result of such
Restricted Payment.
9.17. REDEMPTION, PREPAYMENT, OR AMENDMENT OF SENIOR NOTES AND OTHER
INDEBTEDNESS.
(a) Prepay, redeem, purchase, defease or otherwise satisfy
prior to the scheduled maturity thereof in any manner any Indebtedness
(i) subordinated or junior in rights of payment to the Obligations
except for all of the foregoing not exceeding $25,000,000 in the
aggregate since the Closing Date, or (ii) in violation of any
subordination terms; or
(b) amend, modify or change in any manner any term or
condition of any of the Senior Notes so that the terms and conditions
thereof are less favorable to the Agent and the Lenders than the terms
thereof or more restrictive than the terms of this Agreement, in each
case as of the Closing Date.
9.18. AMENDMENT OF LINE OF BUSINESS TRANSFER DOCUMENTS AND SPINOFF
DOCUMENTS. Amend, modify or change in any manner any term or condition of any of
the Line of Business Transfer Documents or any of the Spinoff Documents (i) so
that the terms and conditions thereof are less favorable to the Agent and the
Lenders than the terms and conditions of such documents as of the Closing Date,
or (ii) that may be reasonably likely to result in a Material Adverse Effect.
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ARTICLE X
Events of Default and Acceleration
----------------------------------
10.1. EVENTS OF DEFAULT. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority), that is to say:
(a) if default shall be made in the due and punctual payment
of the principal of any Loan, Reimbursement Obligation or other
Obligation, when and as the same shall be due and payable whether
pursuant to any provision of ARTICLE II or ARTICLE III or ARTICLE IV,
at maturity, by acceleration or otherwise; or
(b) if default shall be made in the due and punctual payment
of any amount of interest on any Loan, Reimbursement Obligation or
other Obligation or of any fees or other amounts, other than principal
of any Obligation, payable to any of the Lenders or the Agent on the
date on which the same shall be due and payable and such default shall
continue for a period of three (3) or more days; or
(c) if default shall be made in the performance or observance
of any covenant set forth in SECTION 8.8, 8.12, 8.13, 8.18 or ARTICLE
IX;
(d) if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement or
provision contained in this Agreement or the Notes (other than as
described in clauses (a), (b) or (c) above) and such default shall
continue for thirty (30) or more days after the earlier of receipt of
notice of such default by a Responsible Officer from the Agent or a
senior executive officer of the Borrower becomes aware of such default,
or if a default shall be made in the performance or observance of, or
shall occur under, any covenant, agreement or provision contained in
any of the other Loan Documents (beyond any applicable grace period, if
any, contained therein) or in any instrument or document evidencing or
creating any obligation, guaranty, or Lien in favor of the Agent or any
of the Lenders or delivered to the Agent or any of the Lenders in
connection with or pursuant to this Agreement or any of the
Obligations, or if any Loan Document ceases to be in full force and
effect (other than as expressly provided for hereunder or thereunder or
with the express written consent of the Agent or by reason of any
action by the Agent or the Lenders), or any Credit Party shall so state
in writing, or if without the written consent of the Lenders, this
Agreement or any other Loan Document shall be disaffirmed or shall
terminate, be terminable or be terminated or become void or
unenforceable for any reason whatsoever (other than as expressly
provided for hereunder or thereunder or with the express written
consent of the Agent or by reason of any action by the Agent or the
Lenders); or
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(e) if there shall occur (i) a default, which is not waived,
in the payment of any principal, interest, premium or other amount with
respect to the Senior Notes or any other Indebtedness (other than the
Loans and other Obligations) of the Borrower or any Subsidiary in an
amount not less than $5,000,000 with respect to any individual
Indebtedness or $10,000,000 with respect to all Indebtedness in the
aggregate outstanding, or (ii) a default, which is not waived, in the
performance, observance or fulfillment of any term or covenant
contained in any agreement or instrument under or pursuant to which the
Senior Notes or any other such Indebtedness may have been issued,
created, assumed, guaranteed or secured by the Borrower or any
Subsidiary, or (iii) any other event of default as specified in any
agreement or instrument under or pursuant to which the Senior Notes or
any other such Indebtedness may have been issued, created, assumed,
guaranteed or secured by the Borrower or any Subsidiary, and such
default or event of default shall continue for more than the period of
grace, if any, therein specified, or such default or event of default
shall permit the holder of any such Indebtedness (or any agent or
trustee acting on behalf of one or more holders) to accelerate the
maturity thereof or to require the mandatory redemption, repurchase or
call thereof; or
(f) if any representation, warranty or other statement of fact
contained in any Loan Document or in any writing, certificate, report
or statement at any time furnished to the Agent or any Lender by or on
behalf of the Borrower or any Subsidiary pursuant to or in connection
with any Loan Document, or otherwise, shall be false or misleading in
any material respect when given; or
(g) if the Borrower or any Subsidiary shall be unable to pay
its debts generally as they become due; file a petition to take
advantage of any insolvency statute; make an assignment for the benefit
of its creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself or of the whole
or any substantial part of its property; file a petition or answer
seeking liquidation, reorganization or arrangement or similar relief
under the Federal bankruptcy laws or any other applicable law or
statute; or
(h) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Borrower or any Subsidiary or of the
whole or any substantial part of its properties and such order,
judgment or decree continues unstayed and in effect for a period of
sixty (60) days, or approve a petition filed against the Borrower or
any Subsidiary seeking liquidation, reorganization or arrangement or
similar relief under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state,
which petition is not dismissed within sixty (60) days; or if, under
the provisions of any other law for the relief or aid of debtors, a
court of competent jurisdiction shall assume custody or control of the
Borrower or any Subsidiary or of the whole or any substantial part of
its properties, which control is not relinquished within sixty (60)
days; or if there is commenced against the Borrower or any Subsidiary
any proceeding or petition seeking reorganization, arrangement or
similar relief under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
which
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proceeding or petition remains undismissed for a period of sixty (60)
days; or if the Borrower or any Subsidiary takes any action to indicate
its consent to or approval of any such proceeding or petition; or
(i) if (i) one or more judgments or orders where the amount
not covered by insurance (or the amount as to which the insurer denies
liability) is in excess of $10,000,000 is rendered against the Borrower
or any Subsidiary, or (ii) there is any attachment, injunction or
execution against any of the Borrower's or Subsidiaries' properties for
any amount in excess of $10,000,000 (individually or in the aggregate);
and such judgment, attachment, injunction or execution remains unpaid,
unstayed, undischarged, unbonded or undismissed for a period of sixty
(60) days; or
(j) if the Borrower or any Subsidiary shall (i) substantially
change the nature of its business from that currently engaged in or,
other than (A) in the ordinary course of business (as determined by
past practices), (B) in connection with any asset sale permitted under
SECTION 9.6 hereof or (C) (with respect only to a Subsidiary) as a
result of a merger permitted under SECTION 9.8 hereof, or (ii) suspend
all or any part of its operations material to the conduct of the
business of the Borrower or any Subsidiary for a period of more than
sixty (60) days; or
(k) if the Borrower or any Subsidiary shall breach any of the
material terms or conditions of any Swap Agreement or any operative
agreement relating to any Permitted Asset Securitization and such
breach shall continue beyond any grace period, if any, relating thereto
pursuant to the terms of such agreement, or if the Borrower or any
Subsidiary shall disaffirm or seek to disaffirm any such Swap Agreement
or any such operative agreement relating to any Permitted Asset
Securitization or any of its obligations thereunder; or
(l) if there shall occur and not be waived an Event of Default
as defined in any of the other Loan Documents; or
(m) if there shall occur or exist any Change of Control;
or
(n) if the Borrower or any of its Subsidiaries receives notice
of any violation, non-compliance, or liability or potential liability
under Environmental Laws, or the Borrower or any of its Subsidiaries is
in violation of or is not in compliance with or has incurred liability
or potential liability under Environmental Laws, which in either case
would reasonably be expected to result in a Material Adverse Effect and
which, with respect to any violation or non-compliance has not been
cured in all material respects during any applicable cure period,
PROVIDED that the Required Lenders have given the Borrower notice that
the same constitutes an Event of Default;
then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived,
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(A) either or both of the following actions may be
taken: (i) the Agent may, and at the direction of the Required
Lenders shall, declare any obligation of the Lenders and the
Issuing Bank to make further Revolving Loans and Swing Line
Loans or to issue additional Letters of Credit terminated,
whereupon the obligation of each Lender to make further
Revolving Loans, of Bank of America to make further Swing Line
Loans, and of the Issuing Bank to issue additional Letters of
Credit, hereunder shall terminate immediately, and (ii) the
Agent shall at the direction of the Required Lenders, at their
option, declare by notice to the Borrower any or all of the
Obligations to be immediately due and payable, and the same,
including all interest accrued thereon and all other
obligations of the Borrower to the Agent and the Lenders,
shall forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of any
kind, all of which are hereby expressly waived, anything
contained herein or in any instrument evidencing the
Obligations to the contrary notwithstanding; PROVIDED,
however, that notwithstanding the above, if there shall occur
an Event of Default under clause (g) or (h) above, then the
obligation of the Lenders to make Revolving Loans, of Bank of
America to make Swing Line Loans, and of the Issuing Bank to
issue Letters of Credit hereunder shall automatically
terminate and any and all of the Obligations shall be
immediately due and payable without the necessity of any
action by the Agent or the Required Lenders or notice to the
Agent or the Lenders;
(B) The Borrower shall, upon demand of the Agent or
the Required Lenders, deposit cash with the Agent in an amount
equal to the amount of any Letter of Credit Outstandings, as
collateral security for the repayment of any future drawings
or payments under such Letters of Credit, and such amounts
shall be held by the Agent pursuant to the terms of the LC
Account Agreement; and
(C) the Agent and each of the Lenders shall have all
of the rights and remedies available under the Loan Documents
or under any applicable law.
10.2. AGENT TO ACT. In case any one or more Events of Default shall
occur and not have been waived, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
10.3. CUMULATIVE RIGHTS. No right or remedy herein conferred upon the
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
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10.4. NO WAIVER. No course of dealing between the Borrower and any
Lender or the Agent or any failure or delay on the part of any Lender or the
Agent in exercising any rights or remedies under any Loan Document or otherwise
available to it shall operate as a waiver of any rights or remedies and no
single or partial exercise of any rights or remedies shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder or of the
same right or remedy on a future occasion.
10.5. ALLOCATION OF PROCEEDS. If an Event of Default has occurred and
not been waived, and the maturity of the Notes has been accelerated pursuant to
ARTICLE X hereof, all payments received by the Agent hereunder, in respect of
any principal of or interest on the Obligations or any other amounts payable by
the Borrower hereunder, shall be applied by the Agent in the following order:
(a) amounts due to the Lenders and the Issuing Bank pursuant
to SECTIONS 4.6(a), 4.6(b), 4.6(c), AND 12.5;
(b) amounts due to the Agent pursuant to SECTION 4.6(d);
(c) payments of interest on Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of the
Lenders(with amounts payable in respect of Swing Line Outstandings
being included in such calculation and paid to Bank of America);
(d) payments of principal of Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of the
Lenders(with amounts payable in respect of Swing Line Outstandings
being included in such calculation and paid to Bank of America);
(e) payments of cash amounts to the Agent in respect of
outstanding Letters of Credit pursuant to SECTION 10.1(B);
(f) amounts due to the Issuing Bank, the Agent and the Lenders
pursuant to SECTIONS 3.2(h), 8.14(c) and 12.9;
(g) payments of all other amounts due under any of the Loan
Documents, if any, to be applied for the ratable benefit of the
Lenders;
(h) amounts due to any of the Lenders or their affiliates in
respect of Obligations consisting of liabilities under any Swap
Agreement with any of the Lenders or their affiliates on a pro rata
basis according to the amounts owed; and
(i) any surplus remaining after application as provided for
herein, to the Borrower or otherwise as may be required by applicable
law.
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ARTICLE XI
The Agent
---------
11.1. APPOINTMENT, POWERS, AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in SECTION 11.5 and
the first sentence of SECTION 11.6 hereof shall include its affiliates and its
own and its affiliates' officers, directors, employees, and agents):
(a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender;
(b) shall not be responsible to the Lenders for any recital,
statement, representation, or warranty (whether written or oral) made
in or in connection with any Loan Document or any certificate or other
document referred to or provided for in, or received by any of them
under, any Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Loan Document, or
any other document referred to or provided for therein or for any
failure by any Credit Party or any other Person to perform any of its
obligations thereunder;
(c) shall not be responsible for or have any duty to
ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by any Credit Party or the satisfaction of any
condition or to inspect the property (including the books and records)
of any Credit Party or any of its Subsidiaries or affiliates;
(d) shall not be required to initiate or conduct any
litigation or collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted
to be taken by it under or in connection with any Loan Document, except
for its own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
11.2. RELIANCE BY AGENT. The Agent shall be entitled to rely upon any
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telefacsimile) believed by it to
be genuine and correct and to have been signed, sent or made by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Credit Party), independent accountants, and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the holder thereof
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for all purposes hereof unless and until the Agent receives and accepts an
Assignment and Acceptance executed in accordance with SECTION 12.1 hereof. As to
any matters not expressly provided for by this Agreement, the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding on all of the Lenders; PROVIDED, HOWEVER, that the
Agent shall not be required to take any action that exposes the Agent to
personal liability or that is contrary to any Loan Document or applicable law or
unless it shall first be indemnified to its satisfaction by the Lenders against
any and all liability and expense which may be incurred by it by reason of
taking any such action.
11.3. DEFAULTS. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless the Agent has
received written notice from a Lender or the Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default". In the
event that the Agent receives such a notice of the occurrence of a Default or
Event of Default, the Agent shall give prompt notice thereof to the Lenders. The
Agent shall (subject to SECTION 11.2 hereof) take such action with respect to
such Default or Event of Default as shall reasonably be directed by the Required
Lenders, PROVIDED THAT, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
11.4. RIGHTS AS LENDER. With respect to its Revolving Credit Commitment
and the Loans made by it and Letters of Credit issued by it, Bank of America
(and any successor acting as Agent) in its capacity as a Lender hereunder shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. Bank of America (and any successor acting as Agent) and
its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any
Credit Party or any of its Subsidiaries or affiliates as if it were not acting
as Agent, and Bank of America (and any successor acting as Agent) and its
affiliates may accept fees and other consideration from any Credit Party or any
of its Subsidiaries or affiliates for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.
11.5. INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the
extent not reimbursed under SECTION 12.9 hereof, but without limiting the
obligations of the Borrower under such Section) ratably in accordance with their
respective Revolving Credit Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the Agent
(including by any Lender) in any way relating to or arising out of any Loan
Document or the transactions contemplated thereby or any action taken or omitted
by the Agent under any Loan Document; PROVIDED that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
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willful misconduct of the Person to be indemnified. Without limitation of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any costs or expenses payable by the Borrower under SECTION
12.5, to the extent that the Agent is not promptly reimbursed for such costs and
expenses by the Borrower. The agreements contained in this SECTION 11.5 shall
survive payment in full of the Loans and all other amounts payable under this
Agreement.
11.6. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that
it has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Credit Parties and their Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any
Credit Party or any of its Subsidiaries or affiliates that may come into the
possession of the Agent or any of its affiliates.
11.7. RESIGNATION OF AGENT. The Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America having combined capital
and surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this ARTICLE XI shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
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ARTICLE XII
Miscellaneous
-------------
12.1. ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Lender may assign to one or more Eligible Assignees
all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Loans, its
Revolving Note, and its Revolving Credit Commitment); PROVIDED,
HOWEVER, that
(i) each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to another
Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, any such partial assignment
shall be in an amount at least equal to $5,000,000 or an
integral multiple of $5,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its rights and
obligations under this Agreement and its Revolving Note
(except that any assignment by Bank of America shall not
include its rights, benefits or duties as the Issuing Bank or
as the provider of Swing Line Loans); and
(iv) the parties to such assignment shall execute and
deliver to the Agent for its acceptance an Assignment and
Acceptance in the form of EXHIBIT B hereto, together with any
Revolving Note subject to such assignment and a processing fee
of $3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits
of a Lender hereunder and the assigning Lender shall, to the extent of
such assignment, relinquish its rights and be released from its
obligations under this Agreement. Upon the consummation of any
assignment pursuant to this Section, the assignor, the Agent and the
Borrower shall make appropriate arrangements so that, if required, new
Revolving Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall deliver to the Borrower and the
Agent certification as to exemption from deduction or withholding of
Taxes in accordance with SECTION 5.6.
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(b) The Agent shall maintain at its address referred to in
SECTION 12.2 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Revolving Credit Commitment of, and
principal amount of the Revolving Loans owing to, each Lender from time
to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed
by the parties thereto, together with any Note subject to such
assignment and payment of the processing fee, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially
the form of EXHIBIT B hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons
in all or a portion of its rights, obligations or rights and
obligations under this Agreement (including all or a portion of its
Revolving Credit Commitment or its Loans); PROVIDED, HOWEVER, that (i)
such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the participant
shall be entitled to the benefit of the yield protection provisions
contained in ARTICLE V and the right of set-off contained in SECTION
12.3, and (iv) the Borrower shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole
right to enforce the obligations of the Borrower relating to its Loans
and its Note and to approve any amendment, modification, or waiver of
any provision of this Agreement (other than amendments, modifications,
or waivers decreasing the amount of principal of or the rate at which
interest is payable on such Loans or Note, extending any scheduled
principal payment date or date fixed for the payment of interest on
such Loans or Note, or extending its Revolving Credit Commitment).
(e) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign and pledge all or any
portion of its Loans and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning the
Borrower or any of its Subsidiaries in the possession of such Lender
from time to time to assignees and participants (including prospective
assignees and participants).
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(g) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors
and permitted assigns of such party and all covenants, provisions and
agreements by or on behalf of the Borrower which are contained in the
Loan Documents shall inure to the benefit of the successors and
permitted assigns of the Agent, the Lenders, or any of them. The
Borrower may not assign or otherwise transfer to any other Person any
right, power, benefit, or privilege (or any interest therein) conferred
hereunder or under any of the other Loan Documents, or delegate (by
assumption or otherwise) to any other Person any duty, obligation, or
liability arising hereunder or under any of the other Loan Documents,
and any such purported assignment, delegation or other transfer shall
be void.
(h) Neither the Agent nor any Lender shall deliver to any
Person who is a potential assignee or participant hereunder any
financial or other information with respect to the Borrower not
otherwise publicly available which was received by the Agent or such
Lender from the Borrower unless the Borrower has consented to such
Person being a potential assignee or participant (which consent shall
not be unreasonably withheld or delayed) and such Person has executed
and delivered to the Borrower an agreement to be bound by the terms of
SECTION 12.15 as if it were a Lender.
12.2. NOTICES. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of transmission to such party, in the case
of notice by telefacsimile (where the proper transmission of such notice is
either acknowledged by the recipient or electronically confirmed by the
transmitting device), or (iii) on the fifth Business Day after the day on which
mailed to such party, if sent prepaid by certified or registered mail, return
receipt requested, in each case delivered, transmitted or mailed, as the case
may be, to the address or telefacsimile number, as appropriate, set forth below
or such other address or number as such party shall specify by notice hereunder:
(a) if to the Borrower:
OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333
Attn: Michael E. Hicks, Senior Vice President and
Chief Financial Officer
Telephone: (330) 869-4200
Telefacsimile: (330) 869-4514
with a copy to:
OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333
Attn: Cynthia A. Slack, Secretary
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Telephone: (330) 869-4256
Telefacsimile: (330) 869-4272
(b) if to the Agent:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-3917
Telefacsimile: (704) 409-0019
with a copy to:
Bank of America, N.A.
231 South LaSalle Street
9th Floor
Chicago, Illinois 60697
Attention: Ms. Valerie Mills, Managing Director
Telephone: (312) 828-6859
Telefacsimile: (312) 978-7384
(c) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment
and Acceptance;
(d) if to any Guarantor, at the address set forth on the
signature page of the Facility Guaranty executed by
such Credit Party.
12.3. RIGHT OF SET-OFF; ADJUSTMENTS.
(a) Upon the occurrence and during the continuance of any
Event of Default, each Lender (and each of its affiliates) is hereby
authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender (or any of its
affiliates) to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower now or hereafter
existing under this Agreement and the Note held by such Lender,
irrespective of whether such Lender shall have made any demand under
this Agreement or such Note and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender; PROVIDED, HOWEVER,
that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender under this
SECTION 12.3 are in addition to other
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rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time
receive any payment of all or part of the Loans owing to it, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, or otherwise), in a greater
proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans owing to it, or
interest thereon, such benefitted Lender shall purchase for cash from
the other Lenders a participating interest in such portion of each such
other Lender's Loans owing to it, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of
the Lenders; PROVIDED, HOWEVER, that if all or any portion of such
excess payment or benefits is thereafter recovered from such benefitted
Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without
interest. The Borrower agrees that any Lender so purchasing a
participation from a Lender pursuant to this SECTION 12.3 may, to the
fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as
fully as if such Person were the direct creditor of the Borrower in the
amount of such participation.
12.4. SURVIVAL. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of Obligations remain outstanding or any Lender has any
Revolving Credit Commitment hereunder or the Borrower has continuing obligations
hereunder unless otherwise provided herein.
12.5. EXPENSES. The Borrower agrees to pay on demand all costs and
expenses of the Agent in connection with the syndication, preparation,
execution, delivery, administration, modification, and amendment of this
Agreement, the other Loan Documents, and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and expenses of
counsel for the Agent (including the cost of internal counsel) with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under the Loan Documents. The Borrower further agrees to pay on
demand all costs and expenses of the Agent and the Lenders, if any (including,
without limitation, reasonable attorneys' fees and expenses and the cost of
internal counsel), in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of the Loan Documents and the
other documents to be delivered hereunder.
12.6. AMENDMENTS AND WAIVERS. Any provision of this Agreement or any
other Loan Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower or other applicable Credit
Party party to such Loan Document and either the Required Lenders or (as to Loan
Documents other than this Agreement) the Agent on
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behalf of the Required Lenders (and, if ARTICLE XI or the rights or duties of
the Agent are affected thereby, by the Agent); PROVIDED that no such amendment
or waiver shall, unless signed by all the Lenders, (i) increase the Revolving
Credit Commitments of the Lenders or the Total Revolving Credit Commitment, (ii)
reduce the principal of or rate of interest on any Revolving Loan or any fees or
other amounts payable hereunder, (iii) postpone any date fixed for the payment
of any scheduled installment of principal of or interest on any Loan or any fees
or other amounts payable hereunder or for termination of any Revolving Credit
Commitment, (iv) change the percentage of the Revolving Credit Commitment or of
the unpaid principal amount of the Notes, or the number of Lenders, which shall
be required for the Lenders or any of them to take any action under this SECTION
12.6 or any other provision of this Agreement or (v) release any Guarantor which
is a Material Subsidiary or in connection with transactions permitted pursuant
to SECTIONS 9.6, 9.8 OR 9.12; and PROVIDED, FURTHER, that no such amendment or
waiver that affects the rights, privileges or obligations of Bank of America as
provider of Swing Line Loans, shall be effective unless signed in writing by
Bank of America or that affects the rights, privileges or obligations of the
Issuing Bank as issuer of Letters of Credit, shall be effective unless signed in
writing by the Issuing Bank.
