Document:

Exhibit 10.1

 

EXECUTION
VERSION

 

Any text removed pursuant to Rhodia S.A.'s
confidential treatment request has been separately submitted with the U.S.
Securities and Exchange Commission and is marked ["***"] herein.

 

SECURED
CO-ORDINATION AGREEMENT

 

DATED 23RD DECEMBER, 2003

 

BETWEEN

 

RHODIA S.A.

the Company and the Guarantor

 

BORROWING GROUP MEMBERS

 

THE LENDERS

 

and

 

BNP PARIBAS

as Intercreditor Agent

 

and

 

FACILITY AGENTS

 

THIS AGREEMENT IS ENTERED INTO WITH THE BENEFIT OF AND
SUBJECT TO THE TERMS OF A SECURITY SHARING AGREEMENT AND SUBORDINATION
AGREEMENT WHEN ENTERED INTO

 

ALLEN
& OVERY

 

PARIS

 

 

CONTENTS

 

	
  Clause

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	 

	
  1.

  	
   

  	
  Interpretation

  	
   

  	 

	
  2.

  	
   

  	
  Conditions
  precedent

  	
   

  	 

	
  3.

  	
   

  	
  Secured Intercreditor
  Period

  	
   

  	 

	
  4.

  	
   

  	
  Affected
  Facilities

  	
   

  	 

	
  5.

  	
   

  	
  Payments

  	
   

  	 

	
  6.

  	
   

  	
  New Guarantee

  	
   

  	 

	
  7.

  	
   

  	
  Mandatory
  prepayment and cancellation

  	
   

  	 

	
  8.

  	
   

  	
  Representations and
  warranties

  	
   

  	 

	
  9.

  	
   

  	
  Undertakings

  	
   

  	 

	
  10.

  	
   

  	
  Financial
  covenants

  	
   

  	 

	
  11.

  	
   

  	
  Default

  	
   

  	 

	
  12.

  	
   

  	
  The Administrative Parties

  	
   

  	 

	
  13.

  	
   

  	
  Expenses

  	
   

  	 

	
  14.

  	
   

  	
  Changes
  to the Parties

  	
   

  	 

	
  15.

  	
   

  	
  Amendments
  and waivers

  	
   

  	 

	
  16.

  	
   

  	
  Confidentiality

  	
   

  	 

	
  17.

  	
   

  	
  Stamp duties

  	
   

  	 

	
  18.

  	
   

  	
  Indemnities

  	
   

  	 

	
  19.

  	
   

  	
  Co-ordinating
  Committee

  	
   

  	 

	
  20.

  	
   

  	
  Severability

  	
   

  	 

	
  21.

  	
   

  	
  Counterparts

  	
   

  	 

	
  22.

  	
   

  	
  Notices

  	
   

  	 

						

 

 

	
  23.

  	
   

  	
  Language

  	
   

  	 

	
  24.

  	
   

  	
  Jurisdiction

  	
   

  	 

	
  25.

  	
   

  	
  Waiver of immunity

  	
   

  	 

	
  26.

  	
   

  	
  Governing law

  	
   

  	 

	
  Schedules

  	
   

  
	
  1.

  	
   

  	
  Various Parties

  	
   

  	 

	
   

  	
   

  	
  Part 1

  	
  The
  Borrowing Group

  	
   

  	 

	
   

  	
   

  	
  Part
  2

  	
  The
  Original Obligors

  	
   

  	 

	
   

  	
   

  	
  Part 3

  	
  Original Lenders

  	
   

  	 

	
   

  	
   

  	
  Part 4

  	
  Facility Agents

  	
   

  	 

	
  2.

  	
   

  	
  Conditions precedent documents

  	
   

  	 

	
   

  	
   

  	
  Part
  1

  	
  Conditions
  Precedent documents to be provided in form and substance satisfactory to each
  Original Lender are marked with an asterisk (*)

  	
   

  	 

	
   

  	
   

  	
  Part 2

  	
  Conditions precedent
  documents

  	
   

  	 

	
   

  	
   

  	
  Part
  3

  	
  Additional
  Obligor Conditions Precedent Documents

  	
   

  	 

	
  3.

  	
   

  	
  The Existing Facilities, Affected Facilities
  and Exposures

  	
   

  	 

	
  4.

  	
   

  	
  Security—Existing Security Interests

  	
   

  	 

	
  5.

  	
   

  	
  Accession Agreement

  	
   

  	 

	
  6.

  	
   

  	
  Business Plan including Liquidity Analysis

  	
   

  	 

	
   

  	
   

  	
  Part 1

  	
  Rhodia Business
  Plan After Disposals

  	
   

  	 

	
   

  	
   

  	
  Part 2

  	
  Liquidity
  Analysis

  	
   

  	 

	
  7.

  	
   

  	
  Inter-Company Loans

  	
   

  	 

	
   

  	
   

  	
  Part 1

  	
  Intercompany
  Loans/Borrowings between Rhodia S.A. and its Subsidiaries

  	
   

  	 

	
   

  	
   

  	
  Part 2

  	
  Intercompany
  Loans/Borrowings between the Rhodia Subsidiaries (as of 30th November, 2003)

  	
   

  	 

	
  8.

  	
   

  	
  ERISA Events

  	
   

  	 

	
  9.

  	
   

  	
  Agreed Lease Amendment Principles

  	
   

  	 

	
  10.

  	
   

  	
  Form of Compliance Certificate

  	
   

  	 

	
  11.

  	
   

  	
  Agreed Security Principles

  	
   

  	 

	
   

  	
   

  	
  Part 1

  	
  General

  	
   

  	 

	
   

  	
   

  	
  Part 2

  	
  Secured Assets

  	
   

  	 

	
   

  	
   

  	
  Part 3

  	
  Beneficiaries

  	
   

  	 

	
   

  	
   

  	
  Part 4

  	
  Security Sharing Principles

  	
   

  	 

	
  Signatories

  	
   

  	
   

  
									

 

 

THIS
AGREEMENT is dated
23rd December, 2003 between:

 

(1)                                  RHODIA S.A. (a company incorporated in France
(Registered No. 352-170-161) with its registered office at 26 quai Alphonse Le
Gallo 92100 Boulogne Billancourt) (the Company);

 

(2)                                  BORROWING GROUP MEMBERS listed in Part 2 of Schedule 1 (each an Original Obligor and together the Original Obligors);

 

(3)                                  RHODIA S.A. (the Guarantor);

 

(4)                                  THE FINANCIAL INSTITUTIONS listed in Part 3 of Schedule 1 (the Original Lenders);

 

(5)                                  BNP PARIBAS as intercreditor agent for the Lenders (in
this capacity the Intercreditor Agent);
and

 

(6)                                  AGENTS UNDER AFFECTED
FACILITIES listed in Part 4
of Schedule 1 (each a Facility Agent,
together the Facility Agents).

 

IT IS
AGREED as follows:

 

 

1.                                      INTERPRETATION

 

1.1                               Definitions

 

In this Agreement:

 

Additional Obligor means a Borrowing Group Member which becomes an Obligor after the date
of this Agreement.

 

Accession Agreement means an agreement in the form of Schedule 5 (Accession Agreement)
with such amendments as the Intercreditor Agent may approve or reasonably
require.

 

Affected Facility means each of the facilities referred to in Schedule 3 and designated
as “Affected Facilities” and in respect of which the relevant Lender is a Party
to this Agreement.

 

Affected Facility Agreement means any Facility Agreement constituting or
evidencing any Affected Facility.

 

Affiliate means a Subsidiary or a Holding Company of a person or any other
Subsidiary of that Holding Company.

 

Agent
means the Intercreditor Agent and/or the Security Agent.

 

Agreed Lease Amendment Principles means the agreed lease amendment principles
set out in Schedule 9 (Agreed Lease Amendment Principles).

 

Agreed Security Principles means the security principles set out in
Schedule 11.

 

Asset
means:

 

(a)                                  each asset of the Group included in the Asset
Disposal Programme from time to time;

 

(b)                                 any shares or capital stock or equivalent in
any member of the Group; and

 

(c)                                  any assets which are disposed of under Clause
9.9(b)(iv), (but excluding, for the avoidance of doubt, assets disposed of
under Clause 9.9(b)(i), (ii) and (iii)).

 

Asset Disposal Programme means together:

 

(a)                                  an asset disposal programme generating net
cash proceeds of not less than €400,000,000 by no later than 30th June, 2004
(of which no less than €200,000,000 is actually received by the Company in cash
by that date without condition, with the balance to be received in cash,
subject only to satisfaction of conditions outside the control of the buyer or
seller (or their respective affiliates) under binding sale and purchase
agreements entered into prior to 30th June, 2004, and where such balance is
actually received in cash in any event on or before 31st December, 2004); and

 

(b)                                 an additional asset disposal programme
generating additional net cash proceeds of not less than €700,000,000 minus the
net cash proceeds generated from the first disposal programme referred to in
paragraph (a) above, to be received by the Company by no later than 31st
December, 2004,

 

in each case where net cash proceeds means cash proceeds net
of any Taxes payable in the financial year in which the disposal is effected or
proceeds received and reasonable third party costs and expenses attributable to
the disposal, receipt or recovery, as set out in reasonable detail in a
certificate provided to the Intercreditor Agent by the chief financial officer
of the Company.

 

Borrowing Group means each entity listed in Part 1 of Schedule 1.

 

Borrowing Group Member means each member of the Borrowing Group.

 

Business Day means a day (other than a Saturday or a Sunday) on which banks are
generally open for business in London and Paris and:

 

(a)                                  if on that day a payment in or a purchase of
a currency (other than Euro), is to be made, the principal financial centre of
that currency; or

 

(b)                                 if on that day a payment in or a purchase of
Euro is to be made, which is also a Target Day.

 

Business Plan means the business plan to be provided by the Company to the Lenders
as updated on a quarterly basis to include the liquidity analysis in the form
set out in Schedule 6 (Business Plan including Liquidity Analysis).

 

 

Calculation Point means 5.00 p.m. (Paris time) on 30th November, 2003.

 

Code
means the United States Internal Revenue Code of 1986, as amended and the rules
and regulations promulgated thereunder from time to time in effect.

 

Commencement Date means the date on which the Intercreditor Agent provides the
notification to each Party as specified in Clause 2 (Conditions Precedent).

 

Compliance Certificate means a certificate signed by the chief
financial officer or statutory auditors of the Company, as applicable,
substantially in the form of Schedule 10.

 

Co-ordinating Committee means the committee appointed in accordance
with a co-ordinating committee letter dated 30th November, 2003.

 

Dangerous Substance means any radioactive emissions, noise and any natural or artificial
substance (in whatever form) the generation, transportation, storage, treatment
or disposal of which (whether alone or in combination with any other substance)
gives rise to a risk of causing harm to man or any other living organism or
damaging the Environment or public health or welfare including (without
limitation) any controlled, special, hazardous, toxic, radioactive or dangerous
waste.

 

Declared Default means (following a request by any Lender) a notification by the
Intercreditor Agent (acting on the instructions of the Majority Lenders) that
an Event of Default has occurred and is outstanding.

 

Default means (a) an Event of Default; or (b) an event or circumstance which
with the expiry of a grace period, the giving of notice, lapse of time,
determination of materiality or fulfilment of any other applicable condition
(or any combination of the foregoing) is likely to constitute an Event of
Default.

 

Derivative Deposit means, in relation to Lenders under Derivative Instruments referred to
in Schedule 3, the deposit or payment of collateral in an amount equal to the
positive difference (if any) by which that Lender’s Exposure in respect of
Derivative Instruments on the last Business Day of each calendar month exceeds
its maximum Exposure in respect of Derivative Instruments as set out against
its name in Schedule 3 up to a maximum aggregate amount not exceeding
€40,000,000 (or its equivalent in other currencies).

 

Derivative Instrument means any swap, cap, collar, floor, option,
forward or any other agreement or arrangement in the nature of a derivative
instrument.

 

Derivative Liability means, on any date and in respect of any Derivative Instrument between
any member of the Group, any Borrowing Group Member and any creditor, the
amount (if any) payable by that member of the Group or Borrowing Group Member
to that creditor on termination of that Derivative Instrument on that date (or
which would have been payable by that member of the Group or Borrowing Group
Member to that creditor had that Derivative Instrument been terminated on that
date) (where the amount shall be the “marked-to-market” value of that contract
or instrument and shall take into account the operation of any netting provisions
contained within that instrument or contract or master agreement including the
netting of one or more Derivative Instruments between the same creditor and
member of the Group or Borrowing Group Member under the same master agreement).

 

EMTN
means a Euro medium term note programme for the Company in an amount of
€1,800,000,000 as described in an offering circular dated 5th October, 2001.

 

Enforcement Action in respect of an Affected Facility means any of the following actions:

 

(a)                                  to submit a petition for (or vote in favour
of any resolution in any insolvency proceedings) or initiate or support or take
any steps with a view to any bankruptcy, insolvency, liquidation, business
reorganisation or rehabilitation, administration receivership, execution or dissolution
proceedings under any insolvency and composition laws or any similar
proceedings (or any analogous proceedings in any other jurisdiction) involving
the Company or any of its subsidiaries;

 

(b)                                 to serve a notice of a default, event of
default or termination event (howsoever described) on the relevant Borrowing
Group Member, to place on demand, to make demand for or accelerate the due date
for, or declare prematurely payable any moneys under any Affected Facility;

 

(c)                                  to commence or continue any action to enforce
the payment of any amount under any Affected Facility;

 

 

(d)                                 where a breach of contract or
misrepresentation by a Borrowing Group Member under an Affected Facility
results in or from a default, event of default or termination event (howsoever
described), to commence or continue any legal action against that member for
repudiation or rescission of that Affected Facility or damages for loss (or
equivalent), in each case, as a consequence of that breach of contract or
misrepresentation;

 

(e)                                  to take any action to cancel any funded
commitment to lend or to close out or terminate or cancel any swap or similar
hedging arrangement, any guarantee, letter of credit or like commitment in
favour of a third party or any foreign exchange facility, in each case, under
any Affected Facility but excluding any action to close out or terminate any
swap or similar hedging arrangements where any Borrowing Group Member is “in
the money” as a result of close out or termination;

 

(f)                                    to exercise any right of appropriation,
amalgamation of accounts counter-claim or set-off in reduction of outstandings
under any Affected Facility, except that Lenders may continue to apply netting
arrangements in effect as at date of this letter in accordance with the
existing terms thereof; or

 

(g)                                 to take any action to perfect (except if
required to maintain a Security Interest then existing) or to enforce or make
any demand under any Security Interest or any guarantee, indemnity or like
commitment or similar support (except as contemplated by Clause 4.3(d)(iv))
given in connection with an Affected Facility by any Borrowing Group Member or
any other person.

 

Environment means all, or any of, the following media: the air (including air
within other natural or man-made structures above or below ground), water
(including, without limitation, ground and surface water) and land (including,
without limitation, surface and sub-surface soil).

 

Environmental Law means all laws (including, without limitation, common law),
regulations, directives, codes of practice, circulars, guidance notes and the
like having legal effect concerning the protection of human health, the
Environment, the conditions of the workplace or the generation, transportation,
storage, treatment or disposal of Dangerous Substances.

 

Environmental Licence means any permit, licence, authorisation,
consent or other approval required by any Environmental Law.

 

ERISA
means the United States Employee Retirement Income Security Act of 1974 and the
rules and regulations promulgated thereunder from time to time in effect.

 

ERISA Event means any event specified in Schedule 7 Part 2.

 

ERISA Affiliate means any trade or business (whether or not incorporated) that is
treated as a single employer together with the Company under section 414 of the
Code.

 

Euro
means the single currency of the Participating Member States.

 

Event of Default means an event or circumstance specified as such in this Agreement.

 

Excluded Facility means:

 

(a)                                  an uncommitted Facility which is not an
Affected Facility;

 

(b)                                 the Euro 12,420,000 term loan facility dated
21st January, 1995 between CCF and Rhodia Silicone backed by the European
Investment Bank;

 

(c)                                  any Unaffected Credit Facility to the extent
any reduction in Exposures under that Facility is refinanced in full at the
time of that reduction by an Unaffected Credit Facility with a final maturity
date no earlier than that of the refinanced Unaffected Credit Facility and on
terms which do not put or seek to put the creditor of the refinanced Unaffected
Credit Facility in a preferred position as against any Lender as provided in
Clause 4.7(b);

 

 

(d)                                 any Unaffected Committed Facility to the
extent that:

 

(A)                              any reduction in Exposures under that
Facility is refinanced at the time of the reduction by an Unaffected Credit
Facility (i) with a final maturity date falling no earlier than both (x) the
Term Date; and (y) the final maturity date of the refinanced Facility; and (ii)
on terms that do not put or seek to put the creditor of the refinanced Facility
in a preferred position as against any Lender as provided in Clause 4.7(b); and

 

(B)                                the aggregate amount of Exposures under the
Unaffected Committed Credit Facilities is not less than 95% of the aggregate
amount of Exposures under the Unaffected Committed Facilities on the date of
this Agreement at any time;

 

(e)                                  any sale of receivables or forfaiting
Facility which is not an Affected Facility; and

 

(f)                                    each Refinanced Facility to the extent
prepaid in full by the Refinancing Facilities Agreement.