No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising any right, remedy or
option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.
12.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
12.8. TERMINATION. The termination of this Agreement shall not affect
any rights of the Borrower, the Lenders or the Agent or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Obligations arising prior to or after such termination have been
irrevocably paid in full. The rights granted to the Agent for the benefit of the
Lenders under the Loan Documents shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Obligations
have been paid in full after the termination hereof (other than Obligations in
the nature of continuing indemnities or expense reimbursement obligations not
yet due and payable, which shall continue) or the Borrower has furnished the
Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. Notwithstanding the foregoing, if after receipt of
any payment of all or any part of the Obligations, any Lender is for any reason
compelled to surrender such payment to any Person because such payment is
determined to be void or voidable as a preference, impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement shall continue
in full force and the Borrower shall be liable to, and shall indemnify and hold
the Agent or such Lender harmless for, the amount of such payment surrendered
until
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the Agent or such Lender shall have been finally and irrevocably paid in full.
The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Agent or
the Lenders in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to the Agent or the Lenders' rights under this
Agreement and shall be deemed to have been conditioned upon such payment having
become final and irrevocable.
12.9. INDEMNIFICATION; LIMITATION OF LIABILITY. The Borrower agrees to
indemnify and hold harmless the Agent, BAS and each Lender and each of their
affiliates and their respective officers, directors, employees and counsel to
the Agent (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities, costs, and expenses (including, without
limitation, reasonable fees and expenses of counsel and, without duplication,
the allocated cost of internal counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation, or proceeding or preparation of defense in
connection therewith) the Spinoff, the Line of Business Transfer or the
Revolving Credit Facility, the Transaction Documents, any of the transactions
specified therein or herein or the actual or proposed use of the proceeds of the
Loans, except to the extent such claim, damage, loss, liability, cost, or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from (i) such Indemnified Party's gross negligence
or willful misconduct or (ii) legal proceedings commenced against such
Indemnified Party by any other Indemnified Party. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
SECTION 12.9 applies, such indemnity shall be effective whether or not the
transactions contemplated hereby are consummated. The Borrower agrees that no
Indemnified Party shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to it, any of its Subsidiaries or any Guarantor,
arising out of, related to or in connection with the transactions contemplated
herein or in any of the Transaction Documents, except to the extent that such
liability is found in a final non-appealable judgment by a court of competent
jurisdiction to have directly resulted from such Indemnified Party's gross
negligence or willful misconduct. The Borrower agrees not to assert any claim
against the Agent, any Lender, any of their affiliates, or any of their
respective directors, officers, employees, attorneys, agents, and advisers, for
special, indirect, consequential, or punitive damages arising out of or
otherwise relating to the Transaction Documents, any of the transactions
contemplated therein or herein or the actual or proposed use of the proceeds of
the Loans, except for claims for such special, indirect, consequential, or
punitive damages directly arising out of such party's gross negligence or
willful misconduct. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this SECTION 12.9 shall survive the payment in full of the Loans and all
other amounts payable under this Agreement.
12.10. SEVERABILITY. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or invalid as to one or more of
the parties hereto, then such provision shall remain in effect with respect to
all parties, if any, as to whom such provision is neither illegal nor invalid,
and in any event all other provisions hereof shall remain effective and binding
on the parties hereto.
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<PAGE> 97
12.11. ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto (except that those
provisions (if any) which by the express terms of the commitment letter dated as
of July 1, 1999, executed by Bank of America and BAS and accepted by the
Borrower, survive the closing of the Revolving Credit Facility and Letter of
Credit Facility, shall survive and continue in effect).
12.12. AGREEMENT CONTROLS. In the event that any term of any of the
Loan Documents other than this Agreement conflicts with any express term of this
Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.
12.13. USURY SAVINGS CLAUSE. Notwithstanding any other provision
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under applicable law shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest Lawful
Rate (as defined below), the outstanding amount of the Loans made hereunder
shall bear interest at the Highest Lawful Rate until the total amount of
interest due hereunder equals the amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect. In addition, if when the Loans made hereunder are repaid
in full the total interest due hereunder (taking into account the increase
provided for above) is less than the total amount of interest which would have
been due hereunder if the stated rates of interest set forth in this Agreement
had at all times been in effect, then to the extent permitted by law, the
Borrower shall pay to the Agent an amount equal to the difference between the
amount of interest paid and the amount of interest which would have been paid if
the Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of the Lenders and the Borrower to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful Rate, then any such excess shall be cancelled automatically
and, if previously paid, shall at such Lender's option be applied to the
outstanding amount of the Loans made hereunder or be refunded to the Borrower.
As used in this paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
12.14. PAYMENTS. All principal, interest, and other amounts to be paid
by the Borrower under this Agreement and the other Loan Documents shall be paid
to the Agent at the Principal Office in Dollars and in immediately available
funds, without setoff, deduction or counterclaim. Subject to the definition of
"Interest Period" herein, whenever any payment under this Agreement or any other
Loan Document shall be stated to be due on a day that is not a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time in such
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<PAGE> 98
case shall be included in the computation of interest and fees, as applicable,
and as the case may be.
12.15. CONFIDENTIALITY. Each Lending Party agrees to keep confidential
any information furnished or made available to it by the Borrower pursuant to
this Agreement that is marked confidential; PROVIDED that nothing herein shall
prevent any Lending Party from disclosing such information (a) to any other
Lending Party or any affiliate of any Lending Party, or any officer, director,
employee, agent, or advisor of any Lending Party or affiliate of any Lending
Party, (b) to any other Person if reasonably incidental to the administration of
the credit facility provided herein, (c) as required by any law, rule, or
regulation, (d) upon the order of any court or administrative agency, (e) upon
the request or demand of any regulatory agency or authority, (f) that is or
becomes available to the public or that is or becomes available to any Lending
Party other than as a result of a disclosure by any Lending Party prohibited by
this Agreement, (g) in connection with any litigation to which such Lending
Party or any of its affiliates may be a party, (h) to the extent necessary in
connection with the exercise of any remedy under this Agreement or any other
Loan Document, and (i) subject to provisions substantially similar to those
contained in this Section, to any actual or proposed participant or assignee.
12.16. GOVERNING LAW; WAIVER OF JURY TRIAL.
(A) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN
THOSE SECURITY INSTRUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE
GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH
STATE.
(B) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE
INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN,
OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY
SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWER
HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(C) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
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<PAGE> 99
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE
ADDRESS OF THE BORROWER PROVIDED IN SECTION 12.2, OR BY ANY OTHER
METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN
THE STATE OF NEW YORK.
(D) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE
COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY
THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY
WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO
THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER
APPLICABLE LAW.
(E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE
AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE
TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING.
(F) THE BORROWER HEREBY EXPRESSLY WAIVES ANY
OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS
SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM.
12.17. SPECIAL FUNDING OPTION.
(a) Notwithstanding anything to the contrary contained herein,
any Lender (for the purposes of this SECTION 12.17, a "Granting
Lender") may grant to a special purpose funding vehicle (for the
purposes of this SECTION 12.17, an "SPC") the option to make, on behalf
of such Granting Lender, all or a portion of the Advances which such
Granting Lender is obligated to make (a "Funding Obligation") under the
Revolving Credit
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Facility, such option to be exercisable in the sole discretion of the
SPC, PROVIDED, HOWEVER, that
(i) such Granting Lender's obligations under this
Agreement and the Loan Documents shall remain unchanged,
including without limitation the indemnification obligations
of the Granting Lender pursuant to SECTION 11.5 hereof;
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<PAGE> 101
(ii) such Granting Lender shall remain solely
responsible to the other parties hereto for the performance of
all Funding Obligations;
(iii) the Borrower and the Lenders shall continue to
deal solely and directly with such Granting Lender in
connection with such Granting Lender's rights and obligations
under this Agreement; the Agent shall continue to deal
directly with the Granting Lender as agent for the SPC with
respect to distribution of payment of principal, interest and
fees, notices of Conversion and Continuation and all other
matters;
(iv) such Granting Lender shall retain the sole right
to enforce the obligations of the Borrower relating to its
Loans and its Notes and its Participations and to approve any
amendment, modification, or waiver of any provisions of this
Agreement, each of which may, if so agreed in writing between
the Granting Lender and the SPC, require the prior consent of
any such SPC which has exercised the option to undertake the
Funding Obligation in connection with such Granting Lender's
Commitments and Participations and Obligations owing thereto
before the Granting Lender approves any such amendment,
modification or waiver;
(v) the granting of such option shall not constitute
an assignment to or participation of such SPC of or in the
Granting Lender's Commitments and Participations and
Obligations owing thereto;
(vi) such SPC shall not become a Lender hereunder as
a result of the granting of such option;
(vii) such SPC shall not become obligated or
committed to make Advances as a result of the granting of such
option;
(viii) if such SPC elects not to exercise such option
or otherwise fails to make all or any part of an Advance, the
Granting Lender shall retain its Funding Obligation and be
obligated to make the entire Advance or any portion of such
Advance not made by such SPC; and
(b) Advances made by an SPC hereunder shall be deemed to
satisfy the Funding Obligation and utilize the Revolving Credit
Commitment of the Granting Lender as if, and to the same extent, such
Advances were made by such Granting Lender.
(c) Each party hereto agrees that no SPC shall be liable for
any indemnity or payment under this Agreement for which a Granting
Lender would otherwise be liable so long as, and to the extent that,
the Granting Lender provides such indemnity or makes such payment.
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<PAGE> 102
(d) Notwithstanding anything to the contrary contained in this
Agreement, an SPC may disclose on a confidential basis any nonpublic
information relating to Advances made by such SPC hereunder to any
rating agency, commercial paper dealer or provider of any surety or
guarantee to such SPC.
(e) This SECTION 12.17 may not be amended without the prior
written consent of the Granting Lender on behalf of which such SPC has
made all or any part of its Advances which remain outstanding at the
time of such amendment.
[Signatures on following pages]
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<PAGE> 103
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
OMNOVA SOLUTIONS INC.
By: /S/
---------------------------
Name: M. E. HICKS
-------------------------------------------
Title: SR. VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
-------------------------------------------------
BANK OF AMERICA, N.A.,
as Agent for the Lenders
By: /S/
---------------------------
Name: VALERIE C. MILLS
--------------------------------------------------
Title: MANAGING DIRECTOR
-------------------------------------------------
SIGNATURE PAGE 1 OF 15
<PAGE> 104
BANK OF AMERICA, N.A.
By: /S/
----------------------------------------------
Name: VALERIE C. MILLS
---------------------------------------------
Title: MANAGING DIRECTOR
---------------------------------------------
Lending Office for Base Rate Loans:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Corporate Credit Services
Telephone: (704) 388-3917
Telefacsimile: (704) 409-0019
Wire Transfer Instructions:
Bank of America, N.A.
ABA# 053000196
Account No.: 13662122506
Reference: Omnova Solutions Inc.
Attention: Corporate Credit Services
Lending Office for Eurodollar Rate Loans:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Corporate Credit Services
Telephone: (704) 388-3917
Telefacsimile: (704) 409-0019
Wire Transfer Instructions:
Bank of America, N.A.
ABA# 053000196
Account No.: 13662122506
Reference: Omnova Solutions Inc.
Attention: Corporate Credit Services
SIGNATURE PAGE 2 OF 15
<PAGE> 105
BANK ONE, MICHIGAN
By: /S/
---------------------------------------------
Name: PAUL R. DEMELO
-------------------------------------------
Title: VICE PRESIDENT
---------------------------------------------
Lending Office for Base Rate Loans:
Bank One, Michigan
611 Woodward
Detroit, Michigan 48226
Attention: Karen Graham, Loan Services
Telephone: (313) 225-2911
Telefacsimile: (313) 225-1576
Wire Transfer Instructions:
Bank One, Michigan
ABA# 072-000-326
Account No.: 2891000007
Reference: Omnova
Attention: Detroit LSA Group
Lending Office for Eurodollar Rate Loans:
Bank One, Michigan
611 Woodward
Detroit, Michigan 48226
Attention: Karen Graham, Loan Services
Telephone: (313) 225-2911
Telefacsimile: (313) 225-1576
Wire Transfer Instructions:
Bank One, Michigan
ABA# 072-000-326
Account No.: 2891000007
Reference: Omnova
Attention: Detroit LSA Group
SIGNATURE PAGE 3 0F 15
<PAGE> 106
DEUTSCHE BANK AG, New York or Cayman Islands
Branch
By: /S/
----------------------------------------------
Name: PAUL L. HARINSTEIN
----------------------------------------------
Title: MANAGING DIRECTOR
---------------------------------------------
By: /S/
----------------------------------------------
Name: JACK WESOLEK
--------------------------------------------
Title: ASSOCIATE
---------------------------------------------
Lending Office for Base Rate Loans:
Deutsche Bank AG, New York
31 W. 52nd Street
New York, New York 10019
Attention: Noble Samuel
Telephone: (212) 469-4091
Telefacsimile: (212) 469-4138
Wire Transfer Instructions:
Deutsche Bank AG, New York
ABA# 026-00-3780
Account No.: N/A
Reference: Omnova Solutions
Attention: Noble Samuel
Lending Office for Eurodollar Rate Loans:
Deutsche Bank AG, C.I. Branch
31 W. 52nd Street
New York, New York 10019
Attention: Noble Samuel
Telephone: (212) 469-4091
Telefacsimile: (212) 469-4138
Wire Transfer Instructions:
Deutsche Bank AG, C.I. Branch
ABA# 026-00-3780
Account No.: N/A
Reference: Omnova Solutions
Attention: Noble Samuel
SIGNATURE PAGE 4 OF 15
<PAGE> 107
COMERICA BANK
By: /S/
----------------------------------------------
Name: JEFFREY J. JUDGE
----------------------------------------------
Title: VICE PRESIDENT
---------------------------------------------
Lending Office for Base Rate Loans:
Comerica Bank
500 Woodward Avenue
9th Floor, MC 3268
Detroit, Michigan 48226
Attention: Stacie L. McVeigh
Telephone: (313) 222-4515
Telefacsimile: (313) 222-9514
Wire Transfer Instructions:
Comerica Bank
ABA# 072000096
Account No.: 02-21585-90010
Reference: Omnova Solutions Inc.
Attention: Commercial Loan Servicing
Lending Office for Eurodollar Rate Loans:
Comerica Bank
500 Woodward Avenue
9th Floor, MC 3268
Detroit, Michigan 48226
Attention: Stacie L. McVeigh
Telephone: (313) 222-4515
Telefacsimile: (313) 222-9514
Wire Transfer Instructions:
Comerica Bank
ABA# 072000096
Account No.: 02-21585-90010
Reference: Omnova Solutions Inc.
Attention: Commercial Loan Servicing
SIGNATURE PAGE 5 OF 15
<PAGE> 108
FIFTH THIRD BANK, NORTHEASTERN OHIO
By: /S/
----------------------------------------------
Name: JAMES P. BYRNES
---------------------------------------------
Title: VICE PRESIDENT
----------------------------------------------
Lending Office for Base Rate Loans:
Fifth Third Bank, Northeastern Ohio
1404 East Ninth Street
Cleveland, Ohio 44114
Attention: Anne Jones
Telephone: (216) 274-5578
Telefacsimile: (216) 274-5507
Wire Transfer Instructions:
Fifth Third Bank, Northeastern Ohio
ABA# 042000314
Account No.: 99208599
Reference: Omnova Solutions, Inc.
Attention: Ann Jones
Lending Office for Eurodollar Rate Loans:
Fifth Third Bank, Northeastern Ohio
1404 East Ninth Street
Cleveland, Ohio 44114
Attention: Ann Jones
Telephone: (216) 274-5578
Telefacsimile: (216) 274-5507
Wire Transfer Instructions:
Fifth Third Bank, Northeastern Ohio
ABA# 042000314
Account No.: 99208599
Reference: Omnova Solutions, Inc.
Attention: Ann Jones
SIGNATURE PAGE 6 OF 15
<PAGE> 109
FIRST UNION NATIONAL BANK
By: /S/
----------------------------------------------
Name: ROGER PELZ
--------------------------------------------
Title: SENIOR VICE PRESIDENT
-----------------------------------------------
Lending Office for Base Rate Loans:
First Union National Bank
201 S. College Street
Charlotte, North Carolina 28288-1183
Attention: Gary Burkart
Telephone: (704) 374-6613
Telefacsimile: (704) 383-7999
Wire Transfer Instructions:
First Union National Bank
ABA# 053000219
Account No.: 4659060001805
Reference: Omnova
Attention: Gary Burkart
Lending Office for Eurodollar Rate Loans:
First Union National Bank
201 S. College Street
Charlotte, North Carolina 28288-1183
Attention: Gary Burkart
Telephone: (704) 374-6613
Telefacsimile: (704) 383-7999
Wire Transfer Instructions:
First Union National Bank
ABA# 053000219
Account No.: 4659060001805
Reference: Omnova
Attention: Gary Burkart
SIGNATURE PAGE 7 OF 15
<PAGE> 110
KEYBANK NATIONAL ASSOCIATION
By: /S/
----------------------------------------------
Name: LAWRENCE A. MACK
-------------------------------------------
Title: SENIOR VICE PRESIDENT
-----------------------------------------------
Lending Office for Base Rate Loans:
KeyBank National Association
127 Public Square
OH-01-27-06-06
Cleveland, Ohio 44114
Attention: Dianne Cox
Telephone: (216) 689-4450
Telefacsimile: (216) 689-4981
Wire Transfer Instructions:
KeyBank National Association
ABA# 041001039
Account No.: N/A
Reference: Omnova
Attention: Commercial Loans
Lending Office for Eurodollar Rate Loans:
KeyBank National Association
127 Public Square
OH-01-27-06-06
Cleveland, Ohio 44114
Attention: Dianne Cox
Telephone: (216) 689-4450
Telefacsimile: (216) 689-4981
Wire Transfer Instructions:
KeyBank National Association
ABA# 041001039
Account No.: N/A
Reference: Omnova
Attention: Commercial Loans
SIGNATURE PAGE 8 OF 15
<PAGE> 111
NATIONAL CITY BANK
By: /S/
----------------------------------------------
Name: Davis R. Bonner
Title: Senior Vice President/ Senior Lending Officer
Lending Office for Base Rate Loans:
National City Bank
23000 Mill Creek
Highland Hills, Ohio 44122
Attention: Revette Vickerstaff
Telephone: (216) 488-7080
Telefacsimile: (216) 488-7110
Wire Transfer Instructions:
National City Bank
ABA# 041000124
Account No.: 151804
Reference: Omnova Solutions Inc.
Attention: Commercial Loan Ops.
Lending Office for Eurodollar Rate Loans:
National City Bank
2300 Mill Creek
Highland Hills, Ohio 44122
Attention: Revette Vickerstaff
Telephone: (216) 488-7080
Telefacsimile: (216) 488-7110
Wire Transfer Instructions:
National City Bank
ABA# 041000124
Account No.: 151804
Reference: Omnova Solutions Inc.
Attention: Commercial Loan Ops.
SIGNATURE PAGE 9 OF 15
<PAGE> 112
PNC BANK, NATIONAL ASSOCIATION
By: /S/
----------------------------------------------
Name: JEFFERSON M. GREEN
---------------------------------------------
Title: VICE PRESIDENT
----------------------------------------------
Lending Office for Base Rate Loans:
PNC Bank, National Association
249 Fifth Avenue
P2-PTPP-03-1
Pittsburgh, Pennsylvania 15222
Attention: Peggy Collier
Telephone: (412) 762-7946
Telefacsimile: (412) 768-4586
Wire Transfer Instructions:
PNC Bank, National Association
ABA# 0430-00096
Account No.: N/A
Reference: Omnova
Attention: Commercial Loans
Lending Office for Eurodollar Rate Loans:
PNC Bank, National Association
249 Fifth Avenue
P2-PTPP-03-1
Pittsburgh, Pennsylvania 15222
Attention: Peggy Collier
Telephone: (412) 762-7946
Telefacsimile: (412) 768-4586
Wire Transfer Instructions:
PNC Bank, National Association
ABA# 0430-00096
Account No.: N/A
Reference: Omnova
Attention: Commercial Loans
SIGNATURE PAGE 10 OF 15
<PAGE> 113
THE BANK OF NEW YORK
By: /S/
----------------------------------------------
Name: ROBERT J. JOYCE
---------------------------------------------
Title: VICE PRESIDENT
----------------------------------------------
Lending Office for Base Rate and Eurodollar Loans:
The Bank of New York
101 Barclay Street
New York, New York 10007
Attention: Lorna Alleyne
Telephone: (212) 635-6787
Telefacsimile: (212) 635-6426
Wire Transfer Instructions For Base Rate Loans:
The Bank of New York
101 Barclay Street
New York, New York 10007
ABA# 021000018
Commercial Loan Servicing Department
GLA# 111-556
Reference: Omnova Solutions
Specify Interest, Principal, Reserves and the
Period
Attention: Lorna Alleyne
Wire Transfer Instructions for Eurodollar Rate Loans:
The Bank of New York
101 Barclay Street
New York, New York 10007
ABA# 021000018
Commercial Loan Servicing Department
GLA# 111-556
Reference: Omnova Solutions
Specify Interest, Principal, Fee and the
Period
Attention: Lorna Alleyne
SIGNATURE PAGE 11 OF 15
<PAGE> 114
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /S/
----------------------------------------------
Name: WALTER R. WOLFF
---------------------------------------------
Title: JOINT GENERAL MANAGER
----------------------------------------------
Lending Office for Base Rate Loans:
The Industrial Bank of Japan, Limited
1251 Avenue of the Americas
New York, New York 10020
Attention: Jaikisoon Sanichar
Telephone: (212) 282-4061
Telefacsimile: (212) 282-4478
Wire Transfer Instructions:
The Industrial Bank of Japan, Limited,
New York Branch
ABA# 026-008-345
Account No.: N/A
Reference: Omnova Solutions Inc.
Attention: Credit Administration Department
Lending Office for Eurodollar Rate Loans:
The Industrial Bank of Japan, Limited
1251 Avenue of the Americas
New York, New York 10020
Attention: Jaikisoon Sanichar
Telephone: (212) 282-4061
Telefacsimile: (212) 282-4478
Wire Transfer Instructions:
The Industrial Bank of Japan, Limited,
New York Branch
ABA# 026-008-345
Account No.: N/A
Reference: Omnova Solutions Inc.
Attention: Credit Administration Department
SIGNATURE PAGE 12 OF 15
<PAGE> 115
MELLON BANK, N.A.
By: /S/
----------------------------------------------
Name: MARK F. JOHNSTON
--------------------------------------------
Title: VICE PRESIDENT
----------------------------------------------
Lending Office for Base Rate Loans:
Mellon Bank, N.A.
Three Mellon Bank Center
Pittsburgh, Pennsylvania
Attention: Lloyd Martin, Loan Administrator
Telephone: (412) 234-9448
Telefacsimile: (412) 209-6138
Wire Transfer Instructions:
Mellon Bank, N.A.
ABA# 043000261
Account No.: 990873800
Reference: Omnova Solutions
Attention:Loan Administration
Lending Office for Eurodollar Rate Loans:
Mellon Bank, N.A.
Three Mellon Bank Center
Pittsburgh, Pennsylvania
Attention: Lloyd Martin, Loan Administrator
Telephone: (412) 234-9448
Telefacsimile: (412) 209-6138
Wire Transfer Instructions:
Mellon Bank, N.A.
ABA# 043000261
Account No.: 990873800
Reference: Omnova Solutions
Attention:Loan Administration
SIGNATURE PAGE 13 OF 15
<PAGE> 116
THE NORTHERN TRUST COMPANY
By: /S/
----------------------------------------------
Name: MARK E. TAYLOR
--------------------------------------------
Title: SECOND VICE PRESIDENT
-------------------------------------------
Lending Office for Base Rate Loans:
The Northern Trust Company
50 South LaSalle
Chicago, Illinois 60675
Attention: Linda Honda
Telephone: (312) 444-4715
Telefacsimile: (312) 630-1566
Wire Transfer Instructions:
The Northern Trust Company
ABA# 071000152
Account No.: 518640000
Reference: Omnova Solutions Inc.
Attention: Commerical Loan Department
Lending Office for Eurodollar Rate Loans:
The Northern Trust Company
50 South LaSalle
Chicago, Illinois 60675
Attention: Linda Honda
Telephone: (312) 444-4715
Telefacsimile: (312) 630-1566
Wire Transfer Instructions:
The Northern Trust Company
ABA# 071000152
Account No.: 518640000
Reference: Omnova Solutions Inc.
Attention: Commerical Loan Department
SIGNATURE PAGE 14 OF 15
<PAGE> 117
THE SUMITOMO BANK, LIMITED
By: /S/
----------------------------------------------
Name: JOHN H. KEMPER
--------------------------------------------
Title: SENIOR VICE PRESIDENT
-------------------------------------------
Lending Office for Base Rate Loans:
The Sumitomo Bank Limited
277 Park Avenue
Ne York, New York 10172
Attention: Lissette Villanueva-Ruiz
Telephone: (212) 224-4185
Telefacsimile: (212) 224-5197
Wire Transfer Instructions:
Citibank, N.A. New York
ABA# 021000089
Account No.: 36023837
Reference:The Sumitomo Bank, Limited, New York
Attention: Loan Operations
Lending Office for Eurodollar Rate Loans:
The Sumitomo Bank Limited
277 Park Avenue
Ne York, New York 10172
Attention: Lissette Villanueva-Ruiz
Telephone: (212) 224-4185
Telefacsimile: (212) 224-5197
Wire Transfer Instructions:
Citibank, N.A. New York
ABA# 021000089
Account No.: 36023837
Reference:The Sumitomo Bank, Limited, New York
Attention: Loan Operations
SIGNATURE PAGE 15 OF 15
<PAGE> 1
Exhibit 10.15
Execution Copy
TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
<PAGE> 2
TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
RECITALS .........................................................................................1
ARTICLE I DEFINITIONS..............................................................................2
ARTICLE II ALLOCATION OF TAX LIABILITIES............................................................6
2.01 Liability for United States Federal Taxes................................................6
2.02 Liability for State Taxes................................................................6
2.03 Liability for Foreign Taxes..............................................................7
2.04 Spin-off Taxes...........................................................................7
2.05 Method of Allocating Taxes for Straddle Periods..........................................7
2.06 Tax Accounting Practices.................................................................8
ARTICLE III PREPARATION AND FILING OF TAX RETURNS....................................................8
3.01 General..................................................................................8
3.02 Consolidated, Combined and Joint Returns.................................................8
3.05 Right to Review Returns..................................................................9
ARTICLE IV TAX REFUNDS AND CARRYOVERS..............................................................10
4.01 Refunds.................................................................................10
4.02 Carrybacks or Claims for Refund.........................................................10
4.03 Carryovers from Pre-Distribution Periods to Post-Distribution Periods...................11
4.04 State Tax Credits.......................................................................11
ARTICLE V TAX PAYMENTS............................................................................11
5.01 Payment of Consolidated United States Federal Taxes
for Pre-Distribution Periods............................................................11
5.02 Payment of State and Foreign Taxes for Which
GenCorp has Filing Responsibility.......................................................11
5.03 Indemnification Payments................................................................11
5.04 Tax Treatment of Tax and Indemnification Payments.......................................12
ARTICLE VI TAX AUDITS AND APPEALS....................................................................
6.01 Notice..................................................................................12
6.02 Control of Audits and Appeals...........................................................12
6.03 Consent to Settlements..................................................................13
6.04 Information.............................................................................14
6.05 Expenses................................................................................14
6.06 Adverse Effect Issues...................................................................14
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII SPECIAL RULES PERTAINING TO GENCORP SERVICES, INC.......................................16
7.01 Liability for State Taxes...............................................................16
7.02 GSI Tax Returns.........................................................................16
ARTICLE VIII MISCELLANEOUS MATTERS.....................................................................
8.01 Amendment and Waiver....................................................................16
8.02 Tax Allocation Agreements, Etc..........................................................16
8.03 Entire Agreement; Inconsistent Provisions...............................................17
8.04 Affiliate Obligations...................................................................17
8.05 Further Action..........................................................................17
8.06 Time for Notice.........................................................................17
8.07 Notices.................................................................................17
8.08 Remedies................................................................................17
8.09 Successors and Assigns..................................................................18
8.10 Severability............................................................................18
8.11 Counterparts............................................................................18
8.12 Descriptive Headings....................................................................18
8.13 No Third-Party Beneficiaries............................................................18
8.14 Construction............................................................................18
8.15 Form of Payments and Late Payments......................................................19
8.16 Governing Law...........................................................................19
</TABLE>
ii
<PAGE> 4
Execution Copy
TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
THIS TAX MATTERS AGREEMENT (the "Agreement") is made and entered into
September 30, 1999, by and between GenCorp Inc. ("GenCorp"), an Ohio
corporation, and OMNOVA Solutions Inc. ("OMNOVA"), an Ohio corporation, on
behalf of themselves and their respective Affiliates.
RECITALS:
---------
WHEREAS, the Board of Directors of GenCorp has determined that it is
appropriate and desirable to separate GenCorp's Decorative & Building Products
and Performance Chemicals businesses from its other businesses by means of a
series of transactions, including (1) a transfer to OMNOVA of the assets of such
businesses in exchange for all the issued and outstanding stock of OMNOVA and
other consideration (the "Separation") and (2) a dividend consisting of all the
issued and outstanding stock of OMNOVA, on a pro rata basis, to the holders of
GenCorp common stock (the "Distribution"), in transactions that will qualify for
tax-free treatment for purposes of United States Federal Taxes under Sections
368(a)(1)(D) and 355 of the Code (the Separation, the Distribution and related
transactions described in the Ruling Request and in the Ruling being,
collectively, the "Spin-off"); and
WHEREAS, GenCorp and OMNOVA have set forth the principal corporate
transactions required to effect the Spin-off, together with the terms of such
transactions and related matters, in a Distribution Agreement between GenCorp
and OMNOVA, dated September 30, 1999 (the Distribution Agreement"); and
WHEREAS, after the Spin-off. OMNOVA and its Affiliates will cease to be
members of the affiliated group (within the meaning of Section 1504(a) of the
Code) of which GenCorp is the common parent, effective as of the Distribution
Date; and
WHEREAS, GenCorp and OMNOVA desire to provide for and agree upon (1)
the allocation of liabilities for Taxes with respect to the Parties prior to,
arising out of, and subsequent to the Spin-off, (2) the preparation and filing
of Tax Returns along with the payment of Taxes shown due and payable thereon,
(3) the retention and maintenance of records necessary to prepare and file
appropriate Tax Returns and to handle any Tax Contests, as well as the provision
for appropriate access to those records by the Parties, (4) the conduct of
audits, examinations and proceedings by governmental entities which could result
in a redetermination of Taxes of the Parties, (5) the responsibility for any Tax
deficiencies and the treatment of refunds of Taxes and Carryovers and Carrybacks
of the Parties, (6) the cooperation of the Parties
<PAGE> 5
with one another in order to fulfill their duties and responsibilities under
this Agreement and under the Code and other applicable Law, and (7) other
matters related to Taxes;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises, covenants and conditions hereinafter contained, the Parties agree as
follows:
ARTICLE I
---------
DEFINITIONS
-----------
"Affiliate" means any Person that directly or indirectly controls, is
under the control of, or is under common control with, the Person in question.
"Control" of a Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through ownership or voting securities, by contract or otherwise. Except
as otherwise provided herein, the term "Affiliate" shall refer to Affiliates of
a Person determined immediately after the Distribution Date, provided, however,
that, after the Spin-off, GenCorp and OMNOVA (in each case together with the
members of their respective Groups) shall not be Affiliates of each another.
"Adverse Effect Issue" has the meaning set forth in Section 6.06(b).
"Affected Party" has the meaning set forth in Section 6.06(b).
"Agreement" has the meaning set forth in the introduction.
"Carryover" and "Carryback" mean any net operating loss, net capital
loss, excess tax credit, or other similar Tax item which may or must be carried
forward or back, respectively, from one Tax Period to another under the Code or
other applicable Law.
"Code" means the United States Internal Revenue Code of 1986, as
amended, or any successor law.
"Distribution" has the meaning set forth in the Recitals.
"Distribution Agreement" has the meaning set forth in the Recitals.
"Distribution Date" means the effective date of the Distribution as set
forth in the Distribution Agreement.
"Examined Party" has the meaning set forth in Section 6.06(a).
"Foreign Taxes" means any Taxes imposed or collected by any foreign
government, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and "Foreign Tax" means any one of the
foregoing Foreign Taxes.
"GenCorp" has the meaning set forth in the introduction.
2
<PAGE> 6
"GenCorp Group" means GenCorp and its Affiliates.
"Granting Party" has the meaning set forth in Section 6.06(b).
"Group" means each of the GenCorp Group and the OMNOVA Group whenever
no distinction is otherwise required between them.
"GSI" has the meaning set forth in Section 7.01.
"Including" has the meaning set forth in Section 8.14.
"Indemnification Payment" means a payment subject to Section 5.03.
"Indemnified Party" and "Indemnifying Party" have the meanings set
forth in Section 5.03(b).
"IRS" means the United States Internal Revenue Service and any
successor department, agency or organization of the United States.
"Joint Contest" means any Tax Contest seeking a redetermination of
Taxes which involves or could involve one or more members of the GenCorp Group
and the OMNOVA Group.
"Law" means the law of any governmental entity or political subdivision
thereof, other than the Code, relating to any Tax.
"OMNOVA" has the meaning set forth in the introduction.
"OMNOVA Group" means OMNOVA and its Affiliates.
"OMNOVA Group Carryback" has the meaning set forth in Section 4.02(a).
"Participating Party" has the meaning set forth in Section 6.02(b).
"Parties" means GenCorp and OMNOVA.
"Party" means either GenCorp or OMNOVA.
"Person" means any individual and any partnership, joint venture,
corporation, limited liability company, trust, unincorporated organization or
other business entity formed or operating under United States or foreign law.
3
<PAGE> 7
"Post-Distribution Period" means any Tax Period beginning after the
Distribution Date and, in the case of any Straddle Period, the portion of such
Tax Period ending after the Distribution Date.
"Pre-Distribution Period" means any Tax Period ending on or before the
Distribution Date and, in the case of any Straddle Period, the portion of such
Tax Period ending on the Distribution Date.
"Prime Rate" means the prime interest rate published in the Wall Street
Journal from time to time.
"Return" means any return or report of Taxes due, any information
return or statement with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Laws, any claims for refund of Taxes paid, and any amendments or supplements to
any of the foregoing.
"Ruling" means the private letter ruling, dated June 30, 1999, issued
by the IRS in reply to the Ruling Request (including any amendment or supplement
thereto).
"Ruling Request" means the private letter ruling request filed by
GenCorp with the IRS on February 24, 1999, (as modified or supplemented by any
materials submitted to the IRS), seeking rulings that, inter alia, the Spin-off
will qualify for Federal income tax purposes for tax-free treatment under
Sections 368(a)(1)(D) and 355 of the Code.
"Separate Contest" means a Tax Contest which involves (i) only GenCorp
and members of the GenCorp Group, or (ii) only OMNOVA and members of the OMNOVA
Group.
"Separation" has the meaning set forth in the Recitals.
"Short Period" means any Tax Period which is based on an accounting
period which is shorter than the normal accounting period used for determining
such Tax (e.g., in the case of the United States Federal income Tax, any Tax
Period of less than one year).
"Spin-off" has the meaning set forth in the Recitals.
"Spin-off Taxes" means any Taxes incurred by or imposed on GenCorp or
OMNOVA (or their respective Affiliates) resulting from the Spin-off and any
disposition of stock or assets undertaken to separate the OMNOVA Group from the
GenCorp Group, in accordance with the terms of the Distribution Agreement.
"State Property Taxes" means State Taxes that are imposed on or with
respect to the ownership or use of property or based on the value of property,
including ad valorem, real property, personal property (tangible or intangible)
and similar Taxes.
4
<PAGE> 8
"State Taxes" means all Taxes imposed or collected by any state or
local government in the United States (including possessions and territories of
the United States), and "State Tax" means any one of the foregoing State Taxes.
"Straddle Period" means (i) any Tax Period that begins before and ends
after the Distribution Date, (ii) any Short Period that ends on the Distribution
Date and (iii) any Short Period that begins on the first day following the
Distribution Date.
"Tax Authority" means, with respect to any Tax, the governmental entity
or political subdivision thereof that imposes such Tax and any governmental
department, office or agency (if any) charged with the determination or
collection of such Tax for such entity or subdivision.
"Tax Benefit" means any refund, credit, Carryover, Carryback or other
reduction in otherwise required Tax payments. Such term does not include a
decrease in any Tax in one Tax Period that results from a Tax Adjustment in
another Tax Period, such as an increase in a deduction for depreciation that
results from a determination that, in a previous Tax Period, an expenditure is
capitalized and not deducted, or an item of gain is recognized.
"Tax Contest" means an audit, review, examination or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any member of any of the GenCorp Group or the OMNOVA
Group for (1) any Pre-Distribution Period, (2) any Straddle Period or (3) any
Post-Distribution Period, if such proceeding could result in any Tax Adjustment
or Tax Benefit for any Pre-Distribution Period or Straddle Period (without
regard to whether such matter was initiated by an appropriate Tax Authority or
in response to a claim for a refund of Taxes).
"Taxes" means all Federal, state, territorial, local, foreign and other
net income, gross income, gross receipts, sales, use, value added, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, unemployment insurance, workers compensation, social
security, excise, severance, stamp, business license, occupation, premium,
property, environmental, windfall profits, customs, duties, alternative minimum,
estimated or other taxes, fees, premiums, assessments or charges of any kind
whatever imposed or collected by any governmental entity or political
subdivision thereof, which any member of the GenCorp Group or of the OMNOVA
Group is required to pay, collect or withhold, together with any interest and
any penalties, additions to Tax or additional amounts with respect thereto, and
"Tax" means any one of the foregoing Taxes.
"Tax Period" means, with respect to any Tax, the period for which the
Tax is reported as provided under the Code or other applicable Laws.
"United States Federal Taxes" means all Taxes imposed or collected by
the United States Federal Government, and "United States Federal Tax" means any
one of the foregoing United States Federal Taxes.
"1999 Fiscal Year" has the meaning set forth in Section 3.02(b).
5
<PAGE> 9
ARTICLE II
----------
ALLOCATION OF TAX LIABILITIES
-----------------------------
2.01 LIABILITY FOR UNITED STATES FEDERAL TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, and 4.02, GenCorp
shall be liable for, and shall indemnify and hold the OMNOVA Group harmless
from:
(1) any United States Federal Taxes imposed on
GenCorp, OMNOVA and all members of their respective Groups for any
Pre-Distribution Period and
(2) any United States Federal Taxes imposed on
any members of the GenCorp Group for any Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, and 4.02, OMNOVA
shall be liable for, and shall indemnify and hold the GenCorp Group harmless
from all United States Federal Taxes imposed on any members of the OMNOVA Group
for any Post-Distribution Period.
2.02 LIABILITY FOR STATE TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, 4.02, and 7.01,
GenCorp shall be liable for, and shall indemnify and hold the OMNOVA Group
harmless from:
(1) any State Taxes imposed on GenCorp or OMNOVA and all
members of their respective Groups for any Pre-Distribution Period (except as
provided in Section 2.02(b)(1)) and
(2) any State Taxes imposed on any members of the GenCorp
Group for any Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, and 4.02,
OMNOVA shall be liable for, and shall indemnify and hold the GenCorp Group
harmless from:
(1) any State Property Taxes imposed on GenCorp or OMNOVA
and all members of their respective groups for any Pre-Distribution Period, to
the extent such State Property Taxes are imposed on or with respect to the
ownership or use, or are based on the value, of property principally used by any
member of the OMNOVA Group before the Spin-off or immediately thereafter
(including all property transferred, directly or indirectly, to any member of
the OMNOVA Group in the Spin-off).
(2) any State Taxes imposed on any members of the OMNOVA
Group for any Post-Distribution Period.
6
<PAGE> 10
2.03 LIABILITY FOR FOREIGN TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, and 4.02,
GenCorp shall be liable for, and shall indemnify and hold the OMNOVA Group
harmless from:
(1) any Foreign Taxes imposed on GenCorp, OMNOVA or their
respective Groups for any Pre-Distribution Period and
(2) any Foreign Taxes imposed on the GenCorp Group for any
Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, and 4.02, OMNOVA
shall be liable for, and shall indemnify and hold the GenCorp Group harmless
from all Foreign Taxes imposed on the OMNOVA Group for any Post-Distribution
Period.
2.04 SPIN-OFF TAXES. Except as otherwise provided in Section 5.02 of
the Distribution Agreement, GenCorp shall be liable for, and shall indemnify and
hold the OMNOVA Group harmless from all Spin-off Taxes.
2.05 METHOD OF ALLOCATING TAXES FOR STRADDLE PERIODS.
(a) To the extent required or allowed by applicable law,
the Parties shall apportion their respective liabilities for Taxes relating to a
Straddle Period that begins before and ends after the Distribution Date in
accordance with an actual or hypothetical closing of the books on the
Distribution Date in the case of income Taxes or other Taxes based on actual
events and activities of such Party.
(b) Except as provided in Section 2.05(a) Taxes for any
Straddle Period, with respect to any member of the GenCorp Group and the OMNOVA
Group shall be apportioned between Pre-Distribution and Post-Distribution
Periods as follows: First, Taxes for Tax Periods or portions thereof ending on
the last day of the calendar month preceding the Distribution Date (such date is
hereinafter referred to as the "Cutoff Date") shall be based on actual events
and activities through the Cutoff Date and in accordance with past accounting
practices. Second, Taxes for the period from the Cutoff Date through the
Distribution Date shall be computed by prorating the activities of the calendar
month which includes the Distribution Date on a daily pro rata basis.
Notwithstanding the foregoing provisions of this Section 2.05(b), (i)
depreciation, amortization and depletion for any Straddle Period shall be
apportioned on a daily pro rata basis and (ii) extraordinary items not arising
in the ordinary course of business shall be apportioned to the Tax Period in
which the event giving rise to such item occurs.
(c) For purposes of this Agreement, franchise Taxes shall
be allocated to the Periods in which the items with respect to which the Tax is
imposed occur, regardless of whether the Tax is imposed with respect to one or
more other Periods.
7
<PAGE> 11
(d) For purposes of this Agreement, any taxes computed on
a unitary method shall be allocated between the members of the GenCorp Group and
the OMNOVA Group consistent with past accounting practice and consistent with
applicable law.
2.06 TAX ACCOUNTING PRACTICES. Any Straddle Period Returns prepared by
any member of the GenCorp Group or the OMNOVA Group shall be filed in accordance
with past Tax accounting practices used with respect to the Tax Returns in
question, and to the extent any items are not covered by past practices, in
accordance with reasonable Tax accounting practices selected by GenCorp or
OMNOVA, as the case may be (except that accounting elections and determinations
shall be made by each Party, where reasonably possible, in a manner that
minimizes the net Tax incurred by the other Party and its Affiliates). In the
event any member of the GenCorp Group or the OMNOVA Group files Tax Returns for
Straddle Periods that are inconsistent with such past Tax accounting practices,
then, notwithstanding any provision of this Agreement to the contrary, in
addition to any other remedies available, the other Party shall only be
responsible for the amount of Taxes it would owe if such Tax Returns had been
consistent with such past Tax accounting practices. The Parties shall consult
regarding any such proposed changes in accounting methods and attempt in good
faith to agree as to procedures to be followed and the amount of any indemnity
hereunder.
ARTICLE III
-----------
PREPARATION AND FILING OF TAX RETURNS
-------------------------------------
3.01 GENERAL. Except as otherwise provided in this Article III, Tax
Returns shall be prepared and filed by the Person liable for the Tax reported on
such Tax Return, or otherwise obligated to file such Return, under the Code or
other applicable Law. Schedule 3.01 sets forth the United States Federal and
State Tax Returns relating to income Taxes to be filed under this provision and
the Person responsible for filing each such Return. Without limiting the
foregoing, in accordance with Article VI, the Person responsible for filing such
a Return shall also be responsible for responding to any revenue agent request
or any other formal or informal request for information or otherwise relating to
such Return by the IRS or any other applicable Tax Authority. The Parties shall
render assistance and cooperate with one another in accordance with the terms of
the Distribution Agreement.