 

Existing Facility means those Facilities which exist at the date of this Agreement,
brief details of which are listed in Schedule 3.

 

Existing Facility Agreement means any agreement or instrument
constituting or evidencing any Existing Facility.

 

Existing Security Interests means any Security Interest granted by any
member of the Group or any Borrowing Group Member over any asset of that member
in respect of any Existing Facility as at the date of this Agreement which is
either over the assets leased under existing Lease Facilities or as listed in
Schedule 4.

 

Exposure in relation to any creditor under a Facility means at any time:

 

(a)                                  in relation to loan facilities, overdrafts
and credit lines made available to any Borrowing Group Member the actual
aggregate principal amount outstanding to that creditor at that time net of
credit balances to the extent of any netting arrangement in effect at the time;

 

(b)                                 in relation to guarantees, letters of credit
and similar financial accommodation issued by that creditor for the account of
any Borrowing Group Member the maximum aggregate contingent liability of that
creditor under that instrument at that time;

 

(c)                                  in relation to any other financial
accommodation made available to any member of the Borrowing Group, the maximum
aggregate net exposure or exposures or contingent liability of that creditor at
that time determined in accordance with the usual market practice and in
respect of a US synthetic lease shall be calculated by reference to the total
outstanding notes and unrepaid investment of each lessor and owner participant
thereunder;

 

(d)                                 in relation to any Derivative Instrument, the
Derivative Liability in respect thereof; and

 

(e)                                  for the avoidance of doubt, excluding, in
each case, all related interest, fees, commission, banking, legal and other
charges and expenses,

 

and provided that: (i) any
contingent claim (including without limitation a contingent claim with respect
to a guarantee or letter of credit facility) shall, until the contrary is
demonstrated to the reasonable satisfaction of the relevant creditor, be
calculated on the basis that the amount claimed corresponds to a principal
amount and the contingent claim will become payable in full; and (ii) if there
is a dispute between a Lender and the Company with respect to the calculation
of its Exposure that Lender and the Company shall appoint (at the cost of the
Company) an independent expert to act as an expert and not as an arbitrator to
determine the same. The determination by such expert shall be binding on the
parties.

 

Facility means any facility under which a member of the Group, any Relevant
Entity or any Joint Venture Entity has or may incur Financial Indebtedness or
under which there is recourse to a member of the Group in respect of Financial
Indebtedness.

 

Facility Agreement means any agreement or instrument constituting or evidencing any
Facility.

 

Fee Letter means the letter(s) dated on or about the date of this Agreement and
entered into between amongst others the Intercreditor Agent and the Company
setting out the amount of certain fees to be paid in connection with this
Agreement.

 

Finance Document means:

 

(a)                                  this Agreement;

 

(b)                                 an Accession Agreement;

 

(c)                                  the Security Sharing Agreement;

 

 

(d)                                 each Security Document;

 

(e)                                  the Subordination Agreement;

 

(f)                                    the Fee Letter; and

 

(g)                                 any other document designated as such in
writing by the Company and the Intercreditor Agent.

 

Finance Party means a Lender, each Facility Agent, the Security Agent and the
Intercreditor Agent.

 

Financial Indebtedness means any indebtedness for or in respect of:

 

(a)                                  moneys borrowed and debit balances at banks;

 

(b)                                 any debenture, bond, note, loan stock or
other similar instrument;

 

(c)                                  any acceptance credit;

 

(d)                                 receivables sold or discounted (otherwise
than on a non-recourse basis) including, for the avoidance of doubt,
Securitisation Programmes and sale of receivables under Existing Facilities;

 

(e)                                  the acquisition cost of any asset to the
extent payable before or after its acquisition or possession by the party
liable where the advance or deferred payment is arranged primarily as a method
of raising finance or financing the acquisition of that asset;

 

(f)                                    any lease (including, without limitation, a
capital lease and each lease listed in Schedule 3) entered into primarily as a
method of raising finance or financing the acquisition of the asset leased;

 

(g)                                 any Derivative Instrument;

 

(h)                                 any amount outstanding under a Facility or
any amount raised through any other transaction (including any forward sale or
purchase agreement) which has the commercial effect of a borrowing or raising
of money;

 

(i)                                     any counter-indemnity obligation in respect
of any guarantee, indemnity, bond, letter of credit or any other instrument
issued by a bank or financial institution; or

 

(j)                                     any guarantee, indemnity or similar assurance
against financial loss of any person.

 

Group
means the Company and its Subsidiaries.

 

Group Structure Chart means the chart describing the capital and
share ownership of all the members of the Group and the Borrowing Group delivered
as a condition precedent under Schedule 2.

 

High Yield Bonds means the 7.625% US dollar denominated senior notes due 2010, the 8.0%
Euro denominated senior notes due 2010, the 8.875% US dollar denominated senior
notes due 2011 and the 9.25% Euro denominated senior notes due 2011 referred to
in Schedule 3.

 

Holding Company means, in relation to a person, a company in respect of which that
person is a Subsidiary.

 

Insolvency Event means any Event of Default specified in Clauses 11.7 (Insolvency) to
11.12 (Analogous proceedings) (inclusive).

 

Inter-Company Debt means any debt incurred by an Obligor and outstanding to an Affiliate
of the Company.

 

Joint Venture Entity means any unconsolidated subsidiary of the Company or joint venture
entity, in each case:

 

(a)                                  in which the Company owns or effectively
controls, directly or indirectly at least twenty per cent. (20%) of the capital
and voting rights; and

 

 

(b)                                 in relation to the Financial Indebtedness of
which, no Borrowing Group Member has given a guarantee, indemnity or similar
assurance against financial loss.

 

Lease Facility means a lease facility appearing under the
sub-heading “Operating Lease” in Schedule 3.

 

Lease Under Construction Facility means an Existing Facility in relation to a
leasing of a site under construction.

 

Lender
means:

 

(a)                                  an Original Lender; or

 

(b)                                 any bank or financial institution which has
executed and delivered to the Intercreditor Agent an Accession Agreement in
accordance with Clause 14.3 (Transfers by Lenders) and Clause 14.4 (Accession),

 

in each case in its capacity
as a Lender under each Affected Facility to which it is party and not any other
Facility.

 

Lessor Reduction means, in relation to certain Lease Facilities, the reduction of
Exposure thereunder by provision of cash collateral or by way of an early
prepayment of rent or the purchase by the lessee of the assets leased in an
amount equal to 5 per cent. of the relevant lessor’s exposure under the
relevant lease as such Exposure is set out against its name under the heading
“Prepayable” in Schedule 3 to be made on or around the date of this Agreement
and on the Term Date.

 

Limited Recourse means customary recourse by any provider of Financial Indebtedness
incurred by a member of the Group in connection with securitisation of
receivables pursuant to the existing terms of an existing Securitisation
Programme referred to in Schedule 3 to the extent such recourse may be incurred
by that member of the Group in accordance with such terms on the date of this
Agreement.

 

Majority Lenders means, on any date on which a determination is to be made, Lenders
whose Exposures aggregate at least 66 2/3 per cent. of
the aggregate Exposures of all Lenders where the Exposures (converted into Euro
at the Spot Rate of Exchange) are calculated by reference to the amount and
Spot Rate of Exchange as at the last day of the month ending immediately prior
to the date on which a determination is to be made.

 

Material Adverse Effect means a material adverse effect on or
circumstance affecting:

 

(a)                                  the business, assets or financial condition
of the Company, a Material Subsidiary or the Group (taken as a whole); or

 

(b)                                 the ability of any Borrowing Group Member to
perform or comply with any of its payment obligations (after taking into
account any guarantee in relation to that payment obligation which is available
on demand) or to comply with or perform any other material obligation under any
Finance Document or any Facility Agreement; or

 

(c)                                  the validity or enforceability of any Finance
Document or any Facility Agreement or the effectiveness of any Security
Interest over the assets purported to be covered by any Security Document, or
the value of the security (taken as a whole).

 

Material Subsidiary means at any time any Subsidiary of the Company whose net assets or
EBITDA then equal or exceed 5 per cent. of the total net assets or EBITDA of
the Group.

 

For this purpose:

 

(i)                                     the net assets or EBITDA of the relevant
entity will be determined from its financial statements (consolidated if it has
Subsidiaries) upon which the latest audited financial statements of the Group
have been based;

 

(ii)                                  if a Subsidiary of the Company becomes a
member of the Group after the date on which the latest audited financial
statements of the Group have been prepared, the net assets or EBITDA of that
Subsidiary will be determined from its latest financial statements;

 

(iii)                               the total net assets or EBITDA of the Group
will be determined from its latest audited financial statements, adjusted
(where appropriate) to reflect the net assets or EBITDA of any company or
business subsequently acquired or disposed of; and

 

 

(iv)                              if a Material Subsidiary disposes of all or
substantially all of its assets to another Subsidiary of the Company, it will
immediately cease to be a Material Subsidiary and the other Subsidiary (if it
is not already) will immediately become a Material Subsidiary; the subsequent
financial statements of those Subsidiaries and the Group will be used to
determine whether those Subsidiaries are Material Subsidiaries or not.

 

If there is a dispute as to
whether or not a company is a Material Subsidiary under paragraph (b) of this
definition, a certificate of the auditors of the Company will be, in the
absence of manifest error, conclusive.

 

For the purposes of the
above, each reference to EBITDA is to EBITDA as defined in Clause 10.1
(Financial covenant definitions).

 

Member
means, at any time, a member of the Co-ordinating Committee.

 

Multiemployer Plan means a multiemployer plan, as defined in Section 400(a)(3) of ERISA,
to which the Company or any ERISA Affiliate is making or accruing (or is
required to make or accrue) an obligation to make contributions, or has within
any of the preceding five plan years made or accrued (or was required to make
or accrue) an obligation to make contributions.

 

Obligor means: (i) the Company, an Original Obligor or an Additional Obligor
(in each case party to this Agreement); (ii) a Borrowing Group Member (whether
or not party to this Agreement) and (iii) for the purposes of Clause 11
(Default) only, any other member of the Group which is party to any Finance
Document.

 

Original Business Plan means the Business Plan provided on 30th
November, 2003 as validated by Ernst & Young.

 

Original Financial Statements means the consolidated financial statements
of the Company for the half-year ended 30th June, 2003 subject to a limited
review by the Company’s statutory auditors.

 

Overdraft Facilities means any overdraft facility provided by a creditor to any member of
the Group including any other facility which in the normal course of usage
operates on a fluctuating basis, together with any facility under which any
Finance Party guarantees such facility.

 

Participating Member States means a member state of the European
Communities that adopts or has adopted the Euro as its lawful currency under
the legislation of the European Union for European Monetary Union.

 

Party
means a party to this Agreement.

 

PBGC
means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
or any successor thereto.

 

Permitted Reorganisation means an amalgamation, demerger, merger or
reconstruction involving the Company:

 

(a)                                  full details of which are provided by the
Company to the Intercreditor Agent in a timely manner prior to its taking
place; and

 

(b)                                 where the surviving entity (whether or not it
is the Company) has a long-term corporate credit rating from Standard &
Poor’s of BBB- or higher or an equivalent rating from Moody’s; and

 

(c)                                  in relation to which the Intercreditor Agent
has first received legal opinions from external counsel addressed to the
Finance Parties, in form and substance satisfactory to the Intercreditor Agent,
confirming:

 

(i)                                     either that the Company shall be the
surviving entity and that notwithstanding such amalgamation, demerger or
reconstruction, the Transaction Documents shall remain at all times the legal,
valid and binding obligations of the Company, enforceable in accordance with
their terms; or

 

(ii)                                  that upon such amalgamation, demerger or
reconstruction the surviving entity (not being the Company) will accede to the
obligations of the Company under the Transaction Documents in full and that the
Transaction Documents shall be the legal, valid and binding obligations of the
surviving entity, enforceable in accordance with their terms; and

 

(d)                                 where the place of incorporation and
registered head office of the surviving entity is within the European Union,

 

and to which the
Intercreditor Agent (acting on the instructions of the Requisite Lenders) has
given its prior written consent.

 

 

Plan
means a Single Employer Plan or a Multiemployer Plan.

 

Prepayment Event means any of:

 

(a)                                  the entry by the Company into any
amalgamation, demerger, merger or reconstruction which is not a Permitted
Reorganisation (including, without limitation, an amalgamation, demerger,
merger or reconstruction resulting from or constituted by the Company making a
disposal or disposals of assets, or a Material Subsidiary making a disposal or
disposals of assets to the Company, in each case under Clause 9.9 (Disposals)
but excluding, for the avoidance of doubt, assets disposed of under Clause
9.9(b)(iv)); or

 

(b)                                 any person, or group of persons acting in
concert, acquiring more than 50% of the issued and fully paid up share capital
or voting rights in the Company; or

 

(c)                                  the direct or indirect sale, transfer,
conveyance or other disposition (other than by way of merger or consolidation
permitted by and made in accordance with the provisions of this Agreement) in
one or a series of related transactions, of all or substantially all of the
properties or assets or business of the Company and its Subsidiaries taken as a
whole; or

 

(d)                                 the adoption of a plan relating to the
liquidation or dissolution of the Company.

 

Refinanced Facilities means each of the Existing Facilities to be
refinanced under the Refinancing Facilities Agreement referred to in Schedule 3
as “Refinanced Facilities”.

 

Refinancing Facilities Agreement means the refinancing facilities agreement
to be entered into between, amongst others, the Company, each Borrowing Group
Member which is a borrower under the Refinanced Facilities and the Original
Lenders which are lenders under the Refinanced Facilities on terms set out in
the Refinancing Facilities Term Sheet in a form agreed between the parties
thereto.

 

Refinancing Facilities Term Sheet means the term sheet attached to the
refinancing facilities term sheet letter from the Lenders party thereto to the
Company dated on or around the date of this Agreement in respect of the
Refinancing Facilities Agreement, delivered to the Intercreditor Agent as a
condition precedent document under Schedule 2 for identification purposes only.

 

Relevant Entity means an unconsolidated subsidiary of the Company or joint venture
entity, in each case:

 

(a)                                  in which the Company owns or effectively
controls, directly or indirectly, at least twenty per cent. (20%) of the
capital and voting rights; and

 

(b)                                 in relation to the Financial Indebtedness of
which, a Borrowing Group Member has given a guarantee, indemnity or similar
assurance against financial loss.

 

Relevant Proportion in relation to an Affected Facility means the proportion which the
aggregate of the Exposures of the Lenders with respect to that Affected
Facility bears to the aggregate of the Exposures of all the Lenders in relation
to the Affected Facilities (and for these purposes, the Exposures are taken at
their Euro amount on any date on which a Relevant Proportion is ascertained).

 

Requisite Lenders means, at any date on which a determination is to be made, the Lenders
whose Exposures aggregate at least 50% of the aggregate Exposures of all
Lenders where the Exposures (converted into Euro at the Spot Rate of Exchange)
are calculated by reference to the amount and Spot Rate of Exchange as at the
last day of the month ending immediately prior to the date on which a
determination is to be made.

 

Rights Issue means any equity rights issue by the Company generating net cash
proceeds of no less than €300,000,000 to be launched by the Company by no later
than 15th May, 2004 where net cash proceeds means cash proceeds net of any
Taxes and third party costs and expenses attributable to the issue as set out
in reasonable detail in a certificate provided to the Intercreditor Agent by
the chief financial officer of the Company.

 

Secured Intercreditor Period means the period from the Commencement Date
up to and including the earlier of:

 

(a)                                  the Term Date; and

 

(b)                                 the date of notification of a Declared
Default by the Intercreditor Agent.

 

 

Secured Intra Group Loan means a loan made by a member of the Group
which is or, in accordance with the Security Principles is intended to be,
subject to a Security Document.

 

Securitisation Programmes means each of the securitisation programmes
referred to under the heading “Securitisation Programmes” in Schedule 3
existing at the date of this Agreement.

 

Security Agent means the security agent appointed pursuant to the Security Sharing
Agreement.

 

Security Document means any document entered into by a member of the Group with the Security
Agent in an agreed form evidencing or creating a Security Interest over any of
its assets in accordance with the Agreed Security Principles.

 

Security Interest means any:

 

(a)                                  hypothèque, nantissement,
privilège, cession de créance à titre de garantie par bordereau
Dailly, “gage-espèces” or any sûreté
réelle or droit de rétention;

 

(b)                                 mortgage, pledge, lien, charge, assignment by
way of security or for the purpose of providing security, hypothecation, right
in security, security interest or (to the extent applicable) trust arrangement
for the purpose of providing security; and

 

(c)                                  other security agreement or other arrangement
having the effect of providing security (including, without limitation, cash
collateral and the deposit of moneys or property with a person with the primary
intention of affording such person a right of set-off).

 

Security Sharing Agreement means the security sharing agreement to be
entered into between, among others, the Company and the Finance Parties in an
agreed form in accordance with the Agreed Security Principles.

 

Single Employer Plan means a single employer plan, as defined in Section 400(a)(15) of
ERISA, that is subject to Title IV of ERISA and that (a) is maintained for the
employees of the Company or any ERISA Affiliate or which is subject to the
minimum funding requirements of Section 302 of ERISA or Section 412 of the Code
or (b) was so maintained and in respect of which the Company or any ERISA
Affiliate could reasonably be expected to have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.