3.02 CONSOLIDATED, COMBINED AND JOINT RETURNS.
(a) Any Tax Returns for United States Federal Taxes
imposed for any Pre-Distribution Period which reflect Taxes for which any member
of the GenCorp Group has liability under Article II (including, without
limitation, GenCorp's consolidated Federal income Tax Return for the Tax Period
in which the Distribution occurs) shall be prepared by and filed by GenCorp. In
furtherance of, and not by limitation of, the cooperation and assistance
required by the terms of the Distribution Agreement, OMNOVA shall, in connection
with any Tax Return for United States Federal income Taxes for any
Pre-Distribution Period filed after the Distribution Date for which GenCorp has
filing responsibility under this Agreement and which reflects income or
transactions attributable to the OMNOVA Group, provide GenCorp with (i) true and
correct separate Federal income Tax Returns for the OMNOVA Group, together with
all
8
<PAGE> 12
accompanying work papers and other computations of separate Federal income Tax
liability for the OMNOVA Group; (ii) a true and correct reconciliation of book
income to Federal taxable income for the OMNOVA Group, and (iii) any other
information or documentation reasonably requested by GenCorp in connection with
such Tax Return; provided, however, that the Parties shall consult regarding the
type and extent of the information required by GenCorp hereunder.
(b) With respect to the Period ending on November 30, 1999,
or, where applicable to any Group member, the corresponding 52-53 week Period
(the "1999 Fiscal Year"), OMNOVA hereby agrees to provide GenCorp with all such
Returns, work papers and computations relating to Federal Taxes on or before May
15, 2000, and with all such Returns, work papers and computations relating to
State Taxes on or before on or before June 15, 2000.
(c) If, without reasonable cause, OMNOVA fails to provide any
information required by this Section 3.02 within the time frame specified
herein, GenCorp may file the applicable Returns based on the information
available at the time such Returns are due and OMNOVA shall be liable for, and
shall indemnify GenCorp from, any interest or penalties relating to Taxes,
additions to Tax or other costs imposed on GenCorp as a result of OMNOVA's
failure to provide such information; provided, however, that in no event will
OMNOVA be liable to reimburse GenCorp for or indemnify GenCorp against any
increase in tax liability (excluding interest, penalties, additions to tax and
the like) resulting from such information. The Parties shall attempt in good
faith to reach agreement regarding the information to be provided by OMNOVA to
GenCorp and the time such information is needed.
(d) Any Tax Returns for State Taxes for any Pre-Distribution
Period which reflect Taxes for which the GenCorp Group has liability
under Article II, shall be prepared and filed by GenCorp. Sections 3.02(a) and
3.02(c) shall apply mutatis mutandis to all State Tax Returns for any
Pre-Distribution Period that GenCorp must prepare and/or file under this
Agreement that is measured by income and that includes any income or
transactions attributable to OMNOVA or any member of the OMNOVA Group.
(e) Any Tax Returns for Foreign Taxes for any Pre-Distribution
Period which reflect Taxes for which the GenCorp Group has liability under
Article II, shall be prepared and filed by GenCorp. Any Tax Returns for Foreign
Taxes for any Post-Distribution Period (including any such Straddle Period)
which reflect Taxes for which the OMNOVA Group has liability under Article II,
shall be prepared and filed by OMNOVA. For any Straddle Period Tax Returns
prepared and filed by OMNOVA, the liability for Taxes reflected on such Tax
Return will be divided between the Pre-Distribution Period and the
Post-Distribution Period in accordance with Section 2.05.
3.03 RIGHT TO REVIEW RETURNS. Upon the request of either Party, the
other Party shall make available for inspection and copying all Tax Returns (and
related work papers) with respect to Taxes to the extent that (i) such Return
relates to Taxes for which the requesting Party may be liable under this
Agreement, (ii) such Return relates to Taxes for which the requesting Party may
have a claim for Tax Benefits hereunder, or (iii) the requesting Party
reasonably determines that it must inspect such Return to confirm any Person's
compliance with the terms of this
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Agreement. The Parties shall attempt in good faith to resolve any issues arising
out of the review of such Returns.
ARTICLE IV
----------
TAX REFUNDS AND CARRYOVERS
--------------------------
4.01 REFUNDS. Except as provided in Section 4.02, any refund of any
Taxes for any Pre-Distribution Period shall belong to GenCorp. In the event
OMNOVA or any of its Affiliates receives a refund for any Pre-Distribution
Period, the Person receiving such refund shall immediately remit such refund to
GenCorp. A refund includes the application of an amount otherwise refundable as
a reduction of amounts owed or to be owed notwithstanding that no cash is
transferred.
4.02 CARRYBACKS OR CLAIMS FOR REFUND.
(a) At the request of OMNOVA and at OMNOVA's expense,
GenCorp or one of its Affiliates will file one or more claims for refund
(including any tentative carryback or refund adjustment under Section 6411 of
the Code) of Taxes with respect to any Pre-Distribution Period resulting from
any Carryback generated by any member of the OMNOVA Group from a
Post-Distribution Period ("OMNOVA Group Carryback"), provided (subject to
Section 4.02(b)) that such refund does not result in any increase in the
liability of any member of GenCorp's Group for Taxes for any Tax Period. In the
event GenCorp or one of its Affiliates receives a refund for any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period, GenCorp shall immediately remit such refund to OMNOVA.
(b) In the event GenCorp or one of its Affiliates files
one or more claims for refund (including any tentative carryback or refund
adjustment under Section 6411 of the Code) of Taxes with respect to any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period that results in any increase in the liability of any
member of GenCorp's Group for Taxes for any Tax Period, GenCorp or any of its
Affiliates shall be entitled to retain that portion of the refund that exactly
offsets the additional Taxes for which it becomes liable as a result of filing
the refund claim, and the balance of such refund shall be refunded immediately
to OMNOVA. To the extent the increased liability for Taxes of GenCorp or any of
its Affiliates with respect to any Pre-Distribution Period resulting from any
OMNOVA Group Carryback from a Post-Distribution Period is reversed for any Tax
Period, the amount of any Tax Benefit resulting from such reversal shall be paid
immediately to OMNOVA on the date when the Return is filed for the year in which
the Tax Benefit arises or, if such return has already been filed, then
immediately after GenCorp or any of its Affiliates receives a payment reflecting
the Tax Benefit in question. Similarly, to the extent the increased liability
for Taxes of GenCorp or any of its Affiliates with respect to any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period for any Period arises after the refund has been paid to
OMNOVA, GenCorp shall inform OMNOVA of the amount of such increase, and OMNOVA
shall pay the amount of such increase to GenCorp promptly. Procedures similar to
those in Section 5.03 shall apply. All computations under this Section 4.02
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<PAGE> 14
shall be adjusted to take into account interest payable by or to GenCorp, and
any Tax Benefit resulting therefrom.
4.03 CARRYOVERS FROM PRE-DISTRIBUTION PERIODS TO POST-DISTRIBUTION
PERIODS.
(a) If GenCorp or any of its Affiliates (determined for
this purpose as of immediately before the Distribution Date) is entitled to
carry over any Tax Benefit from a Pre-Distribution Period to a Post-Distribution
Period, and if the proper person to claim such Tax Benefit is a member of the
OMNOVA Group, OMNOVA or such member shall, upon request of GenCorp and at
GenCorp's expense, file any return or report reasonably requested by GenCorp in
a manner that claims such Tax Benefit and shall pay the full amount of such Tax
Benefit to GenCorp promptly upon receipt, provided (subject to Section 4.02(b)
)) that such Tax Benefit does not result in any increase in the liability of any
member of the OMNOVA Group for Taxes for any Tax Period.
(b) If OMNOVA or any of its Affiliates claims a carryover
of a Tax Benefit described in Section 4.03(a) that results in any increase in
the liability of any member of the OMNOVA Group for Taxes for any Tax Period,
the provisions of Section 4.02(b) shall apply, mutatis mutandis, to OMNOVA's
obligation to refund such Tax Benefit to GenCorp.
4.04 STATE TAX CREDITS. Notwithstanding any other provision of this
Agreement, the Parties shall consult and shall attempt in good faith to agree
concerning the allocation between them of credits for State Taxes.
ARTICLE V
---------
TAX PAYMENTS
------------
5.01 PAYMENT OF CONSOLIDATED UNITED STATES FEDERAL TAXES FOR
PRE-DISTRIBUTION PERIODS. GenCorp shall pay all Taxes due, be entitled to the
benefit of all overpayments of estimated income tax, and, except as provided in
Section 4.02, shall receive all refunds in connection with, the filing of
GenCorp's Tax Returns relating to U.S. Federal Taxes for all Pre-Distribution
Periods, including GenCorp's consolidated Federal income Tax Return for the 1999
Fiscal Year.
5.02 PAYMENT OF STATE AND FOREIGN TAXES FOR WHICH GENCORP HAS FILING
RESPONSIBILITY. GenCorp shall pay to the appropriate Tax Authority all State and
Foreign Taxes for Tax Returns with respect to which GenCorp (or another member
of the GenCorp Group) has filing responsibility pursuant to Article III.
5.03 INDEMNIFICATION PAYMENTS.
(a) The Parties shall attempt to agree upon procedures
for the payment of indemnities under this Agreement. In the absence of any such
Agreement, the procedures set forth in paragraph (b) shall be followed.
11
<PAGE> 15
(b) Upon payment of any Taxes with respect to which
either Party is entitled to receive indemnification hereunder, such member (the
"Indemnified Party") shall send to the other Party (the "Indemnifying Party") an
invoice accompanied by evidence of payment and a statement detailing the Taxes
paid and describing in reasonable detail the particulars relating thereto. The
Indemnifying Party (or such one or more members of the Indemnifying Party's
Group as it shall nominate) shall remit payment for Taxes for which the
Indemnifying Party is liable for indemnification hereunder to the Indemnified
Party (or such one or more members of the Indemnified Party's Group as it shall
nominate) within 30 days of receipt of such invoice, evidence of payment and
statement, or at any earlier time identified by the Indemnifying Party.
Notwithstanding any provision in this Agreement to the contrary, to the extent
the Indemnified Party receives a refund of Taxes for which it has been
indemnified, it shall remit the refund to the Indemnifying Party (or such one or
more members of the Indemnifying Party's Group as it shall nominate)
immediately. The amount of any payment under this Section 5.03 that is
attributable to interest paid to a Tax Authority shall be adjusted to take into
account the Tax Benefit resulting therefrom.
5.04 TAX TREATMENT OF TAX AND INDEMNIFICATION PAYMENTS. The Parties
agree that, in the absence of any change in law, any Tax or indemnification
payments made under this Agreement or the Distribution Agreement (including
payments made under Sections 2.04, 4.01, 4.02, 4,03, and 5.03 shall be reported
for Tax purposes by the payor and the recipient as capital contributions or
dividends, as appropriate, relating back to the period beginning before the
Distribution Date. The Parties will file their respective Tax Returns on this
basis, unless agreed otherwise in writing by the Indemnified Party and the
Indemnifying Party.
ARTICLE VI
----------
TAX AUDITS AND APPEALS
----------------------
6.01 NOTICE.. Each Party shall provide prompt notice to the other Party
of any pending or threatened Tax Contest of which it becomes aware relating to
Taxes for Tax Periods for which it is indemnified by the other Party. Such
notice shall contain factual information (to the extent known) describing any
asserted Tax liability in reasonable detail and shall be accompanied by copies
of any notice or other document received from any Tax Authority in respect of
any such matter. If either Party has knowledge of an asserted Tax liability with
respect to a matter for which it is to be indemnified hereunder and such Party
fails to give the Indemnifying Party notice of such asserted Tax liability
within 30 days after it has received written notice thereof, then, unless such
failure has no material adverse effect upon the Indemnifying Party's ability to
participate in the Tax Contest, the Indemnifying Party shall have no obligation
to indemnify the Indemnified Party for any Taxes arising out of such asserted
Tax liability.
6.02 CONTROL OF AUDITS AND APPEALS.
(a) SEPARATE CONTESTS. Any Separate Contest shall be
controlled solely by the Party involved in the Tax Contest.
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<PAGE> 16
(b) JOINT CONTESTS. With respect to any Joint Contest, the
Party that filed the Return shall control the proceeding. The personnel and
outside advisers (including counsel) of the Party not controlling the proceeding
may participate, at the expense of such Party, in the proceeding to the extent
such proceeding relates to items or adjustments for which such Party may incur
indemnity liability under this Agreement. Such participation shall be reflected
by the grant of appropriate powers of attorney. The Party granting such power of
attorney (the "Granting Party") shall have the right to revoke the power of
attorney if the Granting Party reasonably determines that the actions or failure
to act on the part of the other Person (the "Participating Party") in the
proceeding has resulted, or can be reasonably expected to result, in the
hindrance or delay of any resolution or settlement of the proceeding. In the
event the Participating Party fails to participate timely and fully in any
proceeding to the extent to which such proceeding relates to items or
adjustments for which the Participating Party has indemnity liability under this
Agreement, the Participating Party shall be liable for, in addition to all Taxes
for which the Participating Party shall be liable under this Agreement, any and
all costs imposed on, or incurred by, the Granting Party as a result of the
Participating Party's failure to participate. The revocation of any power of
attorney under this Section 6.02 shall in no way limit the Participating Party's
indemnity liability under this Agreement.
6.03 CONSENT TO SETTLEMENTS.
(a) Subject to Sections 6.03(b) and (c) neither Party shall
agree to any Tax liability or compromise any Tax claim in a Joint Contest for
the account of any member of the other Group without the consent of such other
Party, which consent shall not be withheld unreasonably. Decisions regarding
settlement of a Joint Contest shall be made jointly by the Parties and their
respective representatives.
(b) If GenCorp refuses to accept a settlement proposal in a
Joint Contest that OMNOVA wishes to accept, then the contest shall continue, and
(i) OMNOVA's liability to GenCorp with respect to such adjustment shall be
determined as if the settlement proposal had been accepted; (ii) GenCorp shall
indemnify OMNOVA from and against any Taxes resulting from an outcome of the
contest less favorable than the settlement and any other costs resulting from
the continuation of the contest, and (iii) GenCorp shall be entitled to all
benefits resulting from any outcome of the contest that is more favorable than
the settlement (less any costs to OMNOVA, against which GenCorp shall indemnify
OMNOVA).
(c) If OMNOVA refuses to accept a settlement proposal in a
Joint Contest that GenCorp wishes to accept, then the contest shall continue and
(i) GenCorp's liability to OMNOVA with respect to such adjustment shall be
determined as if the settlement proposal had been accepted, (ii) OMNOVA shall
indemnify GenCorp from and against any Taxes resulting from an outcome of the
contest less favorable than the settlement and any other costs resulting from
the continuation of the contest, and (iii) OMNOVA shall be entitled to all
benefits resulting from any outcome of the contest that is more favorable than
the settlement (less any costs to GenCorp, against which OMNOVA shall indemnify
GenCorp).
13
<PAGE> 17
6.04 INFORMATION. Each Party shall provide the other Party with
information pertaining to any increase or decrease in its Taxes that might
affect the liability for Taxes of the other Party for any Period. In addition,
upon reasonable request, each Party shall provide information to the other Party
regarding the Tax treatment of any item.
6.05 EXPENSES. Each Party shall bear its own Group's expenses incurred
in connection with any Tax Contest.
6.06 ADVERSE EFFECT ISSUES
(a) The procedures set forth in Sections 6.03(c) through
6.06(f) shall apply if -
(i) in an examination of a Federal income Tax Return of
one of the Parties or any member of its Group (the "Examined Party"), the IRS
raises one or more Adverse Effect Issues, or
(ii) the Examined Party (whether or not in the course of
any audit, examination or other proceeding relating to the determination of its
liability for Federal income Taxes) files an amended Federal income Tax Return
or claim for refund of Federal income Taxes or otherwise takes a position with
the IRS inconsistent with a Federal income Tax Return already filed, if such
amended Federal income Tax Return, claim or position is likely, itself or in
combination with other issues, to be an Adverse Effect Issue.
(b) One or more issues are "Adverse Effect Issues" if, in the
reasonable judgment of the Examined Party, the aggregate effect of all such
issues with respect to the Periods within an examination cycle or similar
proceeding of the Examined Party is significantly likely to increase the
liability for Federal income Taxes (less interest) of the Party that is not the
Examined Party and the members of its Group (the "Affected Party") by at least
$250,000. Only for purposes of determining whether an issue is an Adverse Effect
Issue, the amount of such increase in liability for Federal income Taxes shall
be measured under the following principles:
(i) All increases (less any offsetting decreases resulting
from the same or a related item) in the Affected Party's liability for Federal
income Tax likely to result from such Adverse Effect Issue for all Periods shall
be taken into account, provided, however, that any decrease in liability for
Federal income Tax that may result from the sale or disposition of property not
expected to be sold or disposed of (for example, stock of an operating
subsidiary), or similar items, shall not be taken into account.
(ii) Computations of liability for Federal income Tax
shall be based on the highest marginal rate of Federal income Tax applicable to
the Affected Party for each of the Periods involved.
(iii) There shall be taken into account only increases in
liability for Federal income Tax as compared with the return position taken by
the Affected Party.
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<PAGE> 18
(c) In each case, the Parties shall use their reasonable best
efforts to identify issues that are, or in combination with other issues could
become, Adverse Effect Issues.
(i) Promptly upon becoming aware that any Adverse Effect
Issue has been raised as described in Section 6.06(a)(i), the Examined Party
shall provide notice of such event to the Affected Party. Such notice shall
include a description of the Adverse Effect Issue, a computation (as described
in Section 6.06(b)(ii) showing the expected increase in the Affected Party's
liability for Federal income Tax resulting therefrom, and copies of all
correspondence between the Examined Party and the IRS (including information
document requests, responses thereto and notices of proposed adjustment).
(ii) No less than 30 days before filing any amended return
or claim for refund or taking any action described in Section 6.06(a)(ii), the
Examined Party shall (x) provide notice to the Affected Party (such Notice to
include the information and material listed with respect to the notice provided
in Section 6.06(c)(i) and copies of all amended returns, claims for refund or
other documents proposed to be filed with the IRS with respect to such Adverse
Effect Issue) and (y) consult with the Affected Party regarding such action.
(d) Within 30 days after the notice provided in Section
6.06(c)(i) or Section 6.06(c)(ii), the Affected Party may notify the Examined
Party that the Affected Party wishes to participate in proceedings relating to
the disposition of any or all of the Adverse Effect Issues. If the Affected
Party provides such notice, the procedures for Joint Contest set forth in
Section 6.06(b) shall apply, with the Examined Party being in control of the
proceeding. Provided, however, that (i) if the Affected Party does not provide
such notice within such time period, the proceeding shall continue without
participation of the Affected Party and without regard to Sections 6.06(e) and
6.06(f) and (ii) the Affected Party's right to participate in the proceedings
shall terminate if the Examined Party makes a reasonable determination, after
consultation with the Affected Party, that, notwithstanding the Adverse Effect
Items, the total net increase in the Affected Party's liability for Taxes
(determined as set forth in Section 6.06(b)) from all adjustments relating to
the Period or Periods in the examination cycle or similar proceeding is less
than the amount set forth in Section 6.06(b).
(e) Subject to Section 6.06(f), the Examined Party shall
settle any Adverse Effect Issue with the IRS only with the prior consent of the
Affected Party. The Parties shall attempt in good faith to agree as to the terms
of a proposed settlement. If the Parties are unable to agree, the procedures set
forth in Section 6.03(b) or Section 6.03(c) as the case may be, shall apply to
such Adverse Effect Issue.
(f) Notwithstanding Section 6.06(e), the Examined Party may
settle with the IRS any Adverse Effect Issue without consent of the Affected
Party, if, after consultation with the Affected Party, the Examined Party
reasonably determines that (i) a settlement of such Adverse Effect Issue is
desirable to the Examined Party; (ii) in light of all the circumstances
(including the likelihood of various positions of the Parties being sustained in
further proceedings, the cost of such proceedings and the impact of settlement
on other issues), the overall terms of the settlement do not discriminate
against the Affected Party; and (iii) other
15
<PAGE> 19
issues (which may or may not be Adverse Effect Issues) will be settled, and it
is not practical to settle such other issues on the proposed terms without a
settlement of the Adverse Effect Issue. Before determining that a proposed
settlement of other issues is not practical without a settlement of the Adverse
Effect Issue, the Examined Party will use its reasonable best efforts to secure
a settlement of the other issues while leaving the Adverse Effect Issue open for
further proceedings (for example, by entering into an agreement on IRS Form
870AD or similar form to close proceedings relating to one or more Periods but
reserving the Adverse Effect Issue for further proceedings).
Article VII
-----------
Special RuleS Pertaining to Gencorp Services, Inc.
--------------------------------------------------
7.01 LIABILITY FOR STATE TAXES. Notwithstanding Section 6.02(b), OMNOVA
shall be responsible for, and shall indemnify GenCorp against, (a) all
liabilities for State Taxes of GenCorp Services, Inc., a Ohio corporation
("GSI"), and (b) any liability to GSI or to any member of the GenCorp Group for
adjustments to State Taxes resulting from transactions or arrangements between
GSI and any other member of the GenCorp Group or the OMNOVA Group. Such
liabilities for any Straddle Year in jurisdictions using the unitary method
shall be determined in accordance with Section 2.05(d).
7.02 GSI TAX RETURNS. Notwithstanding Sections 3.01 and 3.02, OMNOVA
shall file all State Tax Returns for GSI, with the exception of unitary returns
set forth on Schedule 3.01, and any tax audit or other proceeding pertaining to
any State Tax of GSI shall be a Separate Contest of the OMNOVA Group. GenCorp
shall provide notice to OMNOVA of any issue raised by a Tax Authority that could
reasonably result in the application of this Article VIII.
ARTICLE VIII
------------
MISCELLANEOUS MATTERS
---------------------
8.01 AMENDMENT AND WAIVER. This Agreement shall not be amended or
modified in any manner whatsoever except by a writing executed by each of the
Parties. No failure by either Party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
8.02 TAX ALLOCATION AGREEMENTS, ETC. Immediately prior to the
Distribution, GenCorp shall cause any and all tax allocation, tax sharing and
similar agreements or arrangements existing between GenCorp and all members of
the OMNOVA Group to be terminated as of the Distribution Date, and shall cause
any amounts due under such agreements or arrangements to be settled in the
manner agreed to by the Parties prior to the Distribution Date. Upon such
termination and settlement, no further payments made by one Party to the other
with respect to such agreements or arrangements shall be made, and all other
rights and obligations resulting from such agreements or arrangements between
the Parties shall cease as of such time. This Agreement shall supercede any such
agreements or arrangements.
16
<PAGE> 20
8.03 ENTIRE AGREEMENT; INCONSISTENT PROVISIONS; OTHER AGREEMENTS. The
Parties agree that the Distribution Agreement, this Agreement and the other
Ancillary Agreements (as that term is defined in the Distribution Agreement)
constitutes the entire agreement between them in respect of the subject matter
of this Agreement, and that, in the event of a conflict or other inconsistency
between any provision or term of this Agreement and any other agreement,
including any provision or term of the Distribution Agreement, then insofar as
such matter relates to Taxes, this Agreement shall prevail.
8.04 AFFILIATE OBLIGATIONS. To the extent that the provisions of this
Agreement pertain to an Affiliate of GenCorp or OMNOVA, GenCorp and OMNOVA
hereby respectively agree that they shall cause such Affiliate to carry out the
terms of this Agreement.
8.05 FURTHER ACTION. The Parties shall execute and deliver all
documents, provide all information, and take or refrain from taking any action
as may be necessary or appropriate to achieve the purposes of this Agreement.
Without limiting the preceding sentence, the members of each Group shall provide
the members of the other Group with such powers of attorney or other authorizing
documentation as is reasonably necessary to empower then to execute and file Tax
Returns they are responsible for hereunder, file claims for refunds and
equivalent claims for Taxes for which they are responsible, and contest, settle
and resolve any Tax Contests that they control under Article VII.
8.06 TIME FOR NOTICE. Notice of any indemnification claim under this
Agreement must be received by the Party against which such claim is made no
later than 30 days from the date on which the Taxes to which such claim relates
have been paid.
8.07 NOTICES. All notices, demands and other communications
which may or are required to be given to or made by either party to the other in
connection with this Agreement shall be in writing (including telex, fax or
other similar writing) and shall be deemed to have been duly given or made: (a)
if sent by registered or certified mail, five days after the posting thereof
with first class postage attached, (b) if sent by hand or overnight delivery,
upon the delivery thereof and (c) if sent by telex or fax, upon confirmation of
receipt of such telex or fax, in each case addressed to the respective parties
as follows:
GenCorp: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attn: Secretary
OMNOVA: OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333
Attn: Secretary
or to such other address and to the attention of such other persons as either
party hereto may specify from time to time by notice to the other party.
17
<PAGE> 21
8.08 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned (other than by merger or pursuant to a sale of all or substantially all
of a party's assets to one Person) by either of the parties hereto without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that no such assignment shall relieve
the assigning party of any liabilities or obligations hereunder. Any transfer or
assignment of any of the rights, interests or obligations hereunder in violation
of the terms hereof shall be void and of no force or effect.
8.09 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the court making the determination of invalidity or
unenforceability shall have the power to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
8.10 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all such
counterparts taken together shall constitute one and the same Agreement.
8.11 DESCRIPTIVE HEADINGS. The Table of Contents and Article and
Section headings of this Agreement are inserted for convenience only and shall
not constitute a part of this Agreement in construing or interpreting any
provision hereof.
8.12 NO THIRD-PARTY BENEFICIARIES. Except as provided in Article V
hereto nothing herein, expressed or implied, is intended or shall be construed
to confer upon or give to any Person any legal or equitable right, remedy, claim
or other benefit under or by reason of this Agreement.
8.13 CONSTRUCTION. It is acknowledged by OMNOVA and GenCorp that this
Agreement has undergone several drafts with the negotiated suggestions of each
and, therefore, no presumptions shall arise favoring either party by virtue of
the authorship of any provision of this Agreement.
8.14 FORM OF PAYMENTS AND LATE PAYMENTS. Any payments owed by any
member of either Group to any member of the other Group under this Agreement
shall be made in the currency in which the Tax to which such payment relates is
assessed by the Tax Authority, and shall be paid in immediately available funds
and in such other manner as the Person to whom such payment is owed may
reasonably request. Any payments required by this Agreement that
18
<PAGE> 22
are not made when due shall bear interest at the Prime Rate from the due date of
the payment to the date paid.
8.15 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAW, AND
NOT THE LAW OF CONFLICTS, OF THE STATE OF OHIO.
IN WITNESS WHEREOF, the Agreement has been duly executed as of the day
and year first above written.
GENCORP INC.
By /s/ William R. Phillips
---------------------------------
Name: William R. Phillips
-----------------------------
Title: Senior Vice President
-----------------------------
OMNOVA SOLUTIONS INC.
By /s/ James C. LeMay
---------------------------------
Name: James C. LeMay
-----------------------------
Title: Senior Vice President
-----------------------------
19
<PAGE> 1
Exhibit 10.16
Execution Copy
ALTERNATIVE DISPUTE RESOLUTION AGREEMENT
----------------------------------------
ALTERNATIVE DISPUTE RESOLUTION AGREEMENT (the "Agreement") dated
September 30, 1999 by and between GENCORP INC., an Ohio corporation ("GenCorp")
and OMNOVA Solutions Inc., an Ohio corporation ("OMNOVA").
This Agreement is made pursuant to the Distribution Agreement dated as
of the date hereof between GenCorp and OMNOVA ("Distribution Agreement"). Each
term used herein that is defined in the Distribution Agreement shall have the
same meaning when used herein as it is given in the Distribution Agreement.
WHEREAS, GenCorp and OMNOVA have determined that it is necessary and
desirable to agree on the procedures described in this Agreement as the sole and
exclusive method or remedy for them to resolve every dispute, controversy or
claim whether sounding in contract, tort or otherwise (hereinafter "Dispute")
which may from time to time arise under or out of, or is in any way related to,
the Transaction Documents or the Distribution (as herein defined); and,
WHEREAS, this Agreement shall apply whether such Dispute is based on a
breach of one party or its obligations under the Transaction Documents or
disagreement between the parties as to the meaning or application of the
Transaction Documents or in any manner related to or arising under or out of the
Distribution or the transactions contemplated by the Transaction Documents
(including all actions taken in furtherance of said Distribution).
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
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):
AMOUNT IN CONTROVERSY: the monetary value of any Dispute plus the
monetary value of any related Dispute or series of related Disputes
then existing or likely to occur in the future.
APPLICABLE DEADLINE: one year and 45 days after the later of the
occurrence of the act or event giving rise to the claim underlying the
Dispute or the date on which such act or event was, or should have
been, in the exercise of reasonable due diligence, discovered by the
party asserting the claim; provided, however, that with respect to
Disputes involving Third Party Claims the applicable act or event shall
be the making of such Third Party Claim.
<PAGE> 2
-2-
CPR: the Center for Public Resources, Inc., New York, NY.
DEMAND: a written demand for arbitration under Article IV of this
Agreement which shall contain a statement setting forth the nature of
the Dispute and the Amount in Controversy.
DISPUTE: is defined in the recitals to this Agreement.
ESCALATION NOTICE: a written notice demanding a meeting of the
respective Chief Executive Officers of the parties for the purpose of
resolving a Dispute.
REQUEST: a written request for mediation under Article III of this
Agreement which shall set forth the nature of the Dispute and the
Amount in Controversy.
TRANSACTION DOCUMENTS: the Distribution Agreement together with the
Ancillary Agreements and other documents referenced in the Distribution
Agreement.
ARTICLE II
RESOLUTION OF DISPUTES
Section 2.01. INTENT. It is the intent of the parties to use their
respective reasonable efforts to resolve expeditiously and on a mutually
acceptable negotiated basis any Dispute between them that may arise from time to
time.
Section 2.02. WAIVER OF RIGHTS. The procedures in this Agreement shall
be the sole and exclusive remedy in connection with any Dispute. Each party to
this Agreement hereby irrevocably waives any rights it may have to trial by jury
or to commence any action in any court of law or equity or before any other
governmental authority with respect to any Dispute, except as expressly
otherwise provided in Sections 4.05(b) and 4.06 of Article IV of this Agreement.
Section 2.03. PROCEDURE. All Disputes between the parties should be
resolved promptly through consultation and good faith negotiation at the working
levels of GenCorp and OMNOVA. All Disputes which cannot be resolved by the
parties at the working level shall first be subjected to escalation as provided
in Section 2.04 of this Article. If escalation does not resolve the Dispute, the
Dispute shall next be submitted to mediation pursuant to Article III of this
Agreement. Subject to Sections 4.05(b) and 4.06 of Article IV of this Agreement,
if a Dispute cannot be resolved through mediation, then such Dispute shall be
submitted to binding Arbitration pursuant to Article IV of this Agreement.
Section 2.04. ESCALATION. If the parties are unable to resolve a
Dispute at working levels within GenCorp and OMNOVA, either party may deliver an
Escalation Notice to the other party demanding an in-person meeting for the
purpose of resolving the Dispute between the Chief Executive Officers ("CEOs")
of both parties in Denver, Colorado, within thirty days
<PAGE> 3
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of receipt of the Escalation Notice. The Escalation Notice shall be delivered in
accordance with Section 5.04 of Article V of this Agreement. The CEO's of the
parties shall have fifteen days following their meeting to resolve the Dispute.
If the Dispute is not resolved within the foregoing period, and in any event
after forty-five days following receipt of an Escalation Notice, either party
may initiate mediation of the Dispute in accordance with Article III of this
Agreement.
ARTICLE III
MEDIATION
Section 3.01. REQUEST FOR MEDIATION. Following completion of the
escalation procedure described in Section 2.04 of Article II of this Agreement,
either party may initiate mediation by delivering a Request to the other party
in accordance with Section 5.04 of Article V of this Agreement.
Section 3.02. APPOINTMENT OF MEDIATOR. Unless the parties otherwise
agree in writing, a single mediator will be appointed by the two parties from
among the former directors of GenCorp who ceased to be members of the GenCorp
Board of Directors at least six months before the Distribution. In the event the
parties are unable to agree upon a mediator or no such former director is
available, the parties shall apply to CPR to appoint a single mediator from the
CPR Panel of Neutrals, which appointment shall be made by CPR within 15 days
after such application.
Section 3.03. DATE, TIME AND PLACE. The date, time and place of each
mediation session shall be determined by agreement of the parties or, if the
parties cannot agree within a reasonable period of time, by the mediator;
provided that the first mediation session shall be held within fifteen (15) days
of the date on which the mediator is appointed. Unless the parties otherwise
agree in writing, all mediation proceedings shall take place in Denver,
Colorado.
Section 3.04. ROLE OF THE MEDIATOR. The mediator shall aid the parties
in their discussions and negotiations by informally advising the parties. Any
opinion expressed by the mediator shall be strictly advisory and shall not be
binding on the parties; provided, however, any final, written opinion expressed
by the mediator shall be admissible in any arbitration proceedings.
Section 3.05. COSTS OF MEDIATION. Costs of the mediation shall be borne
equally by the parties, except that each party shall be responsible for its own
attorney's fees and expenses.
Section 3.06. TERMINATION. The mediation proceedings shall be
terminated upon the happening of any of the following: (i) execution of a
settlement agreement by the parties; (ii) receipt of a written declaration of
the mediator that further efforts at mediation are no longer worthwhile; or,
(iii) receipt of a written declaration of one or both parties that the mediation
proceedings are terminated, which is delivered (in accordance with Section 5.04
of Article V of this Agreement) not earlier than completion of the first
mediation session.
<PAGE> 4
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ARTICLE IV
ARBITRATION
Section 4.01. DEMAND FOR ARBITRATION. (a) At any time after the
termination of mediation as described in Section 3.06 of Article III of this
Agreement, any party may, unless the Applicable Deadline has occurred, make a
Demand that the Dispute be resolved by binding arbitration, which Demand shall
be delivered in the manner set forth in Section 5.04 of Article V of this
Agreement. In the event that any party shall deliver a Demand, the other party
may itself deliver a Demand to such first party with respect to any related
Dispute (with respect to which the Applicable Deadline has not passed) without
the requirement of delivering an Escalation Notice or a Request. In the event
that any party delivers a Demand with respect to any Dispute that is the subject
of any then pending arbitration proceeding or of a previously delivered Demand,
all such Disputes shall be resolved in the arbitration proceeding for which a
Demand was first delivered unless the arbitrator in his or her sole discretion
determines that it is impracticable or otherwise inadvisable to do so.
(b) Except as may be expressly provided in any Transaction
Document, any Demand must be given prior to the Applicable Deadline. The parties
may specifically agree in writing to extend or waive the Applicable Deadline
with respect to any Dispute; however, no discussions, negotiations or mediations
between the parties pursuant to this Agreement, or otherwise, will toll the
Applicable Deadline unless expressly agreed in writing by the parties. Each of
the parties agrees that if a Demand is not given prior to the expiration of the
Applicable Deadline, as between or among the parties, such Dispute will be
barred; provided, however, that if there is a Dispute regarding whether the
Applicable Deadline has expired such Dispute shall be resolved by the
Arbitrator. Subject to Sections 4.05(c) and 4.06 of Article IV of this Agreement
and the preceding sentence, upon delivery of a Demand prior to the Applicable
Deadline, the Dispute shall be decided by a sole arbitrator in accordance with
the rules set forth in this Article IV.
Section 4.02. ARBITRATORS. (a) Within 15 days after a valid Demand is
received, the parties shall attempt to select a sole arbitrator satisfactory to
both parties.
(b) In the event that the parties are not able jointly to
select a sole arbitrator within such 15-day period, the parties shall each
appoint an arbitrator (who need not be disinterested as to the parties or the
matter) within 30 days after delivery of the Demand. If one party appoints an
arbitrator within such time period and the other party fails to appoint an
arbitrator within such time period, the arbitrator appointed by the one party
shall be the sole arbitrator of the matter.
(c) In the event that a sole arbitrator is not selected
pursuant to paragraph (a) or (b) above and, instead, two arbitrators are
selected pursuant to paragraph (b) above, the two arbitrators will, within 30
days after the appointment of the later of them to be appointed, select an
additional arbitrator who shall act as the sole arbitrator of the dispute. After
selection of such sole arbitrator, the initial arbitrators shall have no further
role with respect to the dispute. In the event that the arbitrators so appointed
do not, within 30 days after the
<PAGE> 5
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appointment of the later of them to be appointed, agree on the selection of the
sole arbitrator, any party involved in such dispute may apply to CPR to select
the sole arbitrator, which selection shall be made by CPR within 30 days after
such application. Any arbitrator selected pursuant to this paragraph (c) shall
be disinterested with respect to any of the parties and the matter and shall be
reasonably competent in the applicable subject matter of the Dispute.
(d) The sole arbitrator selected pursuant to paragraph (a),
(b) or (c) above will set a time for the hearing of the matter which will
commence no later than 90 days after the date of appointment of the sole
arbitrator pursuant to paragraph (a), (b) or (c) above and which hearing will be
no longer than 30 days (unless in the judgment of the arbitrator the matter is
unusually complex and sophisticated and thereby requires a longer time, in which
event such hearing shall be no longer than 90 days). The final decision of such
arbitrator will be rendered in writing to the parties not later than 60 days
after the last hearing date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be Denver,
Colorado, unless otherwise agreed by the parties.
Section 4.03. HEARINGS. Within the time period specified in Section
4.02(d) of Article IV of this Agreement, the matter shall be presented to the
arbitrator at a hearing by means of written submissions of memoranda and
verified witness statements, filed simultaneously, and responses, if necessary
in the judgment of the arbitrator or both parties. If the arbitrator deems it to
be essential to a fair resolution of the dispute, live cross-examination or
direct examination may be permitted, but is not generally contemplated to be
necessary. The arbitrator shall actively manage the arbitration with a view to
achieving a just, speedy and cost-effective resolution of the Dispute. The
arbitrator may, in his or her discretion, set time and other limits on the
presentation of each party's case, its memoranda or other submissions, and
refuse to receive any proffered evidence, which the arbitrator, in his or her
discretion, finds to be cumulative, unnecessary, irrelevant or of low probative
nature. Except as otherwise set forth herein, any arbitration hereunder will be
conducted in accordance with the CPR Rules for Non-Administered Arbitration of
Business Disputes then prevailing (except that the fee schedule of CPR will not
apply). Except as expressly set forth in Section 4.06 of Article IV of this
Agreement, the decision of the arbitrator will be final and binding on the
parties, and judgment thereon may be had and will be enforceable in any court
having jurisdiction over the parties. Arbitration awards will bear interest at
an annual rate of the Prime Rate per annum from the date of the award. To the
extent that the provisions of this Agreement and the prevailing rules of the CPR
conflict, the provisions of this Agreement shall govern.
Section 4.04. DISCOVERY AND CERTAIN OTHER MATTERS. (a) Any party may
request limited document production from the other party of specific and
expressly relevant documents, with the reasonable expenses of the producing
party incurred in such production paid by the requesting party. Any such
discovery (under which rights to documents shall be substantially less than
document discovery rights prevailing under the Federal Rules of Civil Procedure)
shall be conducted expeditiously and shall not cause the hearing provided for in
Section 4.03 of Article IV of this Agreement to be adjourned except upon consent
of both
<PAGE> 6
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parties or upon an extraordinary showing of cause demonstrating that such
adjournment is necessary to permit discovery essential to a party to the
proceeding. Depositions, interrogatories or other forms of discovery (other than
the document production set forth above) shall be permitted only upon an
extraordinary showing that such discovery is essential to a party to the
proceeding or upon consent of the parties involved in the applicable Dispute.
Disputes concerning the scope of discovery (including document production and
enforcement of the document production requests) will be determined by written
agreement of the parties or, failing such agreement, will be referred to the
arbitrator for resolution. All discovery requests will be subject to the
parties' rights to claim any applicable privilege. The arbitrator will adopt
procedures to protect the proprietary rights of the parties and to maintain the
confidential treatment of the arbitration proceedings (except as may be required
by law). Subject to the foregoing, the arbitrator shall have the power to issue
subpoenas to compel discovery.
(b) The arbitrator shall have full power and authority to
determine issues of arbitrability but shall otherwise be limited to interpreting
or construing the applicable provisions of the Transaction Documents, including
this Agreement, and will have no authority or power to limit, expand, alter,
amend, modify, revoke or suspend any condition or provision of any of the
Transaction Documents, including this Agreement; it being understood, however,
that the arbitrator will have full authority to implement the provisions of, and
to fashion appropriate remedies for breaches of, the Transaction Documents
including this Agreement (including interim or permanent injunctive relief);
provided that the arbitrator shall not have: (i) any authority in excess of the
authority a court having jurisdiction over the parties and the Dispute would
have absent these arbitration provisions; or, (ii) any right or power to award
punitive, treble or consequential damages except to the extent that any of such
damages are actually paid by a party or a member of a party's Group to a Person.
It is the intention of the parties that in rendering a decision the arbitrator
give effect to the applicable provisions of the Transaction Documents including
this Agreement, and the laws of the State of Ohio without regard to the
principles of conflicts of law thereof (it being understood and agreed that this
sentence shall not give rise to a right of judicial review of the arbitrator's
award).
(c) If a party fails or refuses to appear at and participate
in an arbitration hearing after due notice, the arbitrator may hear and
determine the controversy upon evidence produced by the appearing party.
(d) Arbitration costs will be borne equally by each party,
except that each party will be responsible for its own attorney's fees and its
other costs and expenses, including the costs of witnesses selected by such
party and all internal costs.
Section 4.05. CERTAIN ADDITIONAL MATTERS. (a) Any arbitration award
shall be a bare award limited to a holding for or against a party and shall be
without findings as to facts, issues or conclusions of law (including awards
with respect to any matters relating to the validity or infringement of patents
or patent applications) and shall be without a statement of the reasoning on
which the award rests, but must be in adequate form so that a judgment of a
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court may be entered thereupon. Judgment upon any arbitration award hereunder
may be entered in any court having jurisdiction thereof.
(b) Prior to the time at which an arbitrator is appointed
pursuant to Section 4.02 of Section IV of this Agreement, any party may seek one
or more temporary restraining orders in a court of competent jurisdiction if
necessary in order to preserve and protect the status quo. Neither the request
for, or grant or denial of, any such temporary restraining order shall be deemed
a waiver of the obligation to arbitrate as set forth herein and the arbitrator
may dissolve, continue or modify any such order. Any such temporary restraining
order shall remain in effect until the first to occur of the expiration of the
order in accordance with its terms or the dissolution thereof by the arbitrator.
(c) In the event that at any time the sole arbitrator shall
fail to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth herein for the selection of the initial
arbitrator. The extent, if any, to which testimony previously given shall be
repeated or as to which the replacement arbitrator elects to rely on the
stenographic record (if there is one) of such testimony shall be determined by
the replacement arbitrator.
Section 4.06. LIMITED COURT ACTIONS. (a) Notwithstanding anything
herein to the contrary, in the event that any party reasonably determines the
amount in controversy in any Dispute (or series of related Disputes) is, or is
reasonably likely to be, in excess of $100 million and if such party desires to
commence a lawsuit in lieu of complying with the arbitration provisions of this
Article IV, such party shall so state in its Demand or by notice given to the
other parties within 20 days after receipt of a Demand with respect thereto. If
the other party to the arbitration does not agree that the amount in controversy
in such Dispute (or series of related Disputes) is, or is reasonably likely to
be, in excess of $100 million, the arbitrator selected pursuant to Section 4.02
hereof shall decide whether the amount in controversy in such Dispute (or series
of related Disputes) is, or is reasonably likely to be, in excess of $100
million. The arbitrator shall set a date that is no later than ten days after
the date of his or her appointment for submissions by the parties with respect
to such issue. There shall not be any discovery in connection with such issue.
The arbitrator shall render his or her decision on such issue within five days
of such date so set to the arbitrator. In the event that the arbitrator
determines that the amount in controversy in such Dispute (or such series of
related Disputes) is, or is reasonably likely to be, in excess of $100 million,
the provisions of Sections 4.01, 4.02, 4.03, 4.04, and 4.05 of Article IV of
this Agreement shall not apply, and on or before (but, except as expressly set
forth in Section 4.06(b), not after) the tenth business day after the date of
such decision, either party to the arbitration may elect, in lieu of
arbitration, to commence a lawsuit with respect to such Dispute in any court of
competent jurisdiction. If the arbitrator does not so determine, the provisions
of this Article IV (including with respect to time periods) shall apply as if no
determinations were sought or made pursuant to this Section 4.06(a).
(b) In the event that an arbitration award in excess of $100
million is issued in any arbitration proceeding commenced hereunder, any party
may, within 60 days after the date
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of such award, submit the Dispute giving rise thereto to a court of competent
jurisdiction, regardless of whether such party or any other party sought to
commence lawsuit in lieu of proceeding with arbitration in accordance with
Section 4.06(a) of Article IV of this Agreement. In such event, the applicable
court may elect to rely on the record developed in the arbitration or, if it
determines that it would be advisable in connection with the matter, allow the
parties to seek additional discovery or to present additional evidence. Each
party shall be entitled to present arguments to the court with respect to
whether any such additional discovery or evidence shall be permitted and with
respect to all other matters relating to the Dispute.
(c) No party shall raise as a defense the statute of
limitations if the applicable Demand was delivered on or prior to the Applicable
Deadline and, if applicable, if the matter is submitted to a court of competent
jurisdiction within the 60-day period specified in Section 4.06(b) of Article IV
of this Agreement.