 

Spot Rate of Exchange means the Intercreditor Agent’s spot rate of
exchange for the purchase of the relevant currency with another currency at or
about 11.00 a.m. on a particular day.

 

Subordination Agreement means the subordination agreement to be
entered into between, among others, certain Obligors, the Senior Agent (as
defined therein) and the Senior Creditors (as defined therein) in an agreed
form.

 

Subsidiary means an entity from time to time of which a person has direct or
indirect control or owns directly or indirectly more than fifty per cent (50%)
of the share capital or similar right of ownership.

 

Target Day means a day on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer payment system is open for the settlement of
payments in Euro.

 

Tax
means any tax, levy, impost, duty or other charge or withholding of a similar
nature (including any related penalty or interest).

 

Tax Deduction means a deduction or withholding for or on account of Tax from a
payment under a Finance Document.

 

Term Date means the earlier of:

 

(a)                                  15th May, 2004; and

 

(b)                                 the date on which the Refinanced Facilities
are unconditionally refinanced in full,

 

Provided that:

 

(A)                              where the Rights Issue is launched prior to
15th May, 2004 but where the net proceeds are not received on or prior to 15th
May, 2004, (1) if the Rights Issue has been fully underwritten or subscribed on
or prior to 15th May, 2004 on 

 

 

customary market terms, the
Term Date in paragraph (a) above will be extended to the expected date of
receipt of such net proceeds; or (2) if the Rights Issue has not been fully
underwritten or subscribed on or prior to 15th May, 2004, the Intercreditor
Agent (at the request of the Company or any Finance Party, but acting on the
instructions of the Majority Lenders) may agree to extend the Term Date in
paragraph (a) above to the expected date of receipt of such net proceeds; and

 

(B)                                in any event the Term Date may not be
extended to a date falling after 30th June, 2004.

 

Testing Date has the meaning given to it in Clause 10.1 (Financial covenant
definitions).

 

Transaction Document means:

 

(a)                                  a Finance Document;

 

(b)                                 any underwriting or subscription agreements
(or other contractual arrangements having a similar effect) entered into in
relation to the Rights Issue;

 

(c)                                  any sale and purchase agreements (or other
contractual arrangements having a similar effect) entered into in relation to
the Asset Disposal Programme;

 

(d)                                 each Facility Agreement; or

 

(e)                                  any other document designated as such in
writing by the Company and the Intercreditor Agent.

 

Unaffected Committed Facilities means the Unaffected Credit Facilities
listed under the heading “Committed Bank lines” in Schedule 3 (as refinanced
from time to time after the date of this Agreement).

 

Unaffected Credit Facility means any debt or commercial paper Facility
which is not an Affected Facility with banks or other institutions for
revolving loans, term loans, overdraft facilities, letters of credit and
guarantee facilities and excluding, for the avoidance of doubt, the USPP, the
High Yield Bonds, EMTN and any other bonds, notes or similar instruments.

 

USPP
means the USD 215,000,000 note purchase agreement and USD 75,000,000 note purchase
agreement each dated 30th July, 2002, as amended.

 

Withdrawal Liability has the meaning specified in Part I of Subtitle E of Title IV of
ERISA.

 

1.2                               Construction

 

(a)                                  In this Agreement, unless the contrary
intention appears, a reference to:

 

(i)                                     acting in concert has the meaning given to it in Article
L.233-10 of the French Code de Commerce;

 

(ii)                                  documents being in an agreed form means documents (A) in a form
previously agreed in writing by or on behalf of the Intercreditor Agent and the
Company, or (B) in a form substantially as set out in any Schedule to any
Finance Document, or (C) (if not falling within (A) or (B) above) in form and
substance satisfactory to the Intercreditor Agent (acting on the instructions
of the Lenders);

 

an amendment includes a supplement, novation,
restatement or re-enactment and amended
will be construed accordingly;

 

assets
includes present and future properties, revenues and rights of every
description;

 

an authorisation includes an authorisation,
consent, approval, resolution, license, exemption, filing, registration or
notarisation;

 

control means the power to direct the management and policies of an entity,
whether through the ownership of voting capital, by contract or otherwise;

 

disposal means a sale, transfer, grant, lease or other disposal, whether
voluntary or involuntary, including, without limitation, a capital contribution
and “dispose” will be treated accordingly;

 

 

indebtedness includes any obligation (whether as principal or as surety) for the
payment or repayment of money;

 

a person includes any individual, company, corporation,
unincorporated association or body (including a partnership, trust, joint
venture or consortium), government, state, agency, organisation or other entity
whether or not having separate legal personality;

 

a regulation includes any regulation, rule, official directive,
request or guideline (whether or not having the force of law but if not having
the force of law, being of a type with which any person to which it applies is
accustomed to comply) of any governmental, intra-governmental or supranational
body, agency, department or regulatory, self-regulatory or other authority or
organisation;

 

the equivalent in other currencies or like
terms, unless otherwise agreed or the context otherwise requires, means in
relation to any amount expressed to be denominated in a currency other than
Euro, the equivalent thereof in Euro converted at the Spot Rate of Exchange for
the notional purchase of Euro with the currency concerned in the Paris foreign
exchange market at or about 11.00 a.m. on the day on which any such calculation
falls to be made;

 

(iii)                               a currency is a reference to the lawful
currency for the time being of the relevant country;

 

(iv)                              a Default being outstanding means that it has not been remedied or waived;

 

(v)                                 a provision of law is a reference to that
provision as extended, applied, amended or re-enacted and includes any
subordinate legislation;

 

(vi)                              a Clause, a Subclause or a Schedule is a
reference to a clause or subclause of, or a schedule to, this Agreement;

 

(vii)                           a person includes its successors, permitted
assigns and permitted transferees;

 

(viii)                        a Finance Document, Transaction Document or
another document is a reference to that Finance Document, Transaction Document
or other document as amended or supplemented including without limitation by
this Agreement;

 

(ix)                                a time of day is a reference to Paris time;

 

(x)                                   for the purposes of Clause 4.2(a), pro rata basis means the amount by which
any Existing Facility is repaid, prepaid, redeemed, repurchased, purchased,
defeased or otherwise reduced below its Exposure at the Calculation Point
expressed as a percentage of such Existing Facility; and

 

(xi)                                for the purposes of Clause 8.25 (United
States laws) and Clause 9.29 (United States laws) Federal Power Act means the United States Federal Power Act of
1920, as amended, holding company, affiliate
and subsidiary company have the
meanings given to them in the PUHCA, investment
company and controlled
have the meanings given to them in the United States Investment Company Act of
1940, as amended, public utility
has the meaning given to it in the Federal Power Act and PUHCA means The Limited States Public
Utility Holding Company Act of 1935, as amended.

 

(b)                                 Unless the contrary intention appears, a
reference to a “month” or “months” is a reference to a period starting on one
day in a calendar month and ending on the numerically corresponding day in the
next calendar month or the calendar month in which it is to end, except that:

 

(i)                                     if the numerically corresponding day is not a
Business Day, the period will end on the next Business Day in that month (if
there is one) or the preceding Business Day (if there is not);

 

(ii)                                  if there is no numerically corresponding day
in that month, that period will end on the last Business Day in that month; and

 

(iii)                               notwithstanding sub-paragraph (i) above, a
period which commences on the last Business Day of a month will end on the last
Business Day in the next month or the calendar month in which it is to end, as
appropriate.

 

(c)                                  Unless the contrary intention appears:

 

(i)                                     reference to a Party will not include that
party if it has ceased to be a Party under this Agreement;

 

 

(ii)                                  an amount in Euro is payable only in the Euro
unit;

 

(iii)                               a term used in any other Finance Document or
in any notice given in connection with any Finance Document has the same
meaning in that Finance Document or notice as in this Agreement;

 

(iv)                              if there is an inconsistency between this
Agreement and any other Finance Document, this Agreement will prevail;

 

(v)                                 any obligation of an Obligor under the
Finance Documents which is not a payment obligation remains in force for so
long as any payment obligation is or may be outstanding under the Finance
Documents; and

 

(vi)                              the headings in this Agreement do not affect
its interpretation.

 

1.3                               Third Party Rights

 

(a)                                  Unless expressly provided to the contrary in
a Finance Document, a person who is not a party to a Finance Document may not
enforce any of its terms under the Contracts (Rights of Third Parties) Act
1999.

 

(b)                                 Notwithstanding any term of any Finance
Document, the consent of any third party is not required for any variation
(including any release or compromise of any liability under) or termination of
that Finance Document.

 

1.4                               Security Sharing Agreement
and Subordination Agreement

 

This Agreement is to be
entered into with the benefit of and subject to the Security Sharing Agreement
and the Subordination Agreement.

 

2.                                      CONDITIONS PRECEDENT

 

(a)                                  The obligations and acknowledgements of each
Finance Party to any other Party under this Agreement are subject to the
condition precedent that the Intercreditor Agent has notified each Party that
it has received the documents and other matters set out in Part 1 of Schedule 2
in form and substance satisfactory to the Intercreditor Agent or (as required)
the Lenders. Each Lender undertakes to confirm to the Intercreditor Agent in
writing that it is satisfied with the relevant documents referred to in Part 1
of Schedule 2, promptly upon receipt of the same in a form and substance
satisfactory to it.

 

(b)                                 Unless otherwise expressly stated, the
obligations and undertakings of the Obligors (but not the Lenders) under this
Agreement shall take effect on the date of this Agreement and continue in full
force and effect until (i) the Term Date; or (ii) if a Default is outstanding
on the Term Date until no Default is outstanding.

 

3.                                      SECURED INTERCREDITOR PERIOD

 

3.1                               Duration

 

The undertakings in this
Clause remain in force during the Secured Intercreditor Period.

 

3.2                               No Enforcement Action

 

Subject to Clause 3.1
(Duration) no Finance Party shall take any Enforcement Action in respect of any
default, event of default or termination event (howsoever described) under the
Affected Facilities except in respect of a Default or an Event of Default under
and in accordance with this Agreement as permitted under Clause 11.20
(Enforcement Action) and otherwise in accordance with the Security Sharing
Agreement (when entered into).

 

3.3                               No additional Security Interest

 

(a)                                  Subject to Clause 3.1 (Duration) no Finance
Party shall take any cash collateral, cash cover, guarantee, indemnity or
Security Interest in respect of any Affected Facility.

 

(b)                                 Paragraph (a) does not apply to:

 

(i)                                     an Existing Security Interest;

 

(ii)                                  any Security Interest permitted under Clause
9.7(b)(iv) or (v);

 

 

(iii)                               the Security Documents;

 

(iv)                              any guarantee existing on the date of this
Agreement and the guarantee given by the Guarantor under this Agreement; and

 

(v)                                 subject always to the provisions of the
Security Sharing Agreement, the provision of Lessor Reduction and/or Derivative
Deposit.

 

3.4                               Novation

 

Subject to Clause 3.1
(Duration), no Finance Party shall assign, transfer or novate all or any part
of its rights or obligations under any Affected Facility unless it has procured
that the assignee, transferee or person to whom its rights and/or obligations
are novated, is a Lender under this Agreement or, on that assignment, transfer
or novation, becomes a Lender, in each case, under and in accordance with the
provisions of this Agreement.

 

4.                                      AFFECTED FACILITIES

 

4.1                               Duration

 

Each Obligor agrees to be
bound by and the Company shall ensure that each of its Subsidiaries and each
Borrowing Group Member performs and complies with, the undertakings set out in
this Clause. The undertakings in this Clause shall, subject to the provisions
of Clause 2(b) (Conditions precedent) and 7.2(b)(iii) remain in force until the
Term Date. Subject to Clause 15 (Amendments and waivers) the consent of all
Finance Parties is required for any amendment or waiver of the undertakings in
this Clause. Subject to Clause 15 (Amendments and waivers) any amendment or
waiver not agreed by a Finance Party in respect of the undertakings in this
Clause shall not be binding on that Finance Party.

 

4.2                               Pro rata repayments

 

(a)                                  If the Exposure owed to any person by the
Company, a Borrowing Group Member or other member of the Group under a Facility
(other than an Excluded Facility) is repaid or prepaid (whether or not a voluntary
or mandatory prepayment), redeemed, repurchased, purchased, defeased (whether
by way of legal or covenant defeasance) or otherwise reduced below the Exposure
of that person as at the Calculation Point, the Company and each Borrowing
Group Member shall and the Company will procure that each Borrowing Group
Member will ensure that the Exposure of each Lender under the Affected
Facilities to which that Borrowing Group Member is a party will be repaid,
prepaid (whether or not a voluntary or mandatory prepayment), redeemed,
repurchased, purchased (whether by way of legal or covenant defeasance) or
otherwise reduced simultaneously by that Borrowing Group Member on a pro rata basis.

 

(b)                                 Paragraph (a) does not apply to any reduction
in the Exposures of any person which arises solely as a result of:

 

(i)                                     any fluctuation in Exposures under any
Overdraft Facility;

 

(ii)                                  subject to and in accordance with Clause
4.3(c), any fluctuation in Exposures under any foreign exchange Facilities or
Derivative Instrument including the unwinding or replacement of any Derivative
Instrument or master agreement relating thereto prior to its original scheduled
expiry date provided that, except in the case of a replacement or unwinding
permitted under Clause 4.3(c)(iv), at the time of unwinding or replacement and
after the operation of any netting provision contained in that Derivative
Instrument or master agreement relating to that Derivative Instrument, the net
Exposure is “in the money” for the relevant member of the Group;

 

(iii)                               any fluctuation in exchange rates between the
Calculation Point and the Commencement Date;

 

(iv)                              any reimbursement of an amount paid by a
creditor in respect of its Exposure set out against its name in Schedule 3 for
guarantees or letter of credits;

 

(v)                                 for the avoidance of doubt, the making of any
Derivative Deposit or Lessor Reduction;

 

(vi)                              subject to and in accordance with Clause 3.4
(Novation), any person transferring, novating or assigning its Exposures to any
person under any Facility Agreement;

 

(vii)                           operation of law;

 

 

(viii)                        any application of Excess Proceeds as defined
in and subject to and in accordance with clause 4.10 of the High Yield Bonds
and this Agreement;

 

(ix)                                subject to and in accordance with Clause
4.3(d), any letter of credit, confirmation or guarantee expiring at its
original maturity to the extent not required to be extended, replaced or
renewed by the relevant Borrowing Group Member;

 

(x)                                   subject to and in accordance with Clause
4.4(a), original scheduled payments of rent under leasing Facilities;

 

(xi)                                subject to and in accordance with Clause
4.4(b), any fluctuations in Exposures under the Securitisation Programmes;

 

(xii)                             prepayments under Lease Under Construction
Facilities in a maximum aggregate amount equal to €15,000,000 (or its
equivalent in other currencies);

 

(xiii)                          a mandatory prepayment required to be made
under a Lease Facility with the sale proceeds from a disposal of an asset
leased under that Lease Facility or a payment required to be made under a Lease
Facility following the exercise of a purchase option by the lessee thereunder
in respect of assets sold or contracted to be sold to a person outside the
Group;

 

(xiv)                         the transfer of Affected Facilities from
Rhodia Ying Long to Rhodia China Co. Limited; or

 

(xv)                            the transfer of the loan drawn under the
Primester Facility from Primester to the Company and to the extent Primester
has previously acceded to this Agreement as an Additional Obligor from the
Company to Primester.

 

(c)                                  Paragraph (a) does not apply to any reduction
in the Exposures of any person under any Facility which is made with the prior
written consent of the Requisite Lenders.

 

(d)                                 Paragraph (a) does not apply to any Facility
made to a Borrowing Group Member from the date on which the disposal of that
Borrowing Group Member occurs and that Borrowing Group Member shall no longer
be a Borrowing Group Member for the purposes of this Agreement from that date.

 

4.3                               Maintenance of Affected
Facilities

 

Subject to the provisions of
this Agreement, the Affected Facilities will be maintained at the level (and in
the currency) of Exposures as at the Calculation Point and otherwise on the
following basis:

 

	
   

  	
  (a)

  	
  (i)

  	
  each Affected Facility
  will, on maturity or roll-over dates, be renewed or rolled over in accordance
  with the terms of the relevant Affected Facility;

  

 

(ii)                                  any drawstop (howsoever described) under each
Affected Facility other than in respect of (A) an Event of Default referred to
in Clause 11.20(a) or (B) any Declared Default shall be suspended and have no
effect for such purpose;

 

(iii)                               in the case of a renewal of a maturity or a
roll-over under an Affected Facility, the new maturity or roll-over date shall
be renewed or rolled-over in accordance with Clause 4.6 (Renewals and
Roll-Overs); and

 

(iv)                              on any renewal or roll-over there will be no
change in the level or currency of Exposures under the relevant Affected
Facility as at the Calculation Point.

 

(b)                                 Undrawn or unutilised portions of any
Affected Facility in excess of the maximum Exposure as at the Calculation Point
in respect of any Affected Facility as set out in Schedule 3, whether,
committed or uncommitted, shall be permanently cancelled on the date of this
Agreement (save where necessary to maintain the level of principal Exposure
under the relevant Facility) and no fees or costs shall be payable on such
amounts with effect therefrom.

 

	
   

  	
  (c)

  	
  (i)

  	
  Existing foreign exchange
  facilities and Derivative Instruments will continue to be made available up
  to the maximum net Exposure of the Lender concerned as at the Calculation
  Point;

  

 

(ii)                                  Derivative Instruments that expire may be
extended or replaced by the same Obligor up to the maximum Exposure of the
applicable Lender as at the Calculation Point;

 

 

(iii)                               payments on original scheduled due dates
under any foreign exchange facilities and Derivative Instruments will continue
to be made (including by way of netting if so provided in the relevant instrument)
in accordance with their terms; and

 

(iv)                              the Company will provide Derivative Deposit
in favour of the relevant Lender where required by that Lender and the amounts
of such collateral will be adjusted (upwards or downwards by the payment or
release of such collateral as the case may be) at the latest on the first
Business Day of each calendar month (commencing with January, 2004) PROVIDED
THAT where the aggregate amount of Derivative Deposit provided pursuant to this
Clause would (but for the limitations under this Agreement) otherwise have
exceeded €40,000,000 (or its equivalent in other currencies) then the Company:

 

(A)                              may substitute; or

 

(B)                                if required by that Lender shall unwind with
a corresponding payment as the case may be,

 

that or another Derivative
Instrument (at the cost and expense of the Company) so that the aggregate
amount of Derivative Deposit which the Company is to provide is equal to or
less than €40,000,000 (or its equivalent in other currencies).

 

Prior to any substitution or
unwinding of a Derivative Instrument, the cost and expense thereof and in the
case of an unwinding the corresponding payment shall be agreed between the
relevant Lender and the Company. In the absence of such agreement such amount
shall be determined by an independent third party expert appointed by the
Company and relevant Lender (at the cost of the Company) to act as an expert
and not as an arbitrator for such purpose.

 

	
   

  	
  (d)

  	
  (i)

  	
  Existing documentary
  letter of credit facilities, confirmation facilities, bond facilities and
  guarantee facilities will continue to be made available (in the same
  currency) up to the maximum Exposure of the applicable Lender under such
  facilities (as applicable) as at the Calculation Point subject to and in
  accordance with paragraph (d)(ii) below;

  

 

(ii)                                  if any letter of credit, confirmation or
guarantee expires it shall (A) if required by the relevant Borrowing Group
Member at any time during the Secured Intercreditor Period or (B) in the case
of an “extend or pay” letter of credit, confirmation or guarantee if the Lender
has the option to extend or pay, in each case, be extended (whether by way of
re-issue or replacement or otherwise) within the maximum Exposure of the
applicable Lender to a date no earlier than the Term Date;

 

(iii)                               any scheduled payment of interest, fees and
commission in respect of any letter of credit facilities, confirmation
facilities, bond facilities and guarantee facilities will continue to be made
in accordance with their terms; and

 

(iv)                              if any Lender makes a payment under any such
letter of credit facilities, confirmation facilities, bond facilities and
guarantee facilities in favour of the beneficiary, that Lender may in
accordance with the terms of that Affected Facility make a claim on the
relevant Borrowing Group Member for reimbursement of any sum paid or otherwise
treat any such sum paid by it as an advance of that amount to that member
bearing interest with a margin at the rate set out in Clause 4.5 (Interest,
fees and commission).

 

(e)                                  Affected Facilities that are Overdraft
Facilities will be made available and continue to be operated in accordance
with the net and gross limits (and in the currency) as at the Calculation Point
up to the maximum utilised amount under such Overdraft Facilities at the Calculation
Point.

 

(f)                                    This Clause 4.3 does not apply to any
Affected Facility which is made to a Borrowing Group Member from the date on
which the disposal of that Borrowing Group Member occurs and that Borrowing
Group Member shall no longer be a Borrowing Group Member from that date.

 

4.4                               Continuation of other
Facilities

 

(a)                                  Original scheduled payments of rent
(including for the avoidance of doubt the capital/principal element of any rent
or payment under Lease Facilities referred to in Schedule 3) shall continue to
be made in accordance with their terms under the relevant Lease Facilities.

 

 

Any text removed pursuant to Rhodia S.A.'s
confidential treatment request has been separately submitted with the U.S.
Securities and Exchange Commission and is marked ["***"] herein.

 

(b)                                 The Company shall maintain the Securitisation
Programmes and related back-up lines in force at the date of this Agreement in
accordance with their terms.

 

4.5                               Interest, fees and
commission

 

(a)                                  Subject to paragraphs (b) and (c), interest,
fees, commissions and costs and expenses accrued under any Facility will be
paid promptly as they fall due in accordance with that Facility. Any payment
shall be made by the relevant Obligor free and clear and without deduction for
or on account of any taxes.

 

(b)                                 Any amount advanced to any Obligor under any
Existing Facility in accordance with Clause 4.3(d)(iv) will be repayable at the
end of the Secured Intercreditor Period.

 

(c)                                  The aggregate of the margin over the
applicable base rate, facility fee, guarantee fee or commission applicable to
each Affected Facility, as the case may be (excluding Derivative Instruments,
the Lease Facilities and the Securitisation Programmes), from the date of this
Agreement will be the greater of (i) such margin, facility fee, guarantee fee
or commission applicable to each Affected Facility on the date of this
Agreement; and (ii) [***] per cent. per annum on the relevant Exposure and
otherwise in accordance with its terms.

 

	
  [***]—THE FIGURE ON THIS
  PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL
  TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
  FIGURE.      

  

 

(d)                                 The Company will pay to each Lender directly
on the date of the signing of this Agreement a flat fee calculated and payable
in accordance with the Fee Letter.

 

(e)                                  The Company shall pay to the Intercreditor
Agent (for its own account) agency fees in the manner and amount agreed in the
Fee Letter.

 

(f)                                    From the Commencement Date, the interest
period for each Affected Facility:

 

(i)                                     shall be rolled over for periods of one month
in accordance with its terms;

 

(ii)                                  where a roll-over date falls within one month
of 26th March, 2004, the next interest period shall be shortened to fall on
that date and will be monthly thereafter; and

 

(iii)                               after 26th March, 2004, the payment dates for
interest, any facility fee, guarantee fee or commission applicable to each
Affected Facility during the Secured Intercreditor Period will be re-aligned so
that due dates for their payment will fall on the same roll-over date.

 

(g)                                 Where a letter of credit or guarantee or
equivalent facility continues beyond the Term Date without the benefit of a
counter-guarantee under the Refinancing Facilities Agreement or any other
guarantee or cash deposit, the guarantee fee or commission referred to in
paragraph (c) above shall continue beyond the Term Date.

 

4.6                               Renewals and Roll-Overs

 

(a)                                  The final maturity date of any Affected
Facility which occurs during the Secured Intercreditor Period shall be extended
to a date corresponding to the Term Date.

 

(b)                                 Any roll-over date which occurs under an
Affected Facility during the Secured Intercreditor Period shall be adjusted to
occur on the date referred to in Clause 4.5(f).

 

 

(c)                                  The final maturity date of each Refinanced
Facility shall be amended to occur on a date corresponding to the Term Date.

 

4.7                               Undertakings of the
Borrowing Group

 

Each Borrowing
Group Member shall and will procure that each of its Subsidiaries will ensure
that throughout the term of this Agreement and subject always to the Security
Sharing Agreement and the Subordination Agreement (when entered into):

 

(a)                                  subject to Clause 9.7(b) and Clause 9.16(d),
no Security Interest or guarantee indemnity or like commitment, in any such
case of whatever nature, shall be created or permitted to subsist by the
Company or any of its Subsidiaries in favour of any person under a Facility;

 

(b)                                 it shall not put or seek to put any creditor
under any Facility in a preferred position as against any Lender in particular,
but without limitation, any covenant or default provision more favourable to
the counterparty in respect of a Facility than those under this Agreement,
unless at the same time this Agreement is amended to substantially the same
extent and on substantially the same terms as provided to that counterparty;

 

(c)                                  no Borrowing Group Member shall make any
payment of or otherwise discharge any principal amount due or owing by it to
any other member of the Group or a Relevant Entity:

 

(i)                                     if in respect of a Secured Intra Group Loan
at any time; and

 

(ii)                                  if not in respect of a Secured Intra Group
Loan except:

 

(A)                              whilst no Default is outstanding if made in
accordance with the cash pooling arrangements existing at the date of this
Agreement or if made with respect to sales and purchases of goods, services or
trade receivables in its ordinary course of trading and which does not result
in a Default; and

 

(B)                                otherwise as permitted by and in accordance
with Clause 9.19 (Repayments of inter-group Financial Indebtedness),

 

unless otherwise agreed by
the Requisite Lenders; and

 

(d)                                 no amendment is made to, no interest amounts
payable are increased and no scheduled maturity or repayment dates are advanced
under any Facility on or after the date of this Agreement, in each case, except
as expressly set out herein.

 

4.8                               Restoration

 

If the Exposure of any
Lender reduces from its Exposure as at the Calculation Point other than in
accordance with this Agreement and the Security Sharing Agreement, the Lenders
will take such action as is necessary to ensure that the Exposure of that
Lender is restored as if reduced subject to and in accordance with this
Agreement and the Security Sharing Agreement.

 

4.9                               Acknowledgements by each
Party

 

(a)                                  Subject to Clauses 4.3(c) and 4.3(d) nothing
contained in this Agreement will oblige any Lender to make any further advance,
or extend any credit to, any member of the Group.

 

(b)                                 Except as amended or supplemented by this
Agreement, the Facility Agreements remain in full force and effect.

 

(c)                                  Each Finance Document and Facility Agreement
is subject to this Agreement. If there is any conflict between any other
Finance Document or Facility Agreement and this Agreement, this Agreement shall
prevail.

 

4.10                        Override

 

(a)                                  Clause 7 (Mandatory prepayment and
cancellation), Clause 8 (Representations and warranties), Clause 9
(Undertakings) and Clause 10 (Financial covenants) shall (i) take effect from
the date of this Agreement; and (ii) with effect from the Commencement Date and
throughout the Secured Intercreditor Period shall override any representations
and warranties or undertakings in the Affected Facility Agreements which relate
to the same or corresponding subject (but not otherwise).

 

 

(b)                                 The terms of each Affected Facility
(including, in each case without limitation, the Affected Facility Agreements)
are only overridden to the extent set out in paragraph (a) above and in all
other respects the terms of each Affected Facility shall except as amended or
supplemented by or in accordance with another provision of this Agreement
otherwise remain in full force and effect.

 

(c)                                  Nothing in this Agreement shall override,
amend or replace any provision of an Affected Facility relating to the purpose
for which the relevant Affected Facility may be used.

 

(d)                                 No Finance Document nor any act or omission
of any Finance Party during the Secured Intercreditor Period will constitute a
waiver by that Finance Party of any rights or remedies available to it under
any Transaction Document to which it is a party and those rights and remedies
are reserved by the Finance Parties.

 

4.11                        Amendments to Affected
Facilities

 

(a)                                  If this Agreement is not fully effective with
respect to any Affected Facility under its governing law or the place of
incorporation of the applicable Borrowing Group Member this Agreement shall
operate as a separate or collateral contract between each of the parties to the
Affected Facility and the parties thereto shall (at the cost and expense of the
Company) and the Company shall procure that the applicable Borrowing Group
Member does promptly take all such reasonable steps and actions as may be
necessary to give full effect to the terms of this Agreement under such
governing law or place of incorporation including, without limitation,
amendments to the terms of the corresponding Affected Facility Agreements under
and in accordance with its governing law or place of incorporation.

 

(b)                                 Each Lender authorises its Facility Agent (if
any) to make any amendment required to be made pursuant to paragraph (a) above
under the Affected Facility Agreement to which it is a party.

 

4.12                        Negotiation in good faith

 

If an event or circumstance
occurs before 15th May, 2004 which could have a material impact (whether
positive or negative) on the appropriateness of the Company’s refinancing plan
as contemplated by the Rights Issue, the Asset Disposal Programme and the
Refinancing Facilities Term Sheet, as determined by the Majority Lenders and
the Company, without prejudice to their rights under the Transaction Documents,
the Lenders and the Company will negotiate in good faith with a view to
agreeing appropriate amendments to that refinancing plan.

 

4.13                        Term Date Prepayment

 

Each Obligor shall and the
Company shall ensure that each Borrowing Group Member shall ensure that an
amount equal to 5 per cent. of the Exposure under each of the Affected
Facilities listed under the heading “Prepayable” in Schedule 3 (other than the
Refinanced Facilities) and calculated by reference to the amount set out under
the heading “Exposure” in Schedule 3 is prepaid and cancelled on the Term Date.

 

5.                                      PAYMENTS

 

5.1                               Place

 

Unless otherwise expressly
stated, all payments by an Obligor or a Lender under the Finance Documents
shall be made to the Intercreditor Agent at such office or bank in a principal
financial centre of the country of the relevant currency as it may notify to
that Obligor or Lender for this purpose. Each Obligor and each Facility Agent
shall provide satisfactory evidence to the Intercreditor Agent of each and all
payments made under a Facility Agreement. Unless otherwise expressly stated in
this Agreement, all other payments shall continue to be made as provided in
that Affected Facility (as amended pursuant to this Agreement).

 

5.2                               Funds

 

Payments to the
Intercreditor Agent shall be made for value on the due date at such times and
in such funds as the Intercreditor Agent may specify to the Party concerned as
being customary at the time for the settlement of transactions in the relevant
currency in the place for payment.

 

 

5.3                               Distribution

 

Where a sum is to be paid to
the Intercreditor Agent under the Finance Documents for another Party, the
Intercreditor Agent is not obliged to pay that sum to that Party until it has
established that it has actually received that sum. The Intercreditor Agent
may, however, assume that the sum has been paid to it in accordance with this
Agreement, and, in reliance on that assumption, make available to that Party a
corresponding amount. If the sum has not been made available but the
Intercreditor Agent has paid a corresponding amount to another Party, that
Party shall forthwith on demand by the Intercreditor Agent refund the
corresponding amount together with interest on that amount from the date of
payment to the date of receipt, calculated at a rate determined by the
Intercreditor Agent to reflect its cost of funds.

 

5.4                               Currency

 

(a)                                  A repayment or prepayment of any amount under
a Facility is payable in the currency in which the Facility is denominated on
its due date.

 

(b)                                 Interest is payable in the currency in which
the relevant amount in respect of which it is payable is denominated.

 

(c)                                  Amounts payable in respect of costs, expenses
and Taxes and the like are payable in the currency in which they are incurred.

 

(d)                                 Any other amount payable under the Finance
Documents is, except as otherwise provided in this Agreement, payable in Euro.

 

5.5                               Set-off and counterclaim

 

All payments made by an
Obligor under the Finance Documents shall be made without set-off or
counterclaim.

 

5.6                               Taxes

 

(a)                                  Each Obligor must make all payments to be
made by it under the Finance Documents without any Tax Deduction, unless a Tax
Deduction is required by law.

 

(b)                                 If a Tax Deduction is required by law to be
made on a payment by an Obligor or any Finance Party to a Finance Party under
the Finance Documents, the amount of the payment due from the Obligor will be
increased to an amount which (after making the Tax Deduction) leaves an amount
equal to the payment which would have been due if no Tax Deduction had been
required.

 

(c)                                  Any amount (including fees, costs and
expenses) payable under a Finance Document by an Obligor is exclusive of any
Tax (including value added tax) which might be chargeable in connection with
that amount. If any such tax is chargeable, the Obligor must pay to the Finance
Party (in addition to and at the same time as paying that amount) an amount
equal to the amount of that Tax.

 

5.7                               Non-Business Days

 

If a payment under the
Finance Documents is due on a day which is not a Business Day, the due date for
that payment shall instead be the next Business Day in the same calendar month
(if there is one) or the preceding Business Day (if there is not).

 

5.8                               Taux effectif global

 

In respect of a Borrowing
Group Member which is incorporated in France, for the purpose of Articles
L.313-1, L.313-2, R 313-1 and R 313-2 of the Consumer Code (Code de la Consommation), each Party
acknowledges that:

 

(a)                                  by virtue of certain characteristics of the
Facilities (including, without limitation, the variable interest rate and that
member’s right to select the duration of an interest period), the
re-calculation taux effectif global
in respect of a Facility for that member as a result of the adjustments
referred to in Clause 4.5 (Interest, fees and commission), above cannot be calculated
on the date of this Agreement, but that, an indicative calculation of the taux effectif global, based on assumptions
as to the period rate (taux de période)
and the period (durée de période), will be set out in a letter from the
Lender or its agent (as the case may be) to the relevant Borrowing Group
Member; and

 

(b)                                 that letter shall form part of the Facility
to which it applies.

 

 

6.                                      NEW
GUARANTEE

 

6.1                               Guarantee

 

(a)                                  Subject to paragraph (b) below, the Guarantor
irrevocably and unconditionally:

 

(i)                                     guarantees to each Finance Party under the
Affected Facility Agreements to which such Finance Party is party, punctual
performance by each Borrowing Group Member which is party thereto of all its
payment obligations thereunder as amended or supplemented by this Agreement
(including without limitation pursuant to Clause 4.5 (whether or not such
amendment or supplement is effective));

 

(ii)                                  undertakes with that Finance Party that,
whenever that Borrowing Group Member does not pay any amount when due under or
in connection with that Affected Facility Agreement, it must immediately on
demand by the Intercreditor Agent pay that amount as if it were the principal
obligor; and

 

(iii)                               indemnifies that Finance Party immediately on demand against any cost,
loss or liability suffered by that Finance Party if any obligation guaranteed
by it is or becomes unenforceable, invalid or illegal or any amendment or
supplement of a payment obligation under an Affected Facility made or intended
to be made pursuant to this Agreement including without limitation Clause 4.5,
is not effective for any reason; the amount of the cost, loss or liability
under this indemnity will be equal to the amount that Finance Party would
otherwise have been entitled to recover.