Section 4.07. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise
agreed in writing, the parties will continue to provide service and honor all
other commitments under the Transaction Documents during the course of
arbitration pursuant to the provisions of this Article IV with respect to all
matters not subject to such Dispute.
ARTICLE V
MISCELLANEOUS
Section 5.01. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and the
Transaction Documents and other agreements and documents referred to therein,
shall constitute the entire agreement between the parties with respect to the
subject matter hereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
Section 5.02. SURVIVAL OF AGREEMENTS. All covenants and agreements of
the parties contained in this Agreement shall survive the Distribution Date.
Section 5.03. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio without regard to the
principles of conflicts of law thereof.
Section 5.04. NOTICE. All notices and other communications required or
permitted to be given or made under this Agreement shall, unless otherwise
provided herein, be in writing and shall be deemed to have been given: (i) on
the date of personal delivery; or, (ii) provided such notice or communication is
actually received by the party to which it is addressed in the ordinary course
of delivery, on the date of (A) deposit in the United States mail, postage
prepaid, by registered or certified mail, return receipt requested, (B)
transmission by telegram, cable, telex or facsimile transmission, or (C)
delivery to a nationally-recognized overnight courier service, in each case
addressed as set forth below, or to such other person, entity or address as
either party shall designate by notice to the other in accordance herewith:
<PAGE> 9
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To GenCorp: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attention: General Counsel
To OMNOVA: Omnova Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333-3300
Attention: General Counsel
Section 5.05. WAIVER. No waiver by any party of any of the provisions
of this Agreement will be deemed, or will constitute, a waiver of any other
provision, whether similar, not will any waiver constitute a continuing waiver.
No waiver will be binding unless executed in writing by the party making the
waiver.
Section 5.06. ASSIGNMENT. Neither party may assign, by operation of
law, merger or otherwise, license, sublicense or otherwise transfer any or all
of its rights or obligations under this Agreement to any other person or entity
without obtaining the prior written consent of the other party.
Section 5.07. AMENDMENTS. This Agreement may not be modified or amended
except by an agreement in writing signed by the parties.
Section 5.08. SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
Section 5.09. SUBSIDIARIES. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements,
and obligations set forth herein or arising hereunder to be performed by any
member of such parties' Group on and after the Distribution Date.
Section 5.10. NO THIRD PARTY BENEFICIARIES. This Agreement is solely
for the benefit of the parties hereto and their respective Group members and
shall not be deemed to confer upon third parties any remedy, claim, right or
reimbursement or other right.
Section 5.11. TITLES AND HEADINGS. Titles and headings to articles and
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 5.12. CONFIDENTIALITY. Except as required by law, the parties
shall hold, and shall cause their respective officers, directors, employees,
agents and other representatives to hold, the existence, content and result of
any escalation, mediation or arbitration in confidence in accordance with the
requirements of the Transaction Documents, except as may be required
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in order to enforce any award. Each of the parties shall request that any
mediator or arbitrator comply with such confidentiality requirement.
Section 5.13. 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. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
GENCORP INC.
By: /s/ William R. Phillips
------------------------------------
Name: William R. Phillips
--------------------------------
Title: Senior Vice President
--------------------------------
OMNOVA SOLUTIONS INC.
By: /s/ James C. LeMay
------------------------------------
Name: James C. LeMay
--------------------------------
Title: Senior Vice President
--------------------------------
<PAGE> 1
Exhibit 10.17
Execution Copy
AGREEMENT ON EMPLOYEE MATTERS
This Agreement on Employee Matters ("Agreement") dated September 30,
1999, is made and entered into by and between GenCorp Inc., an Ohio corporation
("GenCorp"), and omnova solutions inc., an Ohio corporation ("OMNOVA") and a
wholly owned subsidiary of GenCorp.
WITNESSETH:
WHEREAS, the Board of Directors of GenCorp has determined that it is
advisable to distribute substantially all of the stock of OMNOVA to its
shareholders in a transaction intended to qualify under Section 355 of the
Internal Revenue Code (variously, the "Distribution" or the "Spin-Off");
WHEREAS, GenCorp and OMNOVA are entering into a Distribution Agreement
which, among other things, sets forth the principal transactions required to
effect the Distribution and sets forth other agreements that will govern certain
other matters following the Distribution; and
WHEREAS, in connection with the Distribution, GenCorp and OMNOVA desire
to provide for the allocation of certain assets and liabilities and for certain
other matters all relating to employment, employee benefit plans and
compensation arrangements.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Terms used but not defined herein shall have the meanings set forth
in the Distribution Agreement. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
(a) CODE. The Internal Revenue Code of 1986, as amended.
(b) DISTRIBUTION DATE. The date on which the shares of OMNOVA
are distributed to the shareholders of GenCorp.
(c) ERISA. The Employee Retirement Income Security Act of
1974, as amended.
(d) GENCORP CONTROLLED GROUP. Collectively, GenCorp and any
GenCorp Group member whose employees are required by Section 414 of the Code to
be treated as if they were employed by a single employer.
(e) GENCORP MEDICAL PLAN. The GenCorp Medical and Dental
Plans.
(f) GENCORP HOURLY PENSION PLAN. The Non-Contributory Pension
Plan of GenCorp Inc., as in effect immediately before the Closing Time.
(g) GENCORP PENSION PLAN TRUSTEE. The trustee or trustees
appointed pursuant to the GenCorp Salaried Pension Plan.
(h) GENCORP SALARIED PENSION PLAN. The Pension Plan for
Salaried Employees of GenCorp Inc. and Certain Participating Subsidiaries, as in
effect immediately before the Closing Time.
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(i) GENCORP STOCK FUND. The GenCorp Stock Fund under the Joint
Savings Plan.
(j) JOINT SAVINGS PLAN. The GenCorp Retirement Savings Plan
and the Profit Sharing Retirement and Savings Plan of GenCorp Inc. and Certain
Participating Subsidiaries, as amended to be jointly sponsored by GenCorp and
OMNOVA.
(k) OMNOVA CONTROLLED GROUP. Collectively, OMNOVA and any
OMNOVA Group member whose employees are required by Section 414 of the Code to
be treated as if they were employed by a single employer.
(l) OMNOVA EMPLOYEES. Any person who is employed by OMNOVA
pursuant to Section 2.1(a) hereof. OMNOVA Employees shall include OMNOVA
Salaried Employees and OMNOVA Hourly Employees.
(m) OMNOVA HOURLY EMPLOYEES. OMNOVA Employees other than
OMNOVA Salaried Employees.
(n) OMNOVA HOURLY PENSION PLAN. The Non-Contributory Pension
Plan of OMNOVA Solutions Inc.
(o) OMNOVA HOURLY PENSION PLAN PARTICIPANT. OMNOVA Hourly
Employees and former hourly employees of GenCorp who terminated employment, with
accrued benefits under the GenCorp Hourly Pension Plan, from (i) business
locations of OMNOVA which are active immediately after the Closing Time and (ii)
the former GenCorp business location in Newcomerstown, Ohio
(p) OMNOVA MEDICAL PLAN. The medical and dental benefit plans
adopted by OMNOVA for the benefit of its salaried employees after the
Distribution and the separate
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medical and dental benefit programs maintained by OMNOVA pursuant to collective
bargaining agreements.
(q) OMNOVA PENSION PLAN TRUSTEE. The trustee or trustees
appointed pursuant to the trust agreement under the OMNOVA Pension Plan.
(r) OMNOVA SALARIED EMPLOYEES. OMNOVA Employees who are
compensated on a salaried basis.
(s) OMNOVA SALARIED PENSION PLAN. The Pension Plan for
Salaried Employees of OMNOVA Solutions Inc.
(t) OMNOVA SALARIED PENSION PLAN PARTICIPANTS. OMNOVA Salaried
Employees and former salaried employees of GenCorp who terminated employment,
with accrued benefits under the GenCorp Salaried Pension Plan, from (i) business
locations of OMNOVA which are active immediately after the Closing Time and (ii)
the former GenCorp business location in Newcomerstown, Ohio.
(u) OMNOVA STOCK FUND. The OMNOVA Stock Fund under the Joint
Savings Plan.
(v) UNFUNDED DEFERRED COMPENSATION. Unfunded obligations of
GenCorp as of the Closing Time to pay deferred compensation and retirement
income under its Benefits Restoration Plan, Deferred Bonus Plan, Non-Employee
Directors Retirement and Deferred Compensation Plans, 1996 Supplemental
Retirement Plan for Management Employees, individual employment agreements, and
other miscellaneous plans related to discontinued operations, including such
additional amounts as may be attributable to earnings growth after the Closing
Time in accordance with the terms of the specific plan or agreement.
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(w) UNION EMPLOYEES. Any OMNOVA Employee who is included in a
collective bargaining unit.
ARTICLE II
EMPLOYMENT AND BENEFIT PLANS
2.1 EMPLOYMENT OF OMNOVA EMPLOYEES AND UNION EMPLOYEES.
(a) Prior to the Distribution, while OMNOVA is still a
wholly-owned subsidiary of GenCorp, GenCorp shall transfer to OMNOVA the
employment of all (i) GenCorp employees who are employed primarily in the OMNOVA
Business, including any such employee on an approved leave of absence (including
disability) at the time of such transfer, and (ii) all GenCorp employees who are
employed at Corporate Headquarters, Corporate Technology Center and Flight
Operations, including any such employee on an approved leave of absence
(including disability) at the time of such transfer, but shall exclude (A)
employees named on Schedule A who shall remain GenCorp employees; (B) employees
designated for termination under the GenCorp Enhanced Involuntary Separation Pay
Plan and named on Schedule B; and (C) employees who have elected to retire under
the GenCorp 1999 Voluntary Enhanced Retirement Program, except the employees
named on Schedule C who shall become OMNOVA Employees until their retirement.
(b) OMNOVA shall employ all OMNOVA Employees transferred to
OMNOVA pursuant to Section 2.1(a). Subject to the terms and conditions of, and
except as otherwise provided in this Agreement, effective as of the Closing
Time, OMNOVA shall provide the OMNOVA Employees with terms and conditions of
employment, including, without limitation, employee benefits and other
perquisites, that are substantially similar to those provided to such persons
immediately prior to the Closing Time. However, nothing
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contained in this Agreement shall impair OMNOVA's ability to make such changes
in such terms and conditions of employment following the Distribution as OMNOVA
may deem to be necessary or appropriate for the operation of OMNOVA.
(c) Subject to Section 2.15, OMNOVA shall, at its own cost and
expense, (a) defend GenCorp from any and all claims, damages, actions or causes
of action ("Claims") which result from OMNOVA's employment and/or termination of
employment of any of the employees named on Schedule C hereto, and (b) indemnify
and hold GenCorp harmless from all damages, liabilities, losses, costs,
judgments, orders, assessments, interest, penalties, fines, settlement payments,
costs and expenses (including, without limitation, attorneys fees and other
investigation and defense costs and expenses) imposed upon or incurred by
GenCorp as a result of any such Claim. GenCorp shall promptly notify OMNOVA of
any Claim and OMNOVA shall be entitled to assume and maintain control over the
defense of any Claim and any negotiations and settlement thereof with counsel
reasonably acceptable to GenCorp provided that OMNOVA will not settle any such
Claim without the consent of GenCorp which consent shall not be unreasonably
withheld. In the event that OMNOVA fails to promptly assume and diligently
investigate and defend or settle any Claim then GenCorp shall have the right, at
OMNOVA's cost, expense and risk, from that time forward to have sole control of
the defense of the Claim and all negotiations for its settlement or compromise.
The party not controlling the defense of any such Claim shall have the right to
participate, at its sole expense, in the defense or settlement thereof.
(d) Subject to entering into mutually acceptable novation
agreements with the applicable Unions, OMNOVA shall assume all collective
bargaining agreements which are in effect as of the Closing Time at active
OMNOVA locations, and following the Distribution
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it will continue to employ all Union Employees pursuant to the terms and
conditions of such collective bargaining agreements.
2.2 JOINT SAVINGS PLAN. (a) Effective on the Distribution Date, the
GenCorp Retirement Savings Plan and the Profit Sharing Retirement and Savings
Plan of GenCorp Inc. and Certain Participating Subsidiaries will become multiple
employer plans (collectively, "Joint Savings Plan") in which both GenCorp and
OMNOVA will be unrelated participating employers. Day-to-day administration of
the Joint Savings Plan will be performed by GenCorp with cooperation and
assistance of OMNOVA pursuant to the separate Services and Support Agreement
between GenCorp and OMNOVA.
(b) GenCorp will continue to be both the administrator and
sponsor of the Joint Savings Plan, as defined in ERISA sections 3(16)(A) and
(B), for purposes of complying with the reporting and disclosure requirements
imposed by ERISA and the Code in administering the Joint Savings Plan.
Notwithstanding the preceding sentence, GenCorp and OMNOVA agree that no changes
will be made to the Joint Savings Plan, except as hereinafter described unless
(i) such changes are determined, with the advice of legal counsel, to be
required for compliance with applicable laws, or (ii) GenCorp and OMNOVA
mutually agree to such changes. In addition,
(1) The Administrative Committee for the Joint
Savings Plan, which will have general responsibility for interpreting
and assuring uniform administration of the provisions of the Joint
Savings Plan, will be composed of three (3) members of the GenCorp
Administrative Committee and two (2) members of the OMNOVA
Administrative Committee; and
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(2) The Benefits Management Committee for the Joint
Savings Plan, which will have the responsibilities related to
maintaining relationships with the trustee and investment managers and
investment of the trust fund, will be composed of two (2) members of
the GenCorp Benefits Management Committee and two (2) members of the
OMNOVA Benefits Management Committee.
(c) On and after the Distribution Date, employer matching
contributions on behalf of GenCorp employees will be made solely by GenCorp and
solely to the GenCorp Stock Fund and employer matching contributions on behalf
of OMNOVA Employees will be made solely by OMNOVA and solely to the OMNOVA Stock
Fund. Not later than the later of October 31, 2001 or two years after the
Distribution Date, the accounts of OMNOVA Employees and former OMNOVA Employees
will be transferred to a new separate savings plan to be established by OMNOVA.
Thereafter, neither OMNOVA nor its employees will participate in the GenCorp
Retirement Savings Plan.
(d) Following the Distribution, OMNOVA common stock held in
the accounts of GenCorp employees that is attributable to contributions made
before the Distribution may be retained in the OMNOVA Stock Fund, transferred to
the GenCorp Stock Fund or transferred to any other investment funds in the Joint
Savings Plan at the participant's election in accordance with the terms of the
Joint Savings Plan. Except as provided in the preceding sentence, contributions
made to or held under the Joint Savings Plan on behalf of GenCorp employees may
not be invested in the OMNOVA Stock Fund. OMNOVA common stock held in the
accounts of GenCorp employees that is attributable to employer matching
contributions that have been in the plan for at least two full plan years may be
withdrawn, in
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cash or in kind. Any dividends on OMNOVA common stock in accounts of GenCorp
employees will be reinvested in the OMNOVA Stock Fund.
(e) Following the Distribution, GenCorp common stock held in
the accounts of OMNOVA Employees that is attributable to contributions made
before the Distribution may be retained in the GenCorp Stock Fund, transferred
to the OMNOVA Stock Fund or transferred to any other investment fund in the
Joint Savings Plan at the Participant's election in accordance with the terms of
the Joint Savings Plan. Except as provided in the preceding sentence,
contributions made to or held under the Joint Savings Plan on behalf of OMNOVA
Employees may not be invested in the GenCorp Stock Fund. GenCorp common stock
held in the accounts of OMNOVA Employees that is attributable to employer
matching contributions that have been in the plan at least two full plan years
may be withdrawn, in cash or in kind. Any dividends after the Distribution Date
on GenCorp common stock in accounts of OMNOVA Employees will be reinvested in
the GenCorp Stock Fund.
2.3 OMNOVA SALARIED PENSION PLAN. (a) OMNOVA shall implement, before
the Closing Time, the OMNOVA Salaried Pension Plan, a qualified defined benefit
plan substantially similar to the GenCorp Salaried Pension Plan for the benefit
of OMNOVA Pension Plan Participants. OMNOVA Salaried Employees shall be eligible
for immediate participation in the OMNOVA Salaried Pension Plan as of the date
their employment is transferred to OMNOVA pursuant to Section 2.1(a). OMNOVA
Salaried Employees shall be credited under the OMNOVA Salaried Pension Plan, for
eligibility and vesting purposes, with the service credited to them under the
GenCorp Salaried Pension Plan. An OMNOVA Salaried Employee shall be credited
under the OMNOVA Salaried Pension Plan, for benefit accrual purposes, with the
service credited to him or her under the GenCorp Salaried Pension
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Plan only if a transfer described in subsection (b) of this Section is made with
respect to such OMNOVA Salaried Employee.
(b) OMNOVA Salaried Employees shall cease to accrue benefits
under the GenCorp Salaried Pension Plan as of the date their employment is
transferred to OMNOVA pursuant to Section 2.1(a). Such transfer shall not be an
event requiring a distribution of benefits under the GenCorp Salaried Pension
Plan.
(c) As soon as practicable after the Distribution Date,
GenCorp shall cause the GenCorp Pension Plan Trustee to segregate within the
GenCorp Pension Plan Trust the Segregated Salaried Pension Assets (as defined in
the following sentence) determined to be allocable with respect to accrued
benefits of OMNOVA Salaried Pension Plan Participants as of the Closing Time.
For purposes of the preceding sentence, the Segregated Salaried Pension Assets
shall mean assets with a value equal to the present value as of the Closing Time
of the accrued benefits of the OMNOVA Salaried Pension Plan Participants under
the GenCorp Salaried Pension Plan, determined by the plan's actuary using
interest assumptions prescribed by the PBGC for valuing annuities in plan
termination situations, plus an amount of surplus assets allocated in proportion
to the allocation of liabilities in accordance with ERISA section 4044.
(d) GenCorp and OMNOVA shall make or cause to be made all
required filings and submissions to appropriate governmental and regulatory
authorities and all necessary or appropriate amendments to the GenCorp Salaried
Pension Plan and the OMNOVA Salaried Pension Plan, and shall take all other
steps necessary and appropriate, to permit the transfer of the Segregated
Salaried Pension Assets from the GenCorp Pension Plan Trustee to the OMNOVA
Pension Plan Trustee. As soon as practicable after the filings,
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submissions, amendments and other steps described in this subsection are
completed, and after the expiration of any waiting periods imposed under
applicable law, GenCorp shall direct the GenCorp Pension Plan Trustee to
transfer to the OMNOVA Pension Plan Trustee, and OMNOVA shall direct the OMNOVA
Pension Plan Trustee to accept assets of the GenCorp Salaried Pension Plan equal
to the Segregated Salaried Pension Assets, as adjusted for contributions,
benefit payments, expenses and investment experience through the date of such
transfer. Such transfer shall be in cash, securities or other property or a
combination thereof, as mutually determined by GenCorp and OMNOVA and acceptable
to both the GenCorp Pension Plan Trustee and the OMNOVA Pension Plan Trustee.
After such transfer, each OMNOVA Salaried Pension Plan Participant for whom such
transfer was made shall be credited with benefits under the OMNOVA Salaried
Pension Plan attributable to service prior to the Closing Time at least equal to
his or her accrued benefit under the GenCorp Salaried Pension Plan, and the
GenCorp Salaried Pension Plan shall have no further obligations with respect to
such accrued benefit. GenCorp and OMNOVA shall prepare a list, certified by a
duly authorized officer of each, of all OMNOVA Salaried Pension Plan
Participants with respect to which a transfer pursuant to this subsection has
been made.
(e) GenCorp shall have no obligation to direct the transfer
described in subsection (d) of this Section unless and until GenCorp receives
either a favorable determination letter issued by the IRS as to the qualified
status of the OMNOVA Salaried Pension Plan under Section 401(a) of the code or
an opinion of counsel to OMNOVA that the OMNOVA Salaried Pension Plan meets the
requirements of Section 401(a) of the Code as to form. The OMNOVA Pension Plan
Trustee shall have no obligation to accept any transfer from the GenCorp
Salaried Pension Plan unless and until OMNOVA and the OMNOVA
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Pension Plan Trustee receives either a favorable determination letter issued by
the IRS as to the qualified status of the GenCorp Salaried Pension Plan under
Section 401(a) of the Code or an opinion of counsel to GenCorp that the GenCorp
Salaried Pension Plan meets the requirements of Section 401(a) of the Code as to
form. GenCorp and OMNOVA will cooperate as necessary to facilitate obtaining
such favorable determination letters.
(f) The OMNOVA Salaried Pension Plan shall be a continuation
of the GenCorp Salaried Pension Plan as to the OMNOVA Salaried Pension Plan
Participants for whom the transfer described in subsection (d) of this Section
was made and the transfer of assets and liabilities from the GenCorp Salaried
Pension Plan to the OMNOVA Pension Plan Trustee pursuant to this Agreement shall
not be deemed a termination or partial termination of the GenCorp Salaried
Pension Plan.
(g) In the event a former employee of GenCorp who participated
in the GenCorp Salaried Pension Plan prior to the Distribution Date becomes an
OMNOVA Employee eligible to participate in the OMNOVA Salaried Pension Plan
after the Distribution Date, GenCorp and OMNOVA agree that the liabilities to
pay pension benefits to such individual and the assets attributable to such
liabilities, in an amount which (based on the certification of the actuary for
the Plans) meets the requirements of Section 414(1) of the Code and the
regulations thereunder, will be transferred by the GenCorp Pension Plan Trustee
from the GenCorp Salaried Pension Plan to the OMNOVA Salaried Pension Plan and
the OMNOVA Pension Plan Trustee in the manner described in, and in compliance
with, Section 414(1) of the Code and the regulations thereunder. In the event of
any such transfer, such employee shall be credited under the OMNOVA Salaried
Pension Plan, for eligibility, vesting and benefit accrual purposes, with the
service credited to him under the GenCorp Salaried Pension Plan.
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(h) The GenCorp Salaried Pension Plan shall provide that an
individual who is an employee of OMNOVA on the Distribution Date shall not be
eligible to commence receiving benefits from the GenCorp Salaried Pension Plan
until he terminates employment with OMNOVA after the Distribution Date. Until
the completion of the transfer of assets and liabilities from the GenCorp
Salaried Pension Plan to the OMNOVA Salaried Pension Plan and the OMNOVA Pension
Plan Trustee described in subsection (c) of this Section, benefits under the
OMNOVA Salaried Pension Plan payable to a OMNOVA Salaried Employee thereunder
shall be computed on the basis of his or her total service with GenCorp and
OMNOVA, but shall be reduced by any benefits accrued by such OMNOVA Salaried
Employee under the GenCorp Salaried Pension Plan.