 

(b)                                 The guarantee given by the Guarantor under
this Clause 6 is supplemental to and does not substitute or replace any other
guarantee existing at the date of this Agreement.

 

6.2                               Continuing guarantee

 

This guarantee is a
continuing guarantee and will extend to the ultimate balance of all sums
payable by each Borrowing Group Member under the Affected Facility Agreements
to which it is party, regardless of any intermediate payment or discharge in
whole or in part.

 

6.3                               Reinstatement

 

(a)                                  If:

 

(i)                                     any discharge (whether in respect of the
obligations of any Borrowing Group Member or any security for those obligations
or otherwise) is made in whole or in part; or

 

(ii)                                  any arrangement is made on the faith of any
payment, security or other disposition which is avoided or must be restored on
insolvency, liquidation or otherwise without limitation,

 

the liability of the Guarantor will continue as if the discharge or
arrangement had not occurred.

 

(b)                                 Each Finance Party may concede or compromise
any claim that any payment, security or other disposition is liable to
avoidance or restoration.

 

6.4                               Waiver of defences

 

The obligations of the
Guarantor under this Clause 6 will not be affected by any act, omission or
thing which, but for this provision, would reduce, release or prejudice any of
its obligations under this Clause 6 (whether or not known to it or any Finance
Party). This includes:

 

(a)                                  any time or waiver granted to, or composition
with, any Obligor or other person;

 

(b)                                 any release of an Obligor or other person
under the terms of any composition or arrangement;

 

(c)                                  the taking, variation, compromise, exchange,
renewal or release of, or refusal or neglect to perfect, take up or enforce,
any rights against, or security over assets of, any Obligor or other person;

 

(d)                                 any non-presentation or non-observance of any
formality or other requirement in respect of any instrument or any failure to
realise the full value of any security;

 

(e)                                  any incapacity or lack of power, authority or
legal personality of or dissolution or change in the members or status of an
Obligor or any other person;

 

(f)                                    any amendment (however fundamental) of a
Transaction Document or any other document or security;

 

(g)                                 any unenforceability, illegality or
invalidity of any obligation of any person under any Transaction Document or
any other document or security; or

 

 

(h)                                 any insolvency or similar proceedings.

 

6.5                               Immediate recourse

 

The Guarantor waives any
right it may have of first requiring any Finance Party (or any trustee or agent
on its behalf) to proceed against or enforce any other right or security or
claim payment from any person before claiming from the Guarantor under this
Clause.

 

6.6                               Appropriations

 

Until all amounts which may
be or become payable by the Obligors under the Transaction Documents to the
Finance Parties have been irrevocably paid in full, each Finance Party (or any
trustee or agent on its behalf) may:

 

(a)                                  without affecting the liability of the
Guarantor under this Clause 6:

 

(i)                                     refrain from applying or enforcing any other
moneys, security or rights held or received by that Finance Party (or any
trustee or agent on its behalf) in respect of those amounts; or

 

(ii)                                  apply and enforce them in such manner and
order as it sees fit (whether against those amounts or otherwise); and

 

(b)                                 hold in an interest-bearing suspense account
any moneys received from the Guarantor or on account of the Guarantor’s
liability under this Clause 6.

 

6.7                               Non-competition

 

Unless:

 

(a)                                  all amounts which may be or become payable by
the Obligors under the Transaction Documents to the Finance Parties have been
irrevocably paid in full; or

 

(b)                                 the Intercreditor Agent otherwise directs,

 

the Guarantor will not, after a claim has been made or by virtue of any
payment or performance by it under this Clause 6:

 

(i)                                     be subrogated to any rights, security or
moneys held, received or receivable by any Finance Party (or any trustee or
agent on its behalf); or

 

(ii)                                  claim, rank, prove or vote as a creditor of
any Obligor or its estate in competition with any Finance Party (or any trustee
or agent on its behalf).

 

The Guarantor must hold in
trust for and immediately pay or transfer to the Intercreditor Agent for the
Finance Parties any payment or distribution or benefit of security received by
it (A) contrary to paragraphs (i) or (ii) above or (B) with respect to any
contribution or indemnity in respect of any payment made or moneys received on
account of the Guarantor’s liability under this Clause 6 or in respect of any
payment or distribution or security from or on account of any Borrowing Group
Member or any right of set-off as against any Borrowing Group Member, subject
to and in accordance with the Subordination Agreement and in accordance with
any directions given by the Intercreditor Agent.

 

6.8                               Termination

 

The provisions of this
Clause 6 shall continue in full force and effect and shall survive the
termination of this Agreement with respect to any Default which occurs on or
before the Term Date notwithstanding the expiry of the Secured Intercreditor
Period.

 

7.                                      MANDATORY PREPAYMENT AND CANCELLATION

 

7.1                               Prepayment Event

 

(a)                                  The Company will notify the Intercreditor
Agent promptly upon the occurrence of a Prepayment Event. Upon being notified
by the Company of a Prepayment Event, the Intercreditor Agent shall promptly
inform each Lender.

 

 

(b)                                 Upon and at any time after having received
notice of a Prepayment Event from the Intercreditor Agent, each Lender, acting
through the Intercreditor Agent, may serve a notice of mandatory prepayment and
cancellation on the Company in respect of its Facility and:

 

(i)                                     on the date of the notice the commitment of
such Lender under its Facility shall be cancelled; and

 

(ii)                                  on the date falling 30 Business Days after
the date of service of such notice the Company shall prepay all participations
of such Lender in the Facility made to it in full through the Intercreditor
Agent together with any other amounts then due in connection with such
participations.

 

(c)                                  The Company and each Lender party to any
Derivatives Instruments or letter of credit facilities, confirmation
facilities, bond facilities and guarantee facilities will negotiate in good
faith with a view to providing to any such Lender the economic benefit of the
provisions of this Clause 7 if such Lender serves a notice on the Company for
such purpose.

 

(d)                                 If the Company seeks the consent of the
Lenders to a proposed Permitted Reorganisation, no Lender will unreasonably
delay in informing the Intercreditor Agent whether it consents to such proposed
Permitted Reorganisation.

 

7.2                               Disposals, equity and
capital market issues

 

(a)                                  Where a disposal is made by any member of the
Group of any Asset including a disposal made pursuant to the Asset Disposal
Programme, for which aggregate proceeds since the date of this Agreement exceed
€700,000,000 (or its equivalent in another currency), the Company must,
promptly on completion of that disposal, apply an amount equal to 50 per cent.
of the net disposal proceeds from any disposal which when aggregated with other
such disposal proceeds exceeds €700,000,000 (or its equivalent in other
currencies) in prepayment and/or cancellation of the principal amount of the
Affected Facilities in accordance with Clause 7.3 (Application of proceeds)
below.

 

(b)                                 (i)                                     Where the aggregate proceeds of a rights
issue launched by the Company prior to the Term Date exceed €300,000,000 (or
its equivalent in another currency), the Company must promptly apply an amount
equal to 25 per cent. of the net issuance proceeds of any issue in excess
of€300,000,000 in prepayment and/or cancellation of the principal amount of the
Affected Facilities in accordance with Clause 7.3 (Application of proceeds)
below.

 

(ii)                                  This paragraph (b) shall not apply in
relation to shares issued:

 

(A)                              in connection with employee share option
schemes; or

 

(B)                                to another member of the Group;

 

(iii)                               The provisions of this Clause 7.2(b) shall
survive termination of this Agreement and shall apply in respect of the net
proceeds of any such rights issue launched prior to the Term Date but which are
received after such date.

 

(c)                                  The Company must promptly upon receipt of the
same by any member of the Group apply an amount equal to 50 per cent. of the
net issuance proceeds of any issue of bonds or notes (including convertible
bonds or other equity-linked debt instruments), debt securities or other
capital markets instruments of any kind (whether publicly listed or privately
placed) by any member of the Group in prepayment and/or cancellation of the
principal amount of the Affected Facilities in accordance with Clause 7.3
(Application of proceeds) below.

 

(d)                                 In paragraphs (a), (b) and (c) above:

 

net disposal proceeds means any amount received by a member of the
Group as consideration for a disposal to a person which is not a Borrowing
Group Member, including the amount of any intercompany loan repaid to
continuing members of the Group and including any Financial Indebtedness
assumed or repaid, less all Taxes payable in the financial year in which the
disposal is effected or proceeds received and reasonable costs and expenses
incurred by members of the Group in connection with the disposal or receipt as
set out in reasonable detail in a certificate provided by the chief financial
officer of the Company; and

 

net issuance proceeds means any amount received by any member of
the Group less all Taxes and reasonable costs and expenses incurred by members
of the Group in connection with that receipt.

 

 

7.3                               Application of proceeds

 

(a)                                  Where an amount (the Prepayment Amount) is to be applied in
prepayment and cancellation of the principal amount of the Affected Facilities
in accordance with Clauses 7.1 (Prepayment Event) and 7.2 (Disposals, equity
and capital market issues) above, the Company shall (subject to paragraphs (b)
and (c) below) prepay and/or cancel the principal amount of each such Affected
Facility in accordance with paragraph (d) below in an amount equal to that
Affected Facility’s Relevant Proportion of the Prepayment Amount on the day on
which the obligation under this Clause 7.3 to prepay and cancel arises.

 

(b)                                 Where the Prepayment Amount relates to net
disposal proceeds from the disposal of shares in a Borrowing Group Member (the Disposed Group Member), the Company must
ensure that the Borrowing Group Members apply that amount in prepayment and
cancellation pro rata according
to their respective Relevant Proportions of the Affected Facilities (other than
an Affected Facility made to that Disposed Group Member). For the purposes of
this Clause 7, any Facility made to a Disposed Group Member shall be deemed not
to be an Affected Facility on and following the date on which the disposal of
the Disposed Group Member occurs and the Disposed Group Member shall no longer
be a Borrowing Group Member from such date.

 

(c)                                  Where the Prepayment Amount relates to net
disposal proceeds from the disposal of an asset (other than shares in a
Borrowing Group Member), the Company must apply, and must ensure that the
Borrowing Group Members apply, an amount equal to such net disposal proceeds in
prepayment and cancellation pro rata
according to their respective Relevant Proportions of the Affected Facilities.

 

(d)                                 Any amount required by this Clause 7.3 to be
applied in prepayment and cancellation of an Affected Facility must be applied
by the Company to that Affected Facility (in accordance with its terms) first
in prepayment and cancellation of the principal amount outstanding under that
Affected Facility (if any) and second to any other amount in permanent
prepayment and cancellation thereof and thirdly in permanent cancellation of
undrawn amounts (if any) under that Affected Facility. Where the Company
prepays an amount outstanding under an Affected Facility pursuant to this
Clause it must at the same time permanently cancel the commitments of the
Lenders under that Affected Facility which correspond to the amount prepaid.

 

(e)                                  Any amount required by this Clause 7.3 to be
applied in prepayment and cancellation of the principal amount of an Affected
Facility and which is paid to or for the benefit of the relevant Lender shall,
for the purposes of this Agreement and irrespective of any other appropriation
of that amount by a Lender in connection with that Affected Facility, be taken
as having reduced that principal amount pro
tanto.

 

(f)                                    Where an amount is to be applied under this
Clause 7.3 in prepayment of any amount outstanding under the Affected
Facilities, unless the date on which the payment is to be made by the Company
is the last day of an interest period (as defined in the relevant Affected
Facility Agreement), that amount shall be paid through the Intercreditor Agent
into an interest bearing blocked and secured account in France in the name of
the Security Agent or the Intercreditor Agent. The Company irrevocably
authorises the Intercreditor Agent to apply any amount deposited with it under
this paragraph (f) towards prepayment of the Affected Facilities on the last
day of the relevant interest period (as defined in the relevant Affected
Facilities Agreement) or earlier at the discretion of the Intercreditor Agent.

 

(g)                                 For the purposes of this Clause 7.3, a
contingent claim of a Lender under an Affected Facility with respect to any
bond, letter of credit, guarantee or similar instrument is prepaid by the
Company providing cash cover in an interest bearing blocked and secured account
in the name of the Security Agent or the Intercreditor Agent in respect of that
claim to that Lender.

 

8.                                      REPRESENTATIONS AND WARRANTIES

 

8.1                               Representations and
warranties

 

Each Obligor makes the
representations and warranties set out in this Clause 8 in respect of itself
and each of its Subsidiaries to each Finance Party. In addition, the Company
makes the representations and warranties set out in this Clause 8 in respect of
itself and each Borrowing Group Member to each Finance Party.

 

8.2                               Status

 

(a)                                  It is a limited liability company, duly
incorporated and in good standing and validly existing under the laws of the
jurisdiction of its incorporation; and

 

(b)                                 it has the power to own its assets and carry
on its business as it is being conducted.

 

 

8.3                               Powers and authority

 

It has the power to enter
into and perform, and has or will have taken at the relevant time all necessary
action to authorise the entry into, performance and delivery of, the Transaction
Documents and the Refinancing Facilities Term Sheet to which it is or will be a
party and the transactions contemplated by those documents.

 

8.4                               Legal validity

 

Each Transaction Document
and the agreements relating to the Refinancing Facilities Term Sheet to which
it is or will be a party constitutes, or when executed in accordance with its
terms will constitute, its legally binding, valid and enforceable obligation.

 

8.5                               Non-conflict

 

The entry into and
performance by it of, and the transactions contemplated by, the Transaction
Documents and the Refinancing Facilities Term Sheet do not and will not
conflict with:

 

(a)                                  any law or regulation or judicial or official
order; or

 

(b)                                 its or any of its Subsidiaries’
constitutional documents; or

 

(c)                                  any document which is binding upon it or any
of its or its Subsidiaries’ assets.

 

8.6                               No Default

 

(a)                                  No Default is outstanding on the date of this
Agreement or the Commencement Date and thereafter no Event of Default is
outstanding.

 

(b)                                 No event or circumstance is outstanding which
constitutes (or, with the giving of notice, lapse of time, determination of
materiality or the fulfilment of any other applicable condition or any
combination of the foregoing, might constitute) a default, termination event or
early prepayment event under any document which is binding on it or any of its
Subsidiaries.

 

(c)                                  Paragraphs (a) and (b) do not apply to
Defaults or events or circumstances the full details of which have been
notified in writing to the Intercreditor Agent and the Lenders prior to the
date of this Agreement.

 

8.7                               Authorisations

 

All authorisations required
by it or desirable in connection with the entry into, performance, validity and
enforceability of, and the transactions contemplated by, the Transaction
Documents and the implementation of the Refinancing Facilities Term Sheet, the
Asset Disposal Programme and the Rights Issue have been, or will be when
necessary, obtained or effected (as appropriate) and are, or will be when
obtained or effected, in full force and effect.

 

8.8                               Title

 

It and each member of the
Group has good title to, or valid leases of, or is otherwise entitled to use
all material assets necessary to conduct its business as it is conducted at the
date of this Agreement.

 

8.9                               Litigation

 

(a)                                  No litigation, arbitration or administrative
proceedings are current or, to its knowledge, pending or threatened against it
on the date of this Agreement and the Commencement Date which have or could
reasonably be expected to involve a claim or related claims in excess of
€15,000,000 (or its equivalent in other currencies) and thereafter which have
or could reasonably be expected to have a Material Adverse Effect.

 

(b)                                 Paragraph (a) does not apply to proceedings
the full details of which have been provided to the Intercreditor Agent.

 

8.10                        Pari Passu Ranking

 

Its obligations under the
Finance Documents rank and will rank at least pari
passu with all its other unsecured and unsubordinated obligations
except for obligations mandatorily preferred by law applying to companies
generally.

 

 

8.11                        Taxes on payments

 

All amounts payable by each
Obligor under the Finance Documents can be made free and clear of and without
deduction for or on account of any Tax.

 

8.12                        Stamp duties

 

No stamp or registration
duty or similar taxes or charges are payable in its jurisdiction of
incorporation in respect of any Finance Document.

 

8.13                        Immunity

 

(a)                                  The execution by each Obligor of each Finance
Document constitutes, and its exercise of its rights and performance of its
obligations under each Finance Document will constitute, private and commercial
acts done and performed for private and commercial purposes; and

 

(b)                                 no Obligor will be entitled to claim immunity
from suit, execution, attachment or other legal process in any proceedings taken
in its jurisdiction of incorporation in relation to any Finance Document.

 

8.14                        No adverse consequences

 

(a)                                  It is not necessary under the laws of its
jurisdiction of incorporation:

 

(i)                                     in order to enable any Finance Party to
enforce its rights under any Finance Document; or

 

(ii)                                  by reason of the execution of any Finance
Document or the performance by it of its obligations under any Finance
Document,

 

that any Finance Party
should be licensed, qualified or otherwise entitled to carry on business in its
jurisdiction of incorporation; and

 

(b)                                 no Finance Party is or will be deemed to be
resident, domiciled or carrying on business in its jurisdiction of
incorporation by reason only of the execution, performance and/or enforcement
of any Finance Document.