(i) In the event that an OMNOVA Salaried Pension Plan
Participant files a claim for payment of pension benefits under the GenCorp
Salaried Pension Plan after the transfer of assets and liabilities from the
GenCorp Salaried Pension Plan to the OMNOVA Salaried Pension Plan and the OMNOVA
Pension Plan Trustee described in subsection (c) of this Section, OMNOVA agrees
to (i) reimburse GenCorp for all costs and expenses incurred to defend such
claim other than through its normal appeal process involving the GenCorp
Administrative Committee; and (ii) cause the OMNOVA Pension Plan Trustee to
transfer, to the GenCorp Salaried Pension Plan and the GenCorp Pension Plan
Trustee, assets from the OMNOVA Salaried Pension Plan equal to the liabilities,
if any, which the GenCorp Salaried Pension Plan is determined by a court of
competent jurisdiction to owe to such OMNOVA Salaried Pension Plan Participant.
In the event of any such transfer, the service upon which the OMNOVA Salaried
Pension Plan Participant's accrued benefit under the GenCorp Salaried
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Pension Plan is based shall be excluded from the service counted for
eligibility, vesting and benefit accrual purposes under the OMNOVA Salaried
Pension Plan.
2.4 OMNOVA HOURLY PENSION PLAN. (a) OMNOVA shall implement, before the
Closing Time, the OMNOVA Hourly Pension Plan, a qualified defined benefit plan
substantially similar to the GenCorp Hourly Pension Plan for the benefit of
OMNOVA Hourly Pension Plan Participants. OMNOVA Hourly Employees who participate
in the GenCorp Hourly Pension Plan immediately before the Closing Time shall be
eligible for immediate participation in the OMNOVA Hourly Pension Plan as of the
Closing Time. OMNOVA Hourly Employees shall be credited under the OMNOVA Hourly
Pension Plan, for eligibility and vesting purposes, with the service credited to
them under the GenCorp Hourly Pension Plan. An OMNOVA Hourly Employee shall be
credited under the OMNOVA Hourly Pension Plan, for benefit accrual purposes,
with the service credited to him or her under the GenCorp Hourly Pension Plan
only if a transfer described in subsection (b) of this Section is made with
respect to such OMNOVA Hourly Employee.
(b) OMNOVA Hourly Employees shall cease to accrue benefits
under the GenCorp Hourly Pension Plan as of the time their employment is
transferred to OMNOVA. Such transfer shall not be an event requiring
distribution of benefits under the GenCorp Hourly Pension Plan.
(c) As soon as practicable after the Distribution Date,
GenCorp shall cause the GenCorp Pension Plan Trustee to segregate within the
GenCorp Pension Plan Trust the Segregated Hourly Pension Assets (as defined in
the following sentence) determined to be allocable with respect to accrued
benefits of OMNOVA Hourly Pension Plan Participants as of the Closing Time. For
purposes of the preceding sentence, the Segregated Hourly Pension
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Assets shall mean assets with a value equal to the present value as of the
Closing Time of the accrued benefits of the OMNOVA Hourly Pension Plan
Participants under the GenCorp Hourly Pension Plan, determined by the plan's
actuary using interest assumptions prescribed by the PBGC for valuing annuities
in plan termination situations, plus an amount of surplus assets allocated in
proportion to the allocation of liabilities in accordance with ERISA section
4044.
(d) GenCorp and OMNOVA shall make or cause to be made all
required filings and submissions to appropriate governmental and regulatory
authorities and all necessary or appropriate amendments to the GenCorp Hourly
Pension Plan and the OMNOVA Hourly Pension Plan, and shall take all other steps
necessary and appropriate, to permit the transfer of the Segregated Hourly
Pension Assets from the GenCorp Pension Plan Trustee to the OMNOVA Pension Plan
Trustee. As soon as practicable after the filings, submissions, amendments and
other steps described in this subsection are completed, and after the expiration
of any waiting periods imposed under applicable law, GenCorp shall direct the
GenCorp Pension Plan Trustee to transfer to the OMNOVA Pension Plan Trustee, and
OMNOVA shall direct the OMNOVA Pension Plan Trustee to accept assets of the
GenCorp Hourly Pension Plan equal to the Segregated Hourly Pension Assets, as
adjusted for contributions, benefit payments, expenses and investment experience
through the date of such transfer. Such transfer shall be in cash, securities or
other property or a combination thereof, as mutually determined by GenCorp and
OMNOVA and acceptable to both the GenCorp Pension Plan Trustee and the OMNOVA
Pension Plan Trustee. After such transfer, each OMNOVA Hourly Pension Plan
Participant for whom such transfer was made shall be credited with benefits
under the OMNOVA Hourly Pension Plan attributable to service prior to the
Closing Time at least equal
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to his or her accrued benefit under the GenCorp Hourly Pension Plan, and the
GenCorp Hourly Pension Plan shall have no further obligations with respect to
such accrued benefit. GenCorp and OMNOVA shall prepare a list, certified by a
duly authorized officer of each, of all OMNOVA Hourly Pension Plan Participants
with respect to which a transfer pursuant to this Subsection has been made.
(e) GenCorp shall have no obligation to direct the transfer
described in subsection (d) of this Section unless and until GenCorp receives
either a favorable determination letter issued by the IRS as to the qualified
status of the OMNOVA Hourly Pension Plan under Section 401 (a) of the code or an
opinion of counsel to OMNOVA that the OMNOVA Hourly Pension Plan meets the
requirements of Section 401(a) of the Code as to form. The OMNOVA Pension Plan
Trustee shall have no obligation to accept any transfer from the GenCorp Hourly
Pension Plan unless and until OMNOVA and the OMNOVA Pension Plan Trustee
receives either a favorable determination letter issued by the IRS as to the
qualified status of the GenCorp Hourly Pension Plan under Section 401(a) of the
Code or an opinion of counsel to GenCorp that the GenCorp Hourly Pension Plan
meets the requirements of Section 401(a) of the Code as to form. GenCorp and
OMNOVA will cooperate as necessary to facilitate obtaining such favorable
determination letters.
(f) The OMNOVA Hourly Pension Plan shall be a continuation of
the GenCorp Hourly Pension Plan as to the OMNOVA Hourly Pension Plan
Participants for whom the transfer described in subsection (d) of this Section
was made and the transfer of assets and liabilities from the GenCorp Hourly
Pension Plan to the OMNOVA Pension Plan Trustee pursuant to this Agreement shall
not be deemed a termination or partial termination of the GenCorp Hourly Pension
Plan.
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(g) The GenCorp Hourly Pension Plan shall provide that an
individual who is an employee of OMNOVA on the Distribution Date shall not be
eligible to commence receiving benefits from the GenCorp Hourly Pension Plan
until he terminates employment with OMNOVA after the Distribution Date. Until
the completion of the transfer of assets and liabilities from the GenCorp Hourly
Pension Plan to the OMNOVA Hourly Pension Plan and the OMNOVA Pension Plan
Trustee described in subsection (c) of this Section, benefits under the OMNOVA
Hourly Pension Plan payable to an OMNOVA Hourly Employee thereunder shall be
computed on the basis of his or her total service with GenCorp and OMNOVA, but
shall be reduced by any benefits accrued by such OMNOVA Hourly Employee under
the GenCorp Hourly Pension Plan.
(h) In the event that an OMNOVA Hourly Pension Plan
Participant files a claim for payment of pension benefits under the GenCorp
Hourly Pension Plan after the transfer of assets and liabilities from the
GenCorp Hourly Pension Plan to the OMNOVA Hourly Pension Plan and the OMNOVA
Pension Plan Trustee described in subsection (c) of this Section, OMNOVA agrees
to (i) reimburse GenCorp for all costs and expenses incurred to defend such
claim other than through its normal appeal process involving the GenCorp
Administrative Committee; and (ii) cause the OMNOVA Pension Plan Trustee to
transfer, to the GenCorp Hourly Pension Plan and the GenCorp Pension Plan
Trustee, assets from the OMNOVA Hourly Pension Plan equal to the liabilities, if
any, which the GenCorp Hourly Pension Plan is determined by a court of competent
jurisdiction to owe to such OMNOVA Hourly Pension Plan Participant. In the event
of any such transfer, the service upon which the OMNOVA Hourly Pension Plan
Participant's accrued benefit under the GenCorp Hourly
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Pension Plan is based shall be excluded from the service counted for
eligibility, vesting and benefit accrual purposes under the OMNOVA Hourly
Pension Plan.
2.5 RENEER PLANS. Both the (i) GenCorp Retirement Income Plan for
Employees of Reneer Films Operations ("Reneer Pension Plan") and (ii) GenCorp
Savings and Investment Plan for Employees of Reneer Films Operations ("Reneer
Savings Plan") cover only employees in the Auburn, PA. manufacturing facility
which will be an active business location of OMNOVA after the Distribution Date.
As soon as practicable after the Distribution Date, GenCorp shall (a) cause the
GenCorp Pension Plan Trustee to transfer the assets attributable to the Reneer
Pension Plan to the OMNOVA Pension Plan Trustee, and (b) cause Mellon Trust,
trustee for the Reneer Savings Plan, to transfer the assets of that plan to a
new trust established by OMNOVA.
2.6 OMNOVA WELFARE BENEFIT PLANS. (a) OMNOVA MEDICAL PLAN. As of the
Closing Time, OMNOVA Employees (and their eligible dependent(s)) shall be
covered by the OMNOVA Medical Plan, which shall be substantially identical to
the medical plan coverage provided to OMNOVA Employees immediately prior to the
Closing Time. The OMNOVA Medical Plan made available to OMNOVA Employees and
their dependent(s) as of the Closing Time shall waive any applicable waiting
periods for coverage of OMNOVA Employees and their dependent(s) which did not
exist with respect to such OMNOVA Employee or dependent(s) immediately prior to
the Closing Time. The OMNOVA Medical Plan shall not contain any exclusion or
limitation with respect to any pre-existing condition of any OMNOVA Employee or
dependent(s) which did not apply with respect to such OMNOVA Employee or
dependent immediately prior to the Closing Time. For purposes of the two
preceding sentences, service with GenCorp and OMNOVA prior to the Closing Time
shall be taken into
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account for purposes of meeting any such waiting period or pre-existing
condition, exclusion or limitation.
(b) OMNOVA EMPLOYEE MEDICAL CLAIMS. As of the Closing Time,
the OMNOVA Medical Plan shall have sole responsibility for all obligations,
financial and otherwise, with respect to medical expense claims submitted by
OMNOVA Employees and their dependent(s) from and after the Closing Time, and
such claims will be processed and paid by OMNOVA's third party administrator.
(c) CLAIM APPEALS. As of the Closing Time, OMNOVA shall have
sole responsibility for the determination of claim appeals filed by OMNOVA
Employees under the OMNOVA Medical Plan. Claim appeals filed by employees of
OMNOVA under the GenCorp Medical Plan will be determined by GenCorp under the
GenCorp Medical Plan.
(d) FLEXIBLE BENEFIT PLANS. (i) OMNOVA shall implement, as of
the Closing Time, a flexible spending account plan, a dependent care
reimbursement plan, a health care reimbursement plan and a pre-tax premium plan
(collectively referred to as the "OMNOVA Flexible Benefit Plan") with provisions
substantially similar to similar plans provided to OMNOVA Employees by GenCorp
prior to the Closing Time; and (ii) Plan Year 1999 deferrals and reimbursements
by or to OMNOVA Employees under the GenCorp Flexible Benefit Plan, shall be
carried over and applied to their accounts under the OMNOVA Flexible Benefit
Plan. Within a reasonable time after the Closing Time, GenCorp will pay to
OMNOVA the net aggregate dependent day care reimbursement and health care
reimbursement account balances of OMNOVA Employees held by GenCorp as of the
Closing Time.
2.7 POSTRETIREMENT BENEFITS. GenCorp currently provides certain health
care and life insurance benefits to most retired employees in the United States
with varied coverage by
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employee groups. The health care plans generally provide for cost sharing in the
form of retiree contributions, deductibles and coinsurance between the company
and its retirees. A portion of the unfunded benefit obligation reported in
GenCorp's financial statements for such postretirement benefits attributable to
OMNOVA Hourly Employees and former employees of GenCorp who terminated
employment from (i) business locations of OMNOVA active as of the Closing Time,
and (ii) the former GenCorp business location in Newcomerstown, Ohio, will be
assumed by OMNOVA.
2.8 GENCORP 1993 AND 1997 STOCK OPTION PLANS. (a) Prior to the
Distribution Date, exercisable options under the GenCorp 1993 and 1997 Stock
Option Plans for (1) active employees, (2) retirees, and (3) other former
employees whose options remain exercisable, will be split into options to
acquire GenCorp common stock and OMNOVA common stock. Except with respect to
options held by the chief executive officers of GenCorp and OMNOVA, the number
of exercisable options in each company will each equal the number of exercisable
options under the GenCorp Stock Option Plans. With respect to exercisable
options held by the chief executive officers, (1) Mr. Wolfe's options will be
converted into 66 2/3% GenCorp options and 33 1/3% OMNOVA options, and (2) Mr.
Yasinsky's options will be converted into 66 2/3% OMNOVA options and 33 1/3%
GenCorp options. The exercise price of each resulting option will bear the same
ratio to the market price, as of the Distribution Date, of the respective
company's stock, as the exercise price of the original GenCorp option bore to
the market price of GenCorp shares immediately before the Distribution Date.
GenCorp and OMNOVA agree that each will issue the appropriate shares of their
common stock to non-employees who exercise the options described in this
subsection (a) subject, in the case of
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OMNOVA, to OMNOVA having an effective Registration Statement under the
Securities Act of 1933 in respect of the shares of stock to be issued by OMNOVA
to non-employees.
(b) Unexercisable options under the GenCorp 1997 Stock Option
Plan for GenCorp employees will be replaced with a number of unexercisable
GenCorp options under that plan which will, based upon (1) the market price of
GenCorp shares immediately after the Distribution Date and (2) the exercise
prices for those options, have an aggregate intrinsic value equal to that of the
unexercisable GenCorp options immediately before the Distribution Date.
(c) Unexercisable options under the GenCorp 1997 Stock Option
Plan for OMNOVA Employees will be replaced with a number of unexercisable OMNOVA
options which will, based upon (1) the market price of OMNOVA shares immediately
after the Distribution Date and (2) the exercise price for such options, have an
aggregate intrinsic value equal to that of the unexercisable GenCorp options
immediately before the Distribution.
(d) In converting the stock option plans for the Distribution,
the exercisable and unexercisable aggregate intrinsic value of the options
immediately after the conversion will be equal to the aggregate intrinsic value
immediately before the conversion. The ratio of the exercise price per option to
the market value per share will not be reduced and the vesting provisions and
option period of the OMNOVA and GenCorp options will be the same as for the
original GenCorp options. Accordingly, no compensation expense will be
recognized by OMNOVA or GenCorp.
2.9 UNFUNDED DEFERRED COMPENSATION.
(a) Subject to legal requirements for employee acquiescence,
GenCorp's legal obligation to pay Unfunded Deferred Compensation for: (1) all
active employees
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transferred to OMNOVA, (2) all retired employees who terminated employment from
business locations of OMNOVA which are active as of the Closing Time, and (3)
all GenCorp directors resigning to become members of the OMNOVA Board will be
assumed by OMNOVA.
(b) The legal obligation to pay Unfunded Deferred Compensation
for: (1) all active employees remaining GenCorp employees, (2) all GenCorp
directors remaining on the GenCorp Board, (3) all other retired employees, and
(4) all retired directors, will be retained by GenCorp.
(c) Former employees and directors of GenCorp or OMNOVA will
be able to elect a lump-sum payment of their Unfunded Deferred Compensation,
subject to (1) a 10% reduction in order to avoid adverse tax consequences, and
(2) all applicable tax withholding. Active employees and directors may receive
lump-sum payments of their Unfunded Deferred Compensation upon termination of
employment or board service with GenCorp or OMNOVA based upon appropriate
advance elections or discretionary approval by the company's benefit management
committee.
(d) GenCorp hereby indemnifies OMNOVA for the obligations to
pay Unfunded Deferred Compensation assumed by OMNOVA pursuant to subsection (a),
and will pay only those amounts of such Unfunded Deferred Compensation that
OMNOVA proves it is unable to pay.
(e) OMNOVA hereby indemnifies GenCorp for the obligation to
pay Unfunded Deferred Compensation retained by GenCorp pursuant to subsection
(b), and will pay only those amounts of Unfunded Deferred Compensation that
GenCorp proves it is unable to pay.
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2.10 ANNUAL BONUSES. Bonus amounts under GenCorp's Executive Incentive
Compensation Plan for the period ending November 30, 1999 will be determined
based upon (1) actual performance up to the Distribution Date, and (2) budgeted
performance, for the remainder of the period, according to GenCorp's annual
operating plan. Subject to all legal requirements for employee acquiescence,
bonus obligations will be assumed by OMNOVA for all OMNOVA Employees, and paid
in cash on January 17, 2000. Bonus obligations will be paid in cash on January
17, 2000 by GenCorp for all GenCorp employees and for terminated GenCorp
employees who are not employed by OMNOVA.
2.11 LONG TERM INCENTIVE COMPENSATION. Performance awards under
GenCorp's Long-Term Incentive Program for the three-year performance period
ending November 30, 1999 will be determined based upon (1) actual performance up
to the Distribution Date, and (2) budgeted performance, for the remainder of the
period, according to GenCorp's annual operating plan. Pro rata performance
awards will be paid under the GenCorp plan for the performance periods ending
November 30, 2000 and November 30, 2001. Pro rata performance awards for each
partial performance period will be determined based upon (1) actual performance
up to the Distribution Date, and (2) budgeted performance, for the remainder of
the fiscal year ending November 30, 1999, according to GenCorp's annual
operating plan. Subject to legal requirements for employee acquiescence,
performance award obligations for the three-year performance period ending
November 30, 1999 will be assumed by OMNOVA for all OMNOVA Employees and paid in
cash on January 17, 2000. Performance award obligations for the three-year
performance period ending November 30, 1999 will be paid in cash on January 17,
2000 by GenCorp for all GenCorp employees and for terminated GenCorp employees
who are not employed by OMNOVA. All pro rata
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performance awards will be paid in cash to all eligible employees of GenCorp and
OMNOVA by GenCorp before October 31, 1999.
2.12 DIRECTOR COMPENSATION. Subject to legal requirements for director
acquiescence, benefit obligations under the Retirement Plan for Nonemployee
Directors of GenCorp Inc. and the Deferred Compensation Plan for Nonemployee
Directors of GenCorp Inc. (hereafter the "GenCorp Director Plans") for GenCorp
directors resigning to become members of the OMNOVA Board will be assumed by
OMNOVA. Benefit obligations under the GenCorp Director Plans for GenCorp
directors remaining on the GenCorp Board and retired directors will be retained
by GenCorp.
2.13 ENHANCED RETIREMENT AND SEPARATION PAY PLANS. GenCorp adopted a
Voluntary Enhanced Retirement Program (VERP) and Enhanced Involuntary Separation
Pay Plan (EISP) which are associated with and contingent upon the Distribution.
Pension and Separation Pay obligations under the VERP and EISP for GenCorp
employees who become OMNOVA Employees in connection with the Spin-Off will be
assumed and paid by OMNOVA. Pension and Separation Pay obligations under the
VERP and EISP for GenCorp employees who do not become employed by OMNOVA in
connection with the Spin-Off will be retained and paid by GenCorp. The total
number and identity of participants and the timing of their departure are not
yet known.
2.14 TRANSITION ADMINISTRATIVE SERVICES. For a transition period
extending up to October 31, 2001, the Joint Savings Plan and other benefit
programs currently applicable to GenCorp active employees and retirees will be
administered under a Services and Support Agreement between GenCorp and OMNOVA.
The purpose of the transition services arrangement will be to allow for an
orderly transition of administrative responsibility for
24
<PAGE> 25
ongoing GenCorp benefit programs to administrative staffs of GenCorp, and for
the implementation and administration of new employee benefit plans for OMNOVA.
In accordance with the Services and Support Agreement, (i) GenCorp will
reimburse OMNOVA specified allocated costs plus all direct expenses incurred by
OMNOVA on behalf of GenCorp, and (ii) OMNOVA will reimburse GenCorp specified
allocated costs plus all direct expenses incurred by GenCorp on behalf of
OMNOVA.
2.15 LIABILITIES TO OMNOVA EMPLOYEES ARISING PRIOR TO DISTRIBUTION
DATE. GenCorp shall retain sole responsibility for (a) payments of any and all
wages, vacation pay, bereavement pay, jury duty pay, disability income,
supplemental unemployment benefits, fringe benefits (excluding medical/dental
claims described in Section 2.5(b)) or other perquisites of employment, or
similar benefits, payroll taxes and other payroll related expenses, (b) workers'
compensation claims or related litigation claims, (c) claims filed with the
equal Employment Opportunity Commission or related litigation claims and (d)
other similar employment-related claims, in any such case arising out of or
relating to (i) the employment of the OMNOVA Employees by GenCorp prior to the
Closing Time or (ii) the employment of former employees whose employment with
OMNOVA or GenCorp or the Controlled Group of either terminated on or before the
Closing Time.
2.16 AT WILL EMPLOYMENT. Nothing in this Agreement shall limit the at
will nature of the employment of any of the OMNOVA Employees who do not have any
other contractual rights with respect to employment by OMNOVA or the right of
GenCorp or OMNOVA to alter or terminate any employee benefit plan.
2.17 SEPARATION PAY. GenCorp and OMNOVA agree that with respect to
individuals who, in connection with the Distribution, cease to be employees of
GenCorp and become
25
<PAGE> 26
employees of OMNOVA at any time, such cessation shall not be deemed a severance
of employment from GenCorp for purposes of the GenCorp Involuntary Separation
Pay Plan. GenCorp shall retain and be solely responsible for, and shall
indemnify OMNOVA against, all liabilities and obligations whatsoever in
connection with claims made by or on behalf of former employees of GenCorp in
respect of separation pay and similar obligations relating to the termination or
alleged termination of any such person's employment from GenCorp on or before
the Distribution Date.
2.18 INTERNAL REVENUE SERVICE FORMS. GenCorp and OMNOVA agree that,
pursuant to the "Alternative Procedure" provided in Section 5 of Revenue
Procedure 96-60, 1996-2 C.B. 399, with respect to filing and furnishing Internal
Revenue Service Forms W-2, W-3 and 941, respectively: (a) GenCorp and OMNOVA
shall report on a "predecessor-successor" basis as set forth therein; (b)
GenCorp shall be relieved from furnishing Forms W-2 to GenCorp's employees whose
employment is transferred to OMNOVA in connection with the Spin-Off and to whom
GenCorp would have been obligated to furnish such Forms; and (c) OMNOVA shall
assume GenCorp's obligation to furnish such Forms to all such employees for the
full 1999 calendar year. Upon OMNOVA's request, GenCorp will promptly provide
OMNOVA with the information relating to periods ending on the Closing Time
necessary for OMNOVA to prepare and distribute Forms W-2 to such employees for
the year ending December 31, 1999, which Forms W-2 will include all remuneration
earned by such employees from both GenCorp and OMNOVA during the year ending
December 31, 1999.