 

8.15                        Jurisdiction/governing law

 

(a)                                  Each Obligor’s:

 

(i)                                     irrevocable submission under Clause 24
(Jurisdiction) to the jurisdiction of the courts of England and the United
States;

 

(ii)                                  agreement that this Agreement is governed by
English law; and

 

(iii)                               agreement not to claim any immunity to which
it or its assets may be entitled,

 

are legal, valid and binding
under the laws of its jurisdiction of incorporation; and

 

(b)                                 any judgement obtained in England or in the
United States will be recognised and be enforceable by the courts of its
jurisdiction of incorporation.

 

8.16                        Security Interests and
guarantees

 

(a)                                  It is the legal and beneficial owner of the
property which it purports to charge pursuant to the Security Documents. No
Security Interests, third party rights, options, claims and competing interests
whatsoever exist over any of its assets other than as permitted by Clause 9.7
(Negative pledge).

 

(b)                                 The Security Interests granted or intended to
be granted under the Security Documents constitute first ranking security in
favour of the Finance Parties.

 

(c)                                  The guarantees given by any Borrowing Group
Member in respect of an Affected Facility continue in full force and effect
with respect to the Affected Facilities as supplemented by this Agreement.

 

 

8.17                        Environmental matters

 

It has obtained any and all
Environmental Licences required for the carrying on of its business as
currently conducted and is in compliance in all material respects with (a) the
terms and conditions of such Environmental Licences and (b) all other
applicable Environmental Law which in each case, if not complied with, has, or
could reasonably be expected to have a Material Adverse Effect.

 

8.18                        Financial Statements and
Business Plan

 

(a)                                  The consolidated financial statements of the
Company most recently delivered to the Intercreditor Agent (which, at the date
of this Agreement, are the Original Financial Statements):

 

(i)                                     have been prepared in accordance with
accounting principles and practices generally accepted in its jurisdiction of
incorporation, consistently applied; and

 

(ii)                                  give a true and fair view of its financial
condition (consolidated, if applicable) as at the date to which they were drawn
up,

 

(b)                                 There has been no material adverse change in
the consolidated financial condition of the Group since the date of the
Original Business Plan.

 

(c)                                  The projections and forecasts contained in
the Business Plan most recently delivered to the Intercreditor Agent were made
in good faith and are based on reasonable assumptions and such Business Plan
does not as at its date omit any projections or forecasts which would make that
Business Plan misleading.

 

8.19                        Information

 

(a)                                  (Unless the Company has notified the
Intercreditor Agent (which shall notify the Lenders) in writing to the contrary
prior to the date of this Agreement, correcting the relevant inaccuracy or lack
of completeness) all written information (other than the Business Plan) (and
including all reports) provided to the Co-ordinating Committee or any other
Finance Party by or on behalf of an Obligor prior to the date of, and in
connection with, this Agreement (the Information)
was true, complete and accurate in all material respects as at the date it was
supplied.

 

(b)                                 All expressions of opinion contained in the
Information were made after careful consideration and were believed by the
Company or a Borrowing Group Member to be reasonable as at the date at which
they were stated to be given.

 

(c)                                  The financial projections contained in the
Information were prepared on the basis of assumptions believed by the Company
or a Borrowing Group Member to be reasonable and prudent as at the date at
which they were stated to be given.

 

(d)                                 Save as otherwise disclosed on or before the
date of delivery of the Information nothing has occurred since the date of that
Information (or, if applicable, the date of any factual information contained
therein as referred to therein) which, if disclosed, would make that
Information untrue or misleading in any material respect.

 

8.20                        Existing Facilities

 

(a)                                  The details in Schedule 3 given in relation
to each Existing Facility are, as at the date of this Agreement or, in the case
of the Exposures, the Calculation Point, true, accurate and complete.

 

(b)                                 Schedule 3 identifies each agreement under
which any member of the Group or Relevant Entity can incur or has outstanding
Financial Indebtedness or to which there is recourse in respect of Financial
Indebtedness to any Borrowing Group Member in each case on the date of this
Agreement.

 

8.21                        Asset Disposal Programme and
Rights Issue

 

The Company has no reason to
believe that the Asset Disposal Programme and Rights Issue cannot be completed
in full in accordance with the timetable applicable thereto and that any
authorisation or consent necessary for the disposal of an asset referred to in
the Asset Disposal Programme or for the launch and implementation of the Rights
Issue will not be forthcoming in time to allow that disposal or Rights Issue to
be implemented in accordance with that timetable.

 

 

8.22                        Inter-Company Indebtedness

 

The list of Inter-Company
loans made to or by each Obligor provided to the Intercreditor Agent pursuant
to this Agreement, being on the date of this Agreement the list set out in
Schedule 7 (Inter Company Loans), is complete and correct in all material
respects as at its date.

 

8.23                        Solvency of Obligors

 

(a)                                  No proceedings of any nature are current or,
to its knowledge, pending or threatened, for the winding-up or dissolution
(other than a solvent winding up or dissolution) of, or in respect of any
insolvency proceeding of any nature relating to any Obligor or each of its
Subsidiaries.

 

(b)                                 It has not defaulted on any of its payment
obligations under any Facility and the Obligors and each of its Subsidiaries
are in a position to meet their respective scheduled payments as they fall due.

 

(c)                                  In relation to each Obligor (other than
Primester in the case of paragraphs (i) and (ii) below) and its Subsidiaries
incorporated or organised in the United States of America (on a consolidated
basis):

 

(i)                                     the aggregate amount of its debts (including
its obligations (if any) under the Finance Documents and the Facility
Agreements) is less than the aggregate value (being the lesser of fair present
valuation and present fair saleable value) of its assets (which for, avoidance
of doubt, include, without limitation, all rights of indemnification,
contribution and subrogation);

 

(ii)                                  its capital is not unreasonably small to
carry on its business as it is being conducted;

 

(iii)                               it did not incur (on the date incurred) and
will not incur, debts beyond its ability to pay as they mature; and

 

(iv)                              it has not made a transfer or incurred any
obligation under any Finance Document or Facility Agreement with the intent to
hinder, delay or defraud any of its present or future creditors.

 

Terms used in this paragraph
(c) have the meanings given to them in the United States Bankruptcy Code of
1978, as amended, and applicable fraudulent conveyance laws in the United
States of America.

 

8.24                        Group Structure Chart

 

As at the date of this
Agreement, the Group Structure Chart describes the corporate ownership
structure of all members of the Group and the Borrowing Group and is true,
complete and correct in all material respects.

 

8.25                        United States laws

 

(a)                                  It is not:

 

(i)                                     a holding company, an affiliate of a holding
company or a subsidiary company of a holding company within the meaning of, or
otherwise subject to regulation under PUHCA;

 

(ii)                                  a public utility, or subject to regulation,
under the Federal Power Act;

 

(iii)                               an investment company or a company controlled
by an investment company; or

 

(iv)                              subject to regulation under any United States
Federal or State law or regulation that limits its ability to incur or
guarantee indebtedness.

 

(b)                                 ERISA

 

(i)                                     No ERISA Event that could reasonably be
expected to have a Material Adverse Effect has occurred or is reasonably
expected to occur with respect to any Plan.

 

(ii)                                  The present value of the benefit liabilities
under each Plan, as determined for the purposes of Schedule B (Actuarial
Information) to such Plan’s most recently completed annual report (Form 5500
Series) that has been filed with the required United States governmental
agencies, which Schedule B is complete and accurate in all material respects,
did not, as of the date of such valuation, exceed the fair market value of the
assets of such Plan by an amount that, when aggregated with any such excess
under any other Plan, could reasonably be expected to have a Material Adverse
Effect, and since the date of such valuation there has been no material adverse
change in such funding status that, when aggregated with any such change with
respect to any other Plan, could reasonably be expected to have a Material
Adverse Effect.

 

 

(iii)                               Except as could not reasonably be expected to
have a Material Adverse Effect, neither it nor any ERISA Affiliate has incurred
or is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan.

 

(iv)                              Except as could not reasonably be expected to
have a Material Adverse Effect, neither it nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganisation or has been terminated, within the meaning of Title IV of
ERISA, and no such Multiemployer Plan is reasonably expected to be in
reorganisation or to be terminated, within the meaning of Title IV of ERISA.

 

8.26                        Times for making
representations and warranties

 

The representations and warranties set out in this Clause 8:

 

(a)                                  are made by each Obligor on the date of this
Agreement; and

 

(b)                                 are deemed to be repeated by each Obligor on
the Commencement Date with reference to the facts and circumstances then
existing; and

 

(c)                                  except those made under Clause 8.6(b) (No
Default), Clause 8.8 (Title), Clause 8.11 (Taxes on payments), Clause 8.12
(Stamp duties), Clause 8.18(c) (Financial Statements and Business Plan), Clause
8.19 (Information), Clause 8.20 (Existing Facilities), Clause 8.21 (Asset
Disposal Programme and Rights Issue), Clause 8.23 (Solvency of Obligors) and
Clause 8.24 (Group Structure Chart) are deemed to be repeated on each roll-over
date determined in accordance with Clause 4.6 (Renewals and Roll-Overs) and in
the case of Clause 8.18(c) (Financial Statements and Business Plan), on each
date that a Business Plan is delivered after the Commencement Date, and in the
case of Clause 8.22 (Inter-Company Indebtedness) on each date that a list of
Inter-Company loans referred to therein is delivered after the Commencement
Date, in each case, with reference to the facts and circumstances then
existing.

 

9.                                      UNDERTAKINGS

 

9.1                               Duration

 

The undertakings in this
Clause 9 remain in force from the date of this Agreement until (i) the Term
Date; or (ii) if a Default is outstanding on the Term Date, until no Default is
outstanding.

 

9.2                               Financial information

 

(a)                                  The Company shall supply or procure that the
relevant member of the Group supplies to the Intercreditor Agent in sufficient
copies for the Lenders:

 

(i)                                     as soon as the same are available (and
subject to paragraph (B) below in any event within 60 days of the end of its
respective financial years):

 

(A)                              the audited consolidated financial statements
of the Company for the financial year; and

 

(B)                                the audited financial statements of each
Borrowing Group Member to the extent the same are required to be supplied under
the Facility Agreement to which it is party, subject to and in accordance with
its terms;

 

(ii)                                  as soon as the same are available (and in any
event with 60 days of the end of its respective financial half-years) the revised
consolidated financial statements of the Company and to the extent the same are
required to be supplied under the Facility Agreement to which it is party, a
Borrowing Group Member for that half-year;

 

(iii)                               as soon as the same are available (and in any
event within 60 days of the end of each of its respective financial quarters)
the consolidated financial statements of the Company and to the extent the same
are required to be supplied under the Facility Agreement to which it is party,
a Borrowing Group Member for that financial quarter;

 

(iv)                              as soon as they become available (and in any
event within 30 days of the end of each calendar month) a copy of its
management accounts for that calendar month which shall contain a profit and
loss statement and cashflow and liquidity;

 

 

and

 

(v)                                 in respect of each Relevant Entity:

 

(A)                              as soon as the same are available (and in any
event within 120 days of the end of each financial year of each Relevant
Entity) the audited consolidated financial statements of that Relevant Entity
for that financial year; or

 

(B)                                if the audited consolidated financial
statements referred to in paragraph (A) above are not prepared by a Relevant
Entity, as soon as the same are available (and in any event within 60 days of
the end of each financial year of that Relevant Entity) the financial
statements of that Relevant Entity for that financial year; and

 

(C)                                provided the same are prepared by a Relevant
Entity and the Company is entitled to receive them, as soon as the same are
available (and in any event within 45 days of the end of each financial half
year of each Relevant Entity) the financial statements (consolidated if
prepared) of that Relevant Entity for that half year.

 

(b)                                 Subject to paragraph (c) below, the Company
shall ensure that:

 

(i)                                     each set of financial statements delivered by
it pursuant to paragraphs (a)(i) to (a)(iv) above:

 

(A)                              is prepared in accordance with accounting
principles and practices generally accepted in France consistently applied;

 

(B)                                shall give a true and fair view of the
financial condition of the Group as at the end of the period to which those
financial statements relate and of the results of its operations during that
period; and

 

(C)                                is (in the case of the financial statements
referred to in paragraph (a)(i)(A) above) audited by an internationally
recognised independent qualified firm of auditors.

 

(c)                                  The Company shall ensure that each set of
financial statements delivered pursuant to paragraph (a)(v) above is prepared
in accordance with either:

 

(i)                                     accounting principles and practices generally
accepted internationally if, in the place of establishment or incorporation of
the Relevant Entity concerned there is a legal requirement to do so; or

 

(ii)                                  if no such requirement exists, accounting
principles and practices generally accepted in the place of establishment or
incorporation of the Relevant Entity concerned,

 

in each case consistently
applied and shall give a true and fair view of the financial condition of the
Relevant Entity to which they relate as at the end of the period to which those
accounts relate and of the results of its operations during that period.

 

(d)                                 Together with each set of financial
statements delivered under paragraph (a)(i)(A) above, the Company shall deliver
a Compliance Certificate signed by its statutory auditors setting out in
reasonable detail (to the Intercreditor Agent’s reasonable satisfaction)
computations in respect of the definitions used in and for the purposes of
establishing compliance with the financial covenants in Clause 10 (Financial
covenants) as at the Testing Date (as defined in Clause 10) to which the
financial statements with which the relevant Compliance Certificate was
delivered were made.

 

(e)                                  Together with each set of financial
statements delivered under paragraph (a)(ii) above, the Company shall deliver a
Compliance Certificate signed by its chief financial officer setting out in
reasonable detail computations in respect of the definitions used in and for
the purposes of establishing compliance with the financial covenants in Clause
10 (Financial covenants) as at the Testing Date (as defined in Clause 10) to
which those financial statements were made up.

 

(f)                                    Together with each set of financial
statements delivered under paragraph (a)(i) and (a)(ii) above, the Company
shall deliver to the Intercreditor Agent a certificate listing the Material
Subsidiaries as determined from those financial statements.

 

(g)                                 The Company shall supply the Intercreditor
Agent (in sufficient copies for the Lenders) with:

 

(i)                                     an update of the Business Plan validated by
Ernst & Young (to include an analysis and projections of liquidity and
cash) on 31st December, 2003 and quarterly thereafter in accordance with the
agreed scope of work;

 

(ii)                                  (A) as soon as the same are available and in
any event within 12 Business Days of the end of each calendar month, details of
the amounts of consolidated gross and net cash available to the Company and the
Exposures under the Facilities commencing with the calendar month ending 31st
December, 2003; and (B) shall use its best efforts to supply monthly liquidity
and cash flow forecasts for each calendar month including a 12-month rolling
forecast for the next twelve months commencing with the calendar month ending
30th April, 2004;

 

 

(iii)                               as soon as the same are available and in any
event within 10 Business Days of the end of each calendar month, a list of all
Inter-Company loans made to or by each Obligor as at the end of that calendar
month;

 

(iv)                              such information, access to personnel and
other assistance as is necessary to enable the Finance Parties to monitor the
cash flow of the Group and compare it with the liquidity and cash flow
forecast; and

 

(v)                                 such other information in respect of any of
the Obligors as the Intercreditor Agent (acting on the instructions of the
Majority Lenders) may reasonably request.

 

(h)                                 Promptly on the supply to the Intercreditor
Agent of the annual financial statements for the financial year of 2003, the
Company shall ensure the availability of senior management of the Company for a
presentation to the Lenders.

 

9.3                               Information-miscellaneous

 

Each Obligor shall and the
Company shall ensure that each Borrowing Group Member will supply to the
Intercreditor Agent in sufficient copies for the Lenders:

 

(a)                                  all notices and documents dispatched by it to
its shareholders (or any class of them) or its creditors (or any class of them)
at the same time as they are dispatched;

 

(b)                               (i)                                       to the extent legally permissible, any
report, notice or statement made or issued to any regulatory authority or stock
exchange of an Obligor promptly upon making or issuing the report, notice or
statement; and

 

(ii)                                  where the report, notice or statement refers
to the Lenders, the Company shall where legally permissible, give the
Intercreditor Agent opportunity to comment on the report, notice or statement
prior to its making or issue;

 

(c)                                  promptly, a copy of any material notification
received from any rating agency in respect of the Company’s long term credit
rating;

 

(d)                                 promptly upon becoming aware of them, details
of any material litigation, arbitration or administrative proceedings which are
current, threatened or pending which it is or may become involved in; and

 

(e)                                  promptly, such further information in the
possession or control of any member of the Group regarding its financial
condition, structure, business and management as any Finance Party may
reasonably request.

 

9.4                               Notification of Default

 

(a)                                  The Company or relevant Obligor shall,
promptly upon becoming aware of the occurrence of the same, notify the
Intercreditor Agent of:

 

(i)                                     any Default in respect of it or its
Subsidiaries (and the steps, if any, being taken to remedy it); or

 

(ii)                                  any event or circumstance which constitutes
(or, with the giving of notice, lapse of time, determination of materiality or
the fulfilment of any applicable condition or any combination of the foregoing,
might constitute) a default, termination event or early prepayment event under
any document which is binding on it or any of its Subsidiaries.

 

(b)                                 The Intercreditor Agent will promptly notify
each Lender (or where appropriate each Facility Agent acting on behalf of a
Lender) of any such Default or event or circumstance upon receipt of
notification from the Obligor.

 

(c)                                  Promptly upon any request by the
Intercreditor Agent (acting in good faith) the Company must supply to the
Intercreditor Agent a certificate, signed by two of its authorised signatories
on its behalf, certifying that no Default is outstanding or, if a Default is
outstanding, specifying the Default and the steps, if any, being taken to
remedy it.

 

 

9.5                               Authorisations

 

Each Obligor shall and the
Company shall ensure that each Borrowing Group Member will promptly:

 

(a)                                  obtain, maintain and comply with the terms
of; and

 

(b)                                 supply certified copies to the Intercreditor
Agent of,

 

any authorisation required
or desirable under any law or regulation to enable it to enter into or to
perform its obligations under, or for the performance, validity or
enforceability of, and the transactions contemplated by, any Transaction
Document and the implementation of the Asset Disposal Programme, the Rights
Issue and the Refinancing Facilities Term Sheet.

 

9.6                               Pari passu ranking

 

Each Obligor shall and the
Company shall ensure that each Borrowing Group Member will procure that its
obligations under the Finance Documents and the Affected Facility Agreements do
and will rank at least pari passu
with all its other present and future unsecured and unsubordinated obligations,
except for obligations mandatorily preferred by law applying to companies
generally.

 

9.7                               Negative pledge

 

(a)                                  No Obligor shall, and the Company shall
procure that no other member of the Group or a Borrowing Group Member will,
create or permit to subsist any Security Interest on any of its assets.

 

(b)                                 Paragraph (a) does not apply to:

 

(i)                                     Existing Security Interests as set out in
Part 1 of Schedule 4 (List of Existing Security Interests);

 

(ii)                                  any lien arising by operation of law in the
ordinary course of business and securing amounts not more than 30 days overdue;

 

(iii)                               any Security Interest over assets granted or
to be granted in favour of a Finance Party under a Security Document or under
or in accordance with Clause 7.3(g);

 

(iv)                              any Security Interest over assets other than
those identified in the Agreed Security Principles or referred to in paragraph
(iii) above, to the extent necessary in order to maintain, refinance, replace
or, to the extent permitted by this Agreement, incur new Financial Indebtedness
up to a maximum aggregate amount of €60,000,000 (or its equivalent in other
currencies); or

 

(v)                                 any Derivative Deposit or Lessor Reduction.

 

9.8                               Transactions similar to
security

 

(a)                                  No Obligor shall, and the Company shall
procure that no other member of the Group or a Borrowing Group Member will:

 

(i)                                     sell, transfer or otherwise dispose of any of
its assets on terms whereby it is or may be leased to or re-acquired or
acquired by a member of the Group or any of its related entities; or

 

(ii)                                  sell, transfer or otherwise dispose of any of
its receivables on recourse terms,

 

in circumstances where the
transaction is entered into primarily as a method of raising finance or of
financing the acquisition of an asset.

 

(b)                                 Paragraph (a) above does not apply to any
disposal of receivables made in respect of the existing Securitisation
Programmes with Limited Recourse only.

 

9.9                               Disposals

 

(a)                                  No Obligor shall, and the Company shall
procure that no other member of the Group or a Borrowing Group Member will,
either in a single transaction or in a series of transactions, whether related
or not, dispose of all or any part of its assets.

 

(b)                                 Paragraph (a) does not apply to:

 

 

(i)                                     disposal of stock-in-trade, business
inventories, fixtures and fittings, furniture and other office equipment, made
in the ordinary course of business of the disposing entity;

 

(ii)                                  disposal of assets (other than shares) in
exchange for other assets comparable or superior as to type, value and quality;

 

(iii)                               disposal of assets (other than the business
of the Company) or shares as part of an intra-group re-organisation from one
Obligor to another Obligor on arms’-length terms, in each case, subject to and
in accordance with Clause 9.11 (Mergers, acquisitions and intra-group
re-organisations);

 

(iv)                              disposal of assets for cash in accordance
with the Asset Disposal Programme and other disposal of assets for cash where
50% of the net proceeds of any such disposal are applied in mandatory
prepayment and cancellation of the Affected Facilities subject to and in
accordance with Clause 7.2 (Disposals, equity and capital market issues) of
this Agreement;

 

(v)                                 disposal of assets made in respect of the
existing Securitisation Programmes with Limited Recourse only;

 

(vi)                              disposal for cash on a non-recourse basis of
VAT credits; or

 

(vii)                           transactions with the prior written approval
of the Majority Lenders.

 

9.10                        Change of
business/registered office

 

(a)                                  The Company shall procure that no substantial
change is made to the general nature or scope of the business of the Company or
the Group (taken as a whole) from that carried on at the date of this
Agreement.

 

(b)                                 The Company shall not change its place of
incorporation or registered head office to one outside the European Union.

 

9.11                        Mergers, acquisitions and
intra-group re-organisations

 

(a)                                  No Obligor shall, and the Company shall
procure that no other member of the Group or a Borrowing Group Member will
enter into any amalgamation, demerger, merger, reconstruction or
re-organisation otherwise than under an intra-group re-organisation involving
the transfer of assets (including of a business other than the business of the
Company) and/or shares provided that such intra-group re-organisation:

 

(i)                                     unless a Permitted Reorganisation, does not
involve the Company;

 

(ii)                                  does not affect any of its assets which are
or are intended to be subject to Security Interests granted in favour of the
Lenders or, to the extent that it does affect any such assets, substitute
Security Interests are granted over assets of a greater or equivalent value
prior to such intra-group re-organisation (together with legal opinions) in
each case in a form and substance satisfactory to the Majority Lenders;

 

(iii)                               does not or is not reasonably likely to
result in a Material Adverse Effect or a Default;

 

(iv)                              does not affect any of the rights or remedies
of the Lenders under the Finance Documents or the Affected Facility Agreements;
and

 

(v)                                 where it involves a Borrowing Group Member
(other than by way of a transfer of its shares), the Lender or Lenders party to
a Facility with that Borrowing Group Member, have provided their prior written
consent.

 

(b)                                 Save as allowed by paragraph (c) below,

 

(i)                                     each Obligor which is not a Joint Venture
Entity shall not;

 

(ii)                                  each Obligor which is a Joint Venture Entity
shall use its best efforts not to; and

 

(iii)                               the Company shall ensure that no member of
the Group will, and to the fullest extent within its power or control that no
Joint Venture Entity will,

 

acquire any assets or
business or make any investment in any business, shares or other securities.

 

 

(c)                                  Paragraph (b) above shall not prevent:

 

(i)                                     acquisitions or investments made in the
ordinary course of trade;

 

(ii)                                  acquisitions with an aggregate consideration
in any financial year of the Group not in excess of €10,000,000 or its
equivalent;

 

(iii)                               acquisitions made with the prior consent of
the Intercreditor Agent (acting on the instructions of the Majority Lenders);
or

 

(iv)                              capital contributions made to Relevant
Entities or Joint Venture Entities by way of inter-company loan or share
capital provided that the aggregate amount of such contributions made since the
date of this Agreement less the aggregate amount of (A) contributions repaid
directly or indirectly to the Company; and (B) the amount of any dividend
distributed directly or indirectly to the Company with respect to that capital
contribution to the extent in excess of the dividends projected to be received
by the Company and Subsidiaries on a fully consolidated basis by reference to
the Original Business Plan does not exceed at any time € 50,000,000 (or its
equivalent in another currency), taking into account any capital contributions
made under Clause 9.16 (Lending and borrowing).

 

9.12                        Capital expenditure

 

No Obligor (except if a
Relevant Entity) shall and the Company shall procure that no other member of
the Group shall incur any tangible or intangible capital expenditure except
where such capital expenditure in aggregate does not exceed 110 per cent. per
annum of the aggregate amount of capital expenditure per annum set out in the
Business Plan.

 

9.13                        Insurance

 

Each Obligor shall and the
Company shall ensure that each Material Subsidiary and each Borrowing Group
Member insures its business and assets with insurance companies to such an
extent and against such risks as companies engaged in a similar business
normally insure.

 

9.14                        Maintenance of status

 

Each Obligor shall, and the
Company shall procure that each Material Subsidiary and each Borrowing Group
Member will:

 

(a)                                  do all such things as are necessary to
maintain its corporate existence; and

 

(b)                                 ensure that it has the right and is duly
qualified to conduct its business as it is conducted in all applicable
jurisdictions.

 

9.15                        Amendments to Facilities

 

(a)                                  No Obligor shall and the Company shall ensure
that no Borrowing Group Member will agree to amend, or seek a waiver of, any
term of any Facility or exercise any right to terminate or reduce any amount
available for drawing under any Facility Agreement.

 

(b)                                 Paragraph (a) does not apply to:

 

(i)                                     any term of any Facility preventing any
Obligor from complying with its obligations under this Agreement; or

 

(ii)                                  any agreement to extend the maturity of any Facility;
or

 

(iii)                               any amendment required to be made under the
terms of this Agreement including, without limitation, under Clause 9.21(a)
(Rights Issue and Other Matters).

 

9.16                        Lending and borrowing

 

(a)                                  Subject to paragraphs (b) and (c) below, no
Obligor shall and the Company shall ensure that no member of the Group or any
Borrowing Group Member will make any loans or provide any other form of credit
(including, without limitation, vendor credit) to any person.

 

(b)                                 Paragraph (a) does not apply to loans or any
other form of credit provided to an Obligor in accordance with the
Subordination Agreement when entered into and otherwise in accordance with its
cash pooling arrangements.

 

 

(c)                                  Paragraph (a) does not apply to capital
contributions made to Relevant Entities or Joint Venture Entities by way of
inter-company loan or share capital provided that the aggregate amount of
contributions made by way of share capital or inter-company loan since the date
of this Agreement less the aggregate amount of (A) such contributions repaid
directly or indirectly to the Company; and (B) the amount of any dividend
distributed directly or indirectly to the Company with respect to that capital
contribution to the extent in excess of the dividends expected to be received by
reference to the latest Business Plan, does not exceed at any time € 50,000,000
(and after the Term Date, subject to and in accordance with the Refinancing
Facilities Agreement, €90,000,000), taking into account any capital
contributions made under Clause 9.11 (Mergers, acquisitions).

 

(d)                                 Subject to the provisions of Clause 9.17(c),
no Obligor shall and the Company shall ensure that no Borrowing Group Member
will give any guarantee or indemnity to or for the benefit of any person in
respect of any obligation of any other person or enter into any document under
which it assumes any liability of any other person except under the Existing
Facilities and this Agreement.

 

9.17                        Financial Indebtedness

 

The Company shall not and it
shall ensure that no member of the Group will and, to the fullest extent within
its power or control, no Relevant Entity shall incur any Financial Indebtedness
(including, without limitation, guarantees of joint venture entities) except:

 

(a)                                  Financial Indebtedness outstanding under the
Existing Facilities at the date of this Agreement and the Refinancing
Facilities Agreement;

 

(b)                                 Financial Indebtedness owed to another member
of the Group on the date of this Agreement and thereafter in accordance with
its cash pooling arrangements and in each case which is subordinated subject to
and in accordance with the Subordination Agreement when entered into;

 

(c)                                  refinancing of Financial Indebtedness under
Unaffected Credit Facilities (other than Unaffected Committed Facilities)
existing at the date of this Agreement up to a maximum aggregate amount of
€50,000,000 (or its equivalent in other currencies) by an Unaffected Credit
Facility with a final maturity date no earlier than both (A) the Term Date; and
(B) the final maturity of the refinanced Unaffected Credit Facility and on
terms which do not put or seek to put the creditor of the refinanced Unaffected
Credit Facility in a preferred position as against any Lender;

 

(d)                                 refinancing of Financial Indebtedness under
Unaffected Committed Facilities by Unaffected Credit Facilities (i) with a
final maturity date falling no earlier than (x) the Term Date; or (y) the final
maturity date of the refinanced Facility; and (ii) on terms that do not put or
seek to put the creditor of the refinanced Facility in a preferred position as
against any Lender as provided in Clause 4.7(b);

 

(e)                                  Financial Indebtedness incurred by the
Company under any Facility which is not an Existing Facility which does not or
could not be expected to have a Material Adverse Effect or result in a Default;

 

(f)                                    Financial Indebtedness in respect of
Overdraft Facilities that may fluctuate in accordance with their terms up to
the maximum Exposure under such overdraft facilities as at the Calculation
Point;

 

(g)                                 Financial Indebtedness in respect of any
issue of bonds, notes, debt securities or capital markets instruments, 50% of
the net proceeds of which are applied pursuant to Clause 7.2(c) in mandatory
prepayment and cancellation of the Affected Facilities; or

 

(h)                                 any other Financial Indebtedness incurred
after the date of this Agreement, by a Subsidiary of the Company or a Relevant
Entity, which at any time does not exceed a maximum aggregate amount of
€50,000,000 (or its equivalent in other currencies).

 

9.18                        Shares and dividends

 

(a)                                  The Company shall not:

 

(i)                                     convene a meeting of shareholders to consider
a resolution to make any distribution or pay any dividend, or other payment (in
cash or in kind) in respect of any of its share capital or any management fees
or charges in favour of its shareholders’ or its shareholders’ Affiliates; or

 

 

(ii)                                  reduce, redeem, repurchase or retire any of
its share capital.

 

(b)                                 The Company shall (to the fullest extent
permitted by applicable law):

 

(i)                                     procure that no Material Subsidiary enters
into any arrangement or agreement which may restrict its ability to declare,
make or pay any dividend on or in respect of its share capital (or any class of
its share capital) or restrict its ability to distribute any dividend; and

 

(ii)                                  procure that each Material Subsidiary will to
the extent necessary to ensure that the Company has funds available to it to
service its payment obligations under the Finance Documents and the Facility
Agreements, declare, make and pay in cash dividends in respect of its shares or
reimburse intercompany loans unless doing so will prevent that Material
Subsidiary from being able to meet its payment obligations which are then due and
payable and provided that (A) no more than an aggregate amount equal to €
150,000,000 (or its equivalent in other currencies) shall be distributed by
Rhodia Inc. by way of dividend or reimbursement of intercompany loans on and
after the date of this Agreement with sale proceeds from disposals of its
assets and (B) such reimbursement of intercompany loans shall be made in
priority to any such distribution of dividends.

 

9.19                        Repayments of inter-group
Financial Indebtedness

 

Subject to Clause 4.7(c), no
Obligor shall and the Company shall ensure that no Borrowing Group Member will
prepay or repay any amounts of Financial Indebtedness owed to its shareholders
or any member of the Group except directly or indirectly (including via Rhodia
Finances and Rhodia Financial Services Inc.) to the Company and otherwise to
the extent permitted in the Subordination Agreement.

 

9.20                        No set-off

 

No Obligor shall and the
Company shall ensure that no Borrowing Group Member will exercise any right of
set-off or counterclaim against any person nor agree to or permit any set-off
to occur without the prior written consent of the Majority Lenders except for:

 

(a)                                  any right of set-off or consolidation of
accounts which is (i) contractual or arising as a matter of law; or (ii) pursuant
to legally binding netting arrangements in force on the date of this Agreement
in each case with any person outside the Group; or

 

(b)                                 to the extent expressly permitted by the
Subordination Agreement.

 

9.21                        Rights Issue and Other
Matters

 

(a)                                  The Company shall:

 

(i)                                     launch the Rights Issue by no later than 15th
May, 2004;

 

(ii)                                  initiate and implement the Asset Disposal
Programme (in accordance with the terms of the definition thereof);

 

(iii)                               use its best endeavours to execute the
Refinancing Facilities Agreement on or before 15th January, 2004 and shall in
any event enter into the Refinancing Facilities Agreement by 15th February,
2004;

 

(iv)                              use its best endeavours to execute amendments
to the USPP documents to allow it to implement the Agreed Security Principles
on or before the 15th January, 2004; and

 

(v)                                 use its best endeavours to amend the leases
not inconsistent with the Agreed Lease Amendment Principles prior to entering
into the Refinancing Facilities Agreement and in any event on or before 15th February,
2004.

 

(b)                                 The Company shall notify the Intercreditor
Agent promptly upon becoming aware of:

 

(i)                                     any failure to obtain or maintain any
authorisation, consent or other condition necessary for the disposal of an
asset referred to in the Asset Disposal Programme or the launch and
implementation of the Rights Issue in order to enable the Asset Disposal
Programme and the Rights Issue to be implemented; or

 

(ii)                                  of any decision by it not to implement the
Asset Disposal Programme or the Rights Issue.

 

 

9.22                        Joint Ventures

 

No Obligor will, and the
Company will ensure that no other member of the Group or a Borrowing Group
Member will, enter into or acquire any interest in any new joint venture,
partnership or similar arrangement except where any such interest is held
through an entity incorporated with limited liability and does not result in or
could not reasonably be expected to result in a breach of any other provisions
of any Finance Document.