26
<PAGE> 27
ARTICLE III
ACCESS AND SHARING OF INFORMATION
3.1 SHARING OF INFORMATION. Each of GenCorp and OMNOVA agrees to
provide the other, as soon as practicable after the Distribution Date, with such
information regarding employee benefit plan participants prior to the
Distribution Date (including term of service for eligibility, vesting and
benefit accrual purposes under such Plans and a listing of accrued benefits) as
may be reasonably requested by a party to establish and administer effectively
its employee benefit plans.
3.2 ACCESS TO INFORMATION. (a) From and after the Closing Time each
party hereto shall afford the other party and its accountants, counsel and other
designated representative reasonable access (including using reasonable efforts
to give duplicating rights during normal business hours) to all records, books,
contracts, instruments, computer data and other data and information in such
party's possession relating to the business and affairs of such other party
(other than data and information subject to an attorney/client or other
privilege), insofar as such access is reasonably required by such other party
including, without limitation, for audit, accounting and litigation purposes and
administration of employee benefit plans, as well as for purposes of fulfilling
disclosure and reporting obligations.
(b) For a period of up to 24 months from and after the
Distribution Date, (or longer as required in connection with the Joint Savings
Plan) each party shall make available to the other during normal business hours
and in a manner which will not unreasonably interfere with such party's
business, its financial, tax, accounting, legal, employee benefits and such
other staff and services to the extent that the same may be reasonably required
in connection
27
<PAGE> 28
with the preparation of tax returns, audits, claims, administration of employee
benefit plans and otherwise to assist in effecting an orderly transition
following the Distribution.
ARTICLE IV
MISCELLANEOUS
4.1 COMPLETE AGREEMENT. This Agreement, together with the Distribution
Agreement, and the exhibits thereto, shall constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and writings with respect to
such subject matter.
4.2. GOVERNING LAW. This Agreement and (unless otherwise provided) all
amendments hereof shall be governed by the internal laws of the State of Ohio,
without regard to the conflicts of law principles thereof.
4.3 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns; provided, however, that neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned (other than
by merger or pursuant to a sale of all or substantially all of a party's assets
to one person) by either of the parties hereto without the prior written consent
of the other party, which consent shall not be unreasonably withheld; provided,
however, that no such assignment shall relieve the assigning party of any
liabilities or obligations hereunder. Any transfer or assignment of any of the
rights, interests or obligations hereunder in violation of the terms hereof
shall be void and of no force or effect.
4.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, mailed by
registered or certified mail (return receipt
28
<PAGE> 29
requested) or sent by telecopy or by a recognized overnight courier service,
addressed as follows:
To OMNOVA at: OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333-3300
Attention: General Counsel
Fax Number: 330-869-4272
To GenCorp at: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attention: General Counsel
Fax Number: 916-351-8665
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section.
4.5 AMENDMENT. This Agreement may be amended, modified or supplemented
only by a written agreement signed by all the parties hereto.
4.6 WAIVER. No waiver by any party of any of the provisions of this
Agreement will be deemed, or will constitute, a waiver of any other provision,
whether similar, nor will any waiver constitute a continuing waiver. No waiver
will be binding unless executed in writing by the party making the waiver.
4.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument and all of
which together shall constitute one and the same instrument.
4.8 INTERPRETATION. The Section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement of the
parties hereto and shall not in any way affect the meaning or interpretation of
this Agreement.
29
<PAGE> 30
4.9 NO THIRD PARTY BENEFICIARY. Nothing in this Agreement, express or
implied, shall confer on any person other than the parties any rights or
remedies under or by virtue of this Agreement.
4.10 DISPUTE RESOLUTION. Any dispute between the parties concerning the
performance of this Agreement which cannot be resolved by good faith negotiation
of the parties shall be determined in accordance with the provisions of the
Alternative Dispute Resolution Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written. GENCORP INC.
By: /s/ William R. Phillips
-----------------------------------
Name: William R. Phillips
--------------------------------
Title: Senior Vice President
--------------------------------
OMNOVA SOLUTIONS INC.
By: /s/ James C. LeMay
-----------------------------------
Name: James C. LeMay
---------------------------------
Title: Senior Vice President
--------------------------------
30
<PAGE> 1
Exhibit 10.18
Execution Copy
SERVICES AND SUPPORT AGREEMENT
This Services and Support Agreement ("Agreement"), dated September 30,
1999, is made and entered into by and between GENCORP INC., an Ohio corporation
("GenCorp"), and OMNOVA SOLUTIONS INC., an Ohio corporation ("OMNOVA") and a
wholly-owned subsidiary of GenCorp.
WITNESSETH:
WHEREAS, the Board of Directors of GenCorp has determined that it is
advisable to distribute substantially all of the stock of OMNOVA to its
shareholders in a transaction intended to qualify under Section 355 of the
Internal Revenue Code (the "Distribution");
WHEREAS, GenCorp and OMNOVA are entering into a Distribution Agreement
(the "Distribution Agreement") which, among other things, sets forth the
principal transactions required to effect the Distribution and sets forth other
agreements that will govern certain other matters following the Distribution;
and
WHEREAS, in connection with the Distribution, GenCorp and OMNOVA have
agreed to enter into this Agreement in order for OMNOVA and GenCorp each to
assist the other by providing to the other certain services and support not
otherwise specified in any of the Ancillary Agreements (as defined in the
Distribution Agreement) other than this Agreement (the "Other Agreements");
NOW THEREFORE, in consideration of these premises and the mutual
promises and conditions contained herein, GenCorp and OMNOVA hereby agree as
follows:
<PAGE> 2
ARTICLE I
TERM
1.1 TERM OF THE AGREEMENT. The term of this Agreement shall be from the
date hereof to and including October 31, 2001 (the "Term"), although the actual
duration of specific services may be for a shorter period as provided herein.
The Term, or the duration of specific services, may be extended by the mutual
agreement of GenCorp and OMNOVA.
ARTICLE II
SERVICES
2.1 SERVICES PROVIDED BY OMNOVA. OMNOVA shall provide, or cause its
relevant affiliates to provide, to GenCorp during the Term the services listed
on Schedule A attached hereto. The services listed on Schedule A are based on
the understanding of the parties hereto of the support and administrative
services reasonably expected to be required by GenCorp following the
Distribution. If, following the Distribution, GenCorp reasonably determines that
additional services consistent with recent historical practices should be
provided by OMNOVA, the parties agree to negotiate in good faith to modify this
Agreement appropriately with respect to such additional services. In the event
the parties agree that OMNOVA shall provide such additional services, the
parties hereto further agree that such agreement to provide such additional
services shall also amend Schedule A hereto to reflect such agreement of the
parties. GenCorp may reduce or terminate any specific services at any time upon
30 days written notice.
2
<PAGE> 3
2.2 PAYMENT FOR SERVICES PROVIDED BY OMNOVA. (a) GenCorp shall pay
OMNOVA on a monthly basis, in consideration of the services provided to GenCorp
by OMNOVA hereunder, (i) the amounts specified as "Costs Allocated to GenCorp"
on Schedule A, (ii) reasonable out-of-pocket expenses incurred by OMNOVA in
connection with providing to GenCorp the services listed on Schedule A, and
(iii) charges by third party service providers to the extent that they are
attributable to services provided to or for GenCorp. To the extent that GenCorp
has provided notice to reduce services in accordance with Section 2.1, the
"Costs Allocated to GenCorp" shall be appropriately reduced.
(b) Charges for the services shall be invoiced on or about the
tenth (10th) day of the calendar month next following the calendar month in
which the services have been performed. Each invoice shall describe in
reasonable detail, as appropriate, the services upon which the amount to be
charged is based, and such invoice shall be paid within thirty (30) days
following receipt thereof.
2.3 SERVICES PROVIDED BY GENCORP. GenCorp shall provide, or cause its
relevant affiliates to provide, to OMNOVA during the Term the services listed on
Schedule B attached hereto. The services listed on Schedule B are based on the
understanding of the parties hereto of the support and administrative services
reasonably expected to be required by OMNOVA following the Distribution. If,
following the Distribution, OMNOVA reasonably determines that additional
services consistent with recent historical practices should be provided by
GenCorp, the parties agree to negotiate in good faith to modify this Agreement
appropriately with respect to such additional services. In the event the parties
agree that OMNOVA shall provide such additional services, the parties hereto
further agree that such agreement to provide such additional services shall also
amend Schedule B hereto to reflect such agreement
3
<PAGE> 4
of the parties. OMNOVA may reduce or terminate any specific services at any time
upon 30 days written notice.
2.4 PAYMENT FOR SERVICES PROVIDED BY GENCORP.
(a) OMNOVA shall pay GenCorp on a monthly basis, in
consideration of the services provided to OMNOVA by GenCorp hereunder, (i) the
amounts specified as "Costs Allocated to OMNOVA" on Schedule B, (ii) reasonable
out-of-pocket expenses incurred by GenCorp in connection with providing
services, and (iii) charges by third party service providers to the extent that
they are attributable to services provided to or for OMNOVA. To the extent that
OMNOVA has provided notice to reduce services in accordance with Section 2.3,
the "Costs Allocated to OMNOVA" shall be appropriately reduced.
(b) Charges for the services shall be invoiced on or about the
tenth (10th) day of the calendar month next following the calendar month in
which the services have been performed. Each invoice shall describe in
reasonable detail, as appropriate, the services upon which the amount to be
charged is based, and such invoice shall be paid within thirty (30) days
following receipt thereof.
ARTICLE III
TERMINATION
3.1 AUTOMATIC TERMINATION. This Agreement automatically shall terminate
at the conclusion of the Term unless such Term is extended in accordance with
Section 1.1 hereto.
3.2 TERMINATION WITH NOTICE. If either GenCorp or OMNOVA (the
"Defaulting Party") shall fail to perform in any material respect any of its
material obligations under this Agreement, whether voluntarily or involuntarily,
the other may terminate this Agreement upon
4
<PAGE> 5
one hundred twenty (120) days' written notice to the Defaulting Party that it
has so failed to perform its obligations under this Agreement, unless during
such period the Defaulting Party shall have remedied such failure.
3.3 MUTUAL COOPERATION AND ADDITIONAL ASSUMPTIONS. Prior to the
termination of this Agreement, the parties shall reasonably cooperate in good
faith to facilitate an orderly transition of responsibility for the services
provided pursuant to this Agreement, and each party shall deliver to the other
party copies of such documents, records and information as are reasonably
necessary to achieve such transition. Upon the termination of this Agreement,
each party promptly shall deliver to the other party copies of all remaining
documents, records and information in such party's possession and owned by the
other party that may be reasonably necessary for the other party to assume
complete internal responsibility for all of the services provided pursuant to
this Agreement.
ARTICLE IV
TERMS RELATED TO SPECIFIC SERVICES
4.1 EMPLOYEE BENEFITS ADMINISTRATION. (a) GenCorp will continue to
employ a Benefits Transition Team ("Team") to be based at OMNOVA's corporate
headquarters in Fairlawn, Ohio. The responsibilities of the Team will include
(i) administration of GenCorp's employee benefit plans, (ii) transfer of
administrative responsibility for GenCorp's employee benefit plans to GenCorp's
new corporate headquarters in California and/or to GenCorp Vehicle Sealing
headquarters, and (iii) implementation and administration of new employee
benefit plans for OMNOVA as described on Schedule B. The Team will report to
OMNOVA's Director, Compensation and Benefits, regarding its responsibilities to
administer
5
<PAGE> 6
employee benefit plans for OMNOVA. GenCorp and OMNOVA hereby agree to cooperate
to establish and manage priorities for the Team in connection with fulfilling
its responsibilities for both parties.
(b) In connection with the Team's administration of GenCorp's employee
benefit plans, OMNOVA will process and pay certain welfare benefits to or for
GenCorp plan participants with OMNOVA funds. Notwithstanding Section 2.2,
GenCorp agrees to reimburse OMNOVA for any and all such payments, by wire
transfer, on the business day next following each payment by OMNOVA.
(c) GenCorp shall, at its own cost and expense, (a) defend OMNOVA from
any and all claims, damages, actions or causes of action ("Claims") which result
from GenCorp's employment and/or termination of employment of any of the
employees included in its Benefits Transition Team on or after the Distribution
Date, and (b) indemnify and hold OMNOVA harmless from all damages, liabilities,
losses, costs, judgments, orders, assessments, interest, penalties, fines,
settlement payments, costs and expenses (including, without limitation,
attorneys fees and other investigation and defense costs and expenses) imposed
upon or incurred by OMNOVA as a result of any such Claim. OMNOVA shall promptly
notify GenCorp of any Claim and GenCorp shall be entitled to assume and maintain
control over the defense of any Claim and any negotiations and settlement
thereof with counsel reasonably acceptable to OMNOVA, provided that GenCorp will
not settle any such Claim without the consent of OMNOVA which consent shall not
be unreasonably withheld. In the event that GenCorp fails to promptly assume and
diligently investigate and defend or settle any Claim then OMNOVA shall have the
right, at GenCorp's cost, expense and risk, from that time forward to have sole
control of the defense of the Claim and all negotiations for its settlement
6
<PAGE> 7
or compromise. The party not controlling the defense of any such Claim shall
have the right to participate, at its sole expense, in the defense or settlement
thereof.
4.2 PAYROLL SERVICES. In connection with payroll services described on
Schedule A, OMNOVA will process and pay certain salaries and wages and related
payroll taxes with OMNOVA funds. Notwithstanding Section 2.2, GenCorp agrees to
reimburse OMNOVA for any and all such payments, by wire transfer, on the
business day next following GenCorp's receipt of notice of each payment by
OMNOVA.
4.3 CUSTOMER FINANCIAL SERVICES. In connection with customer financial
services described on Schedule A, OMNOVA will process and pay certain accounts
payable for GenCorp Vehicle Sealing with OMNOVA funds. Notwithstanding Section
2.2, GenCorp agrees to reimburse OMNOVA for any and all such payments, by wire
transfer, on the business day next following GenCorp's receipt of notice of each
payment by OMNOVA.
4.4 LEASED EMPLOYEES. (a) GenCorp will continue to employ the
individuals named as Leased Employees on Schedule B, until their respective
retirement dates determined under GenCorp's 1999 Voluntary Enhanced Retirement
Program. The Leased Employees will provide services to OMNOVA as directed by
OMNOVA. GenCorp shall be exclusively responsible for all wages, benefits,
withholdings and other employment-related matters in respect of Leased
Employees.
(b) GenCorp shall, at its own cost and expense, (i) defend OMNOVA from
any and all claims, damages, actions or causes of action ("Claims") which result
from GenCorp's employment and/or termination of employment of any of the Leased
Employees prior to, on or after the Distribution Date, and (ii) indemnify and
hold OMNOVA harmless from all damages, liabilities, losses, costs, judgments,
orders, assessments, interest, penalties, fines, settlement
7
<PAGE> 8
payments, costs and expenses (including, without limitation, attorneys fees and
other investigation and defense costs and expenses) imposed upon or incurred by
OMNOVA as a result of any such Claim. OMNOVA shall promptly notify GenCorp of
any Claim and GenCorp shall be entitled to assume and maintain control over the
defense of any Claim and any negotiations and settlement thereof with counsel
reasonably acceptable to OMNOVA provided that GenCorp will not settle any such
Claim without the consent of OMNOVA which consent shall not be unreasonably
withheld. In the event that GenCorp fails to promptly assume and diligently
investigate and defend or settle any Claim then OMNOVA shall have the right, at
GenCorp's cost, expense and risk, from that time forward to have sole control of
the defense of the Claim and all negotiations for its settlement or compromise.
The party not controlling the defense of any such Claim shall have the right to
participate, at its sole expense, in the defense or settlement thereof.
4.5 ACCESS TO WAREHOUSE. GenCorp shall grant OMNOVA reasonable access
to the Jacoby Road Warehouse for storing, maintaining or retrieving Records and
other OMNOVA assets and shall give OMNOVA reasonable advance written notice of
any termination or non-renewal of the lease of such Warehouse.
ARTICLE V
GENERAL
5.1 NON-WAIVER. The failure of either party to enforce at any time or
for any of the provisions hereof shall not be construed to be a waiver of such
provisions or of the right of such party thereafter to enforce each and every
such provision.
8
<PAGE> 9
5.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
mailed by registered or certified mail (return receipt requested), or sent by
telecopy or by a nationally recognized overnight courier service, to the parties
at the following addresses (or such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice is received:
To OMNOVA at: OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333-3300
Attention: General Counsel
Fax Number: 330-869-4272
To GenCorp at: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attention: General Counsel
Fax Number: 916-351-8665
5.3 GOVERNING LAW. This Agreement shall be governed by and enforced in
accordance with the internal laws of the State of Ohio, without
regard to the conflicts of law principles thereof.
5.4 LEVEL OF SERVICE. OMNOVA and GenCorp each severally undertake to
provide the same quality of services and use the same degree of care in
rendering services under this Agreement as it respectively utilizes in rendering
such services for its own operations and shall not be liable for any failure to
provide services.
5.5 SEVERABILITY. In the event any provision of this Agreement or
portion thereof is found to be wholly or partially invalid, illegal or
unenforceable in any judicial proceeding, then such provision shall be deemed to
be modified or restricted to the extent and in the manner necessary to render
the same valid and enforceable or shall be deemed excised from this
9
<PAGE> 10
Agreement, as the case may require, and this Agreement shall be construed and
enforced to the maximum extent permitted by law as if such provision had been
originally incorporated herein as so modified or restricted, or as if such
provision had not been originally incorporated herein, as the case may be.
5.6 ENTIRE AGREEMENT. This Agreement supersedes and cancels any and all
previous agreements, written or oral, between the parties relating to the
subject matter hereof. This Agreement and the Other Agreements expresses the
complete and final understanding of the parties with respect to the subject
matter thereto and may not be changed in any way, except by an instrument in
writing signed by both parties.
5.7 ASSIGNMENT. Neither of the parties shall assign any of its rights
or obligations under this Agreement without the prior written consent of the
other party, which consent shall not unreasonably be withheld.
IN WITNESS WHEREOF, the parties have hereunto caused their authorized
representative to execute this Agreement as of the day and year first above
written. GENCORP INC.
By: /s/ William R. Phillips
----------------------------------
Name: William R. Phillips
--------------------------------
Title: Senior Vice President
-------------------------------
OMNOVA SOLUTIONS INC.
By: /s/ James C. LeMay
----------------------------------
Name: James C. LeMay
--------------------------------
Title: Senior Vice President
-------------------------------
10
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF OMNOVA SOLUTIONS INC.(1)
The following is a list of the subsidiaries of OMNOVA Solutions Inc., an
Ohio corporation (the "Corporation"). The common stock of all the companies
listed below is wholly owned, directly or indirectly, by the Corporation.
<TABLE>
<CAPTION>
NAME OF CORPORATION STATE OF INCORPORATION
------------------- ----------------------
<S> <C>
OMNOVA Services Inc. Ohio
OMNOVA Wallcovering (USA), Inc. Ohio
OMNOVA Wallcovering (UK), Limited United Kingdom limited
company
</TABLE>
(1) The Corporation also controls, directly or indirectly, thirteen other
companies that, in the aggregate as a single subsidiary, would not
constitute a significant subsidiary, as such term is defined in Rule 1-02
(w) of Regulation S-X.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
OMNOVA Solutions Inc.
We consent to the incorporation by reference in the Prospectuses
constituting part of OMNOVA Solutions Inc.'s Registration Statements No.
333-88143 and 333-88145 on Form S-8 and Registration Statement No. 333-88587 on
Form S-3 and Post Effective Amendment No. 1 to Registration Statement No.
333-88143 on Form S-8 of our report dated January 13, 2000 with respect to the
consolidated financial statements of OMNOVA Solutions Inc. included in this
Annual Report (Form 10-K) for the year ended November 30, 1999.
Ernst & Young LLP
Akron, Ohio
February 7, 2000
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of OMNOVA
Solutions Inc. hereby constitutes and appoints J. C. LeMay and C. A. Slack, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of OMNOVA Solutions Inc. for
the fiscal year ended November 30, 1999 on his behalf, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 2000.
/s/ E. P. Campbell
---------------------------
E. P. Campbell, Director
Dated: February 2, 2000
--------------------
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of OMNOVA
Solutions Inc. hereby constitutes and appoints J. C. LeMay and C. A. Slack, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of OMNOVA Solutions Inc. for
the fiscal year ended November 30, 1999 on his behalf, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 2000.
/s/ C. A. Corry
---------------------------
C. A. Corry, Director
Dated: February 2, 2000
--------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of OMNOVA
Solutions Inc. hereby constitutes and appoints J. C. LeMay and C. A. Slack, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of OMNOVA Solutions Inc. for
the fiscal year ended November 30, 1999 on his behalf, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 2000.
/s/ D. A. Daberko
---------------------------
D. A. Daberko, Director
Dated: February 2, 2000
--------------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of OMNOVA
Solutions Inc. hereby constitutes and appoints J. C. LeMay and C. A. Slack, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of OMNOVA Solutions Inc. for
the fiscal year ended November 30, 1999 on his behalf, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 2000.
/s/ B. G. Gower
---------------------------
B. G. Gower, Director
Dated: February 2, 2000
--------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of OMNOVA
Solutions Inc. hereby constitutes and appoints J. C. LeMay and C. A. Slack, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of OMNOVA Solutions Inc. for
the fiscal year ended November 30, 1999 on his behalf, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 2000.
/s/ D. E. McGarry
---------------------------
D. E. McGarry, Director
Dated: February 2, 2000
--------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of OMNOVA
Solutions Inc. hereby constitutes and appoints J. C. LeMay and C. A. Slack, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of OMNOVA Solutions Inc. for
the fiscal year ended November 30, 1999 on his behalf, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 2000.
/s/ S. W. Percy
---------------
S. W. Percy, Director
Dated: February 2, 2000
--------------------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of OMNOVA
Solutions Inc. hereby constitutes and appoints J. C. LeMay and C. A. Slack, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of OMNOVA Solutions Inc. for
the fiscal year ended November 30, 1999 on his behalf, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 2000.
/s/ R. B. Pipes
---------------
R. B. Pipes, Director
Dated: February 2, 2000
--------------------
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 10,500
<SECURITIES> 0
<RECEIVABLES> 122,000
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0
0
<COMMON> 4,200
<OTHER-SE> 310,500
<TOTAL-LIABILITY-AND-EQUITY> 722,500
<SALES> 767,400
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<CGS> 503,800
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<INCOME-TAX> 24,100
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