 

9.23                        Compliance with laws

 

Each Obligor shall and the Company
shall ensure that each Material Subsidiary and each Borrowing Group Member will
comply in all material respects with all applicable laws and regulations of any
governmental authority, whether domestic or foreign, having jurisdiction over
it or any of its assets, where failure to comply with any such laws or
regulations has, or could be expected to have, in each case in the reasonable
opinion of the Majority Lenders, a Material Adverse Effect.

 

9.24                        Compliance with
Environmental Laws and Indemnity

 

(a)                                  Each Obligor shall and the Company shall
ensure that each Material Subsidiary and each Borrowing Group Member will:

 

(i)                                     obtain any and all Environmental Licences
required for the carrying on of its business as currently conducted; and

 

(ii)                                  comply in all material respects with (i) the
terms and conditions of such Environmental Licences and (ii) all other
applicable Environmental Law which in each case, if not complied with, has, or
could be expected to have, in each case in the reasonable opinion of the Majority
Lenders, a Material Adverse Effect or result in any liability for the Finance
Parties in excess of €5,000,000 in aggregate.

 

(b)                                 The Company shall indemnify each Finance
Party and their respective officers, employees, agents and delegates (together
the Indemnified Parties) against
any cost or expense suffered or incurred by them (except if caused by their own
negligence or wilful default) which:

 

(i)                                     arises by virtue of any actual or alleged
breach of any Environmental Law (whether by any Obligor, an Indemnified Party
or any other person); or

 

(ii)                                  arises by virtue of the release or threatened
release of, or exposure to, any Dangerous Substance stored or handled upon,
transported from, or otherwise associated with, the past or present facilities
or operations of any Obligor or Group member.

 

Each Indemnified Party may
rely on this Clause 9.24 and enforce its terms under the Contracts (Rights of
Third Parties) Act 1999.

 

9.25                        Arm’s-length terms

 

No Obligor will, and each
Obligor will ensure that no member of the Group or a Borrowing Group Member
will, enter into any transaction with any person except on ordinary commercial
terms and on the basis of arm’s-length arrangements, or enter into any
transaction whereby any Obligor or member of the Group might pay more than the
ordinary commercial consideration for any purchase or acquisition or might
receive less than full commercial consideration for its services or products.

 

9.26                        Access

 

Upon the occurrence of an
Event of Default which is continuing, each Obligor shall and the Company shall
ensure that each Material Subsidiary and each Borrowing Group Member must allow
any one or more representatives of the Intercreditor Agent and/or accountants
or other professional advisers appointed by the Intercreditor Agent (at the
Company’s risk and expense) to have access during normal business hours to the
assets, books and records of that member of the Group and to inspect the same.

 

9.27                        Security and Subordination

 

The Obligors shall and the
Company shall ensure that each relevant member of the Group will at their own
expense:

 

(a)                                  enter into the Security Sharing Agreement and
the Security Documents with the Finance Parties and other creditors under
Facilities which are to benefit from a Security Document under the Agreed
Security Principles as soon as reasonably practicable and in any event within
15 Business Days following the date on which it is not prevented from doing so
under the terms of the USPP;

 

 

 

(b)                                 enter into the Subordination Agreement as
soon as reasonably practicable and in any event within 45 days of the date of
this Agreement; and

 

(c)                                  execute and do all such assurances, acts and
things as the Intercreditor Agent and the Security Agent may reasonably require
to effect the above including perfecting or protecting the security intended to
be afforded by the Security Documents and shall deliver to the Intercreditor
Agent and the Security Agent at the same time such directors’ and shareholders’
resolutions, title documents and other documents and legal opinions as set out
in Part 2 of Schedule 2 (Conditions precedent) and otherwise as the
Intercreditor Agent and the Security Agent may reasonably require in relation
to the same.

 

9.28                        ERISA Reporting Requirements

 

The following shall be
provided to the Intercreditor Agent:

 

(a)                           (i)                  promptly
and in any event within 10 Business Days after any Obligor or any ERISA
Affiliate knows or has reason to know that any ERISA Event has occurred that is
reasonably expected to have a Material Adverse Effect, a statement of the Chief
Financial Officer of the Obligor describing such ERISA Event and the action, if
any, that such Obligor or such ERISA Affiliate has taken and proposes to take
with respect thereto; and

 

(ii)                                  on the date any records, documents or other
information must be furnished to the PBGC with respect to any Plan pursuant to
Section 4010 of ERISA, a copy of such records, documents and information;

 

(b)                                 promptly and in any event within five
Business Days after receipt thereof by any Obligor or any ERISA Affiliate,
copies of each notice from the PBGC stating its intention to terminate any Plan
or to have a trustee appointed to administer any Plan;

 

(c)                                  promptly upon request of the Intercreditor
Agent/a Finance Party, copies of each Schedule B (Actuarial Information) to the
most recent annual report (Form 5500 Series) with respect to each Plan; and

 

(d)                                 promptly and in any event within five
Business Days after receipt thereof by any Obligor or any ERISA Affiliate from
the sponsor of a Multiemployer Plan, copies of each notice concerning (i) the
imposition of Withdrawal Liability by any such Multiemployer Plan that is
reasonably expected to have a Material Adverse Effect, (ii) the reorganisation
or termination, within the meaning of Title IV of ERISA, of any such Multiemployer
Plan that is reasonably expected to have a Material Adverse Effect or (iii) the
amount of liability incurred, or that may be incurred, by such Obligor or any
ERISA Affiliate in connection with any event described in Clause (i) or (ii).

 

9.29                        United States laws

 

(a)                                  The Company will not, either by act or
omission, become, or permit any other Obligor, to become, subject to regulation
under PUHCA.

 

(b)                                 The Company will not, either by act or
omission, become, or permit any other Obligor, to become, subject to regulation
under the Federal Power Act.

 

(c)                                  The Company will not, either by act or
omission, become, or permit any other Obligor to become, an investment company
or a company controlled by an investment company.

 

9.30                        Cash pooling / Inter-Company
loan arrangements

 

(a)                                  The Company shall use its best efforts to
maintain its existing cash pooling arrangements as are currently in force at
the date of this Agreement where failure to so maintain has or would be
reasonably likely to have a Material Adverse Effect.

 

(b)                                 The Company will ensure that all Secured
Intra Group Loans and, subject to and in accordance with the Subordination
Agreement, long-term Inter-Company Debt between any member of the Group which
is a creditor of an Obligor is documented in the form of the agreed
Inter-Company Debt loan agreement.

 

(c)                                  The Company will ensure that all
Inter-Company Debts between any member of the Group which is a creditor of the
Company are subject to the Subordination Agreement on or before incurring any such
Inter-Company Debt.

 

 

10.                               FINANCIAL COVENANTS

 

10.1                        Financial covenant
definitions

 

In this Clause 10:

 

Adjusted EBITDAR means, in respect of a particular period, the Company’s EBITDAR
adjusted to reflect the EBITDAR of each Relevant Entity (Relevant Entity EBITDAR), provided that the
amount of such adjustment shall be pro rata
to the Company’s participation in the capital of the Relevant Entity.

 

Consolidated Net Indebtedness means, without double counting, the
aggregate of (A) the Company’s long term debt (including participating loans),
bank overdrafts, current portion of long term debt, (B) guarantees given with
respect to Financial Indebtedness of third parties or joint ventures in which
the Company is involved or the Company’s unconsolidated subsidiaries or
otherwise (C) outstanding amounts with respect to any securitisation programme,
sale of receivables and any outstanding amount under a lease (being defined as
the aggregate of the net present value of (i) lease rentals and (ii) the
residual value or lease balance of such lease) and (D) short term borrowings minus the aggregate of cash, short term
deposits, marketable securities, each as calculated from the items so described
in the English language version of the consolidated accounts of the Company
most recently delivered by the Company to the Intercreditor Agent under Clause
9.2 (Financial information).

 

EBITDA
means, in respect of a particular period, (before restructuring costs and after
cash impact of provisions other than provisions for restructuring) and in
respect of the Company or a Relevant Entity, the aggregate of the Company’s or
the Relevant Entity’s (as the case may be) (as determined from the accounts of
the Relevant Entity most recently delivered by the Company to the Intercreditor
Agent under Clause 9.2(a)(v)) Operating Income, Depreciation and Amortisation
of Assets, where:

 

(a)                                  Operating Income means net sales minus operating expenses
(operating expenses being production costs and expenses, administrative and
selling expenses, research and development expenses, Depreciation and
Amortisation of Assets, additional goodwill amortisation (if any) and provision
for environmental costs);

 

(b)                                 Depreciation and
Amortisation of Assets
means:

 

(i)                                     amortisation of acquisition goodwill and equity
goodwill in net income of affiliated companies;

 

(ii)                                  amortisation of patents, licenses,
trade-marks and software;

 

(iii)                               amortisation of other intangible assets;

 

(iv)                              depreciation of land, buildings and other
tangible assets;

 

(v)                                 additional goodwill amortisation (if any);
and

 

(vi)                              investments allowance.

 

EBITDAR means in respect of a particular period, EBITDA for that period plus
the aggregate amount of any lease rental payments paid or payable in that
period to the extent such payments are taken into account as an operating
expense in the calculation of EBITDA.

 

Net Financial Expenses means, in respect of a particular period,
Interest Expenses minus Interest
Income, where:

 

(a)                                  Interest Expenses means the aggregate of the Company’s
interest on financial debts and financing operations (being interest on loans
payable and bank overdrafts, financial expenses related to securitisations, the
interest element of lease rental payments, discounts of notes receivable and
amortisation of redemption premium) after capitalisation of financial expenses
related to the financing of certain assets and incorporated in the purchase
cost of such assets, excluding
penalties or commissions for loan prepayment, losses on financial instruments
such as interest rate options and interest rate swaps, interest payable on non
financial debts (commercial or other), loans issuing costs whether or not
spread over the duration of the loan, net losses on disposals of marketable
securities, decreases in the probable stock exchange value of trading
securities, losses on repurchase of shares, debentures and other securities
issued by the Company or its Subsidiaries; and

 

 

(b)                                 Interest income means the Company’s interest income on
financial assets (loans receivable, debit balance on bank current accounts,
etc.), excluding income from non
financial receivables, gains on financial instruments such as interest rate
swaps or interest rate options, gains on disposal of marketable securities,
increase in the probable stock exchange value of trading securities, income
from marketable securities, gains on repurchase of shares, debentures or other
securities issued by the Company or its Subsidiaries,

 

each as calculated from the
items so described in the English language version of the consolidated
financial statements of the Company most recently delivered by the Company to
the Intercreditor Agent under Clause 9.2 (Financial information).

 

Ratio Period means each twelve month period ending on the date to which each set of
financial statements delivered by the Company pursuant to Clause 9.2 (Financial
information) was prepared.

 

Testing Date means 31st March, 30th June, 30th September and 31st December of each
year.

 

10.2                        Ratio of Consolidated Net
Indebtedness to Adjusted EBITDAR

 

The Company shall procure
that the ratio of its Consolidated Net Indebtedness to its Adjusted EBITDAR is
not, on each Testing Date in relation to any Ratio Period ending on that
Testing Date, greater than:

 

(a)                                  9.0:1.0 in respect of the Ratio Period ending
on 31st December, 2003; and

 

(b)                                 9.5:1.0 in respect of the Ratio Period ending
on 31st March, 2004.

 

10.3                        Ratio of EBITDAR to Net
Financial Expenses

 

The Company shall procure
that the ratio of its EBITDAR to its Net Financial Expenses is not, at the end
of each Ratio Period, less than:

 

(a)                                  2.0 to 1.0 in respect of the Ratio Period
ending on 31st December, 2003; and

 

(b)                                 1.75 to 1.0 in respect of the Ratio Period
ending on 31st March, 2004.

 

10.4                        Net Debt

 

The Company shall procure
that the Consolidated Net Indebtedness is not on each Testing Date greater
than:

 

(a)                                  €3,850,000,000 on the Testing Date falling on
31st December, 2003; and

 

(b)                                 €4,050,000,000 on the Testing Date falling on
31st March, 2004.

 

10.5                        Calculation and
interpretation

 

(a)                                  All the terms used in Clause 10.1 (Financial
covenant definitions) are to be calculated in accordance with the accounting
principles and practices applied in connection with the Original Financial
Statements, consistently applied.

 

(b)                                 The Company shall promptly notify the
Intercreditor Agent of:

 

(i)                                     each change in the accounting principles and
practices in accordance with which the Company’s consolidated financial
statements are prepared; and

 

(ii)                                  each change in the end of the Company’s
financial year.

 

(c)                                  Following each change of the type referred to
in paragraph (b) above, the Company shall:

 

(i)                                     procure that its chief financial officer or
(if the Intercreditor Agent so requests) its statutory auditors deliver with
the audited financial statements of the Company next delivered under Clause 9.2
(Financial information) (the New Accounts)
a certificate containing a description of the change in the basis on which the
Company’s consolidated financial statements are prepared from that used in the
preparation of the consolidated financial statements of the Company delivered
immediately prior to the change (the Old
Accounts) and information:

 

 

(A)                              sufficient, in the reasonable opinion of the
Majority Lenders, to allow the Finance Parties to make an accurate comparison
of the Company’s financial position as set out in the Old Accounts and that set
out in the New Accounts and any adjustments necessary to ensure that the New
Accounts reflect the format, and/or basis used in the preparation, of the Old
Accounts; and

 

(B)                                sufficient, in the reasonable opinion of the
Intercreditor Agent, to enable the Intercreditor Agent to ascertain the
compliance by the Company with the financial covenants contained in Clauses
10.2 (Ratio of Consolidated Net Indebtedness to Adjusted EBITDAR) and 10.3
(Ratio of EBITDAR to Net Financial Expenses); and

 

(ii)                                  at the request of the Intercreditor Agent
(acting on the instructions of the Majority Lenders), negotiate in good faith
with the Intercreditor Agent with a view to agreeing such amendments to this
Clause 10 as may be necessary to ensure that the Finance Parties’ interests
under this Agreement are not prejudiced by such change.

 

(d)                                 If:

 

(i)                                     the Intercreditor Agent, acting reasonably,
disputes (1) the Company’s statutory auditors’ interpretation of any term in
Clause 10.1 (Financial covenant definitions) or any computation under this
Clause 10, in each case, contained in a certificate delivered by the Company
under Clause 9.2 (Financial information) or (2) any certificate or the contents
thereof delivered by the Company’s statutory auditors; or

 

(ii)                                  if no agreement is reached within 30 days of
a request by the Intercreditor Agent under paragraph (c)(ii) above),

 

the Intercreditor Agent may,
at the expense of the Company, instruct an independent expert (which shall be
an internationally recognised independent qualified firm of auditors) to act as
an expert and not as an arbitrator, and the determination of such expert shall
be final and binding on the Parties and, in the case of an instruction made
pursuant to paragraph (d)(ii) above, this Agreement will be amended to the
extent such expert advises to be necessary to ensure that the Finance Parties’
interests under this Agreement are not prejudiced by the change of the type
referred to in paragraph (b) above.

 

11.                               DEFAULT

 

11.1                           On and from the Commencement Date and (i)
until the Term Date; or (ii) if a Default is outstanding on the Term Date,
until no Default is outstanding, the expression Event of Default as defined in this Agreement shall supplement
all events of default or termination events (howsoever defined or described)
contained in the documentation relating to each Affected Facility as if such
Events of Default were set out therein mutatis
mutandis.

 

11.2                           Each of the events or circumstances set out
in this Clause 11 is an Event of Default (whether or not caused by any reason
whatsoever outside the control of any Obligor or any other person).

 

11.3                        Non-payment

 

An Obligor does not pay on
the due date any amount payable by it under any Finance Document or Facility
Agreement in the manner required under the Finance Documents or Facility
Agreements, unless the non-payment:

 

(a)                                  is caused by technical or administrative
error; and

 

(b)                                 is remedied within three Business Days of the
due date.

 

11.4                        Breach of other obligations

 

(a)       (i)                The
Company does not comply with any term of Clause 10 (Financial covenants) or
Clause 9.21 (Rights Issue and Other Matters); or

 

(ii)                                  at any time the projections set out in the
most recent Business Plan show that the Company will not be in compliance with
any term of Clause 10 (Financial covenants) on the then next Testing Date.

 

(b)                                 An Obligor does not comply with any of its
obligations (other than as referred to in paragraph (a) above) under any
Finance Document or any Facility Agreement not already referred to in paragraph
(a) above unless the non-compliance is capable of remedy and is remedied
within:

 

 

(i)                                     fifteen calendar days of the earlier of the
Intercreditor Agent giving notice and the Obligor becoming aware of the
non-compliance; or

 

(ii)                                  where the non-compliance is in respect of an
Obligor’s obligations under a Facility Agreement, within the applicable grace
period provided in that Facility Agreement.

 

11.5                        Misrepresentation

 

(a)                                  A representation, warranty or statement made
or repeated in or in connection with any Finance Document or Facility
Agreements or in any document delivered by or on behalf of any Obligor under or
in connection with any Finance Document or Facility Agreement is incorrect in
any material respect when made or deemed to be made or repeated.

 

(b)                                 The Majority Lenders determine that a
representation, warranty or statement made or repeated in or in connection with
the Rights Issue or in any document delivered by or on behalf of any Obligor
under or in connection with the Rights Issue is incorrect in any material
respect when made or deemed to be made or repeated.

 

11.6                        Cross-default

 

(a)                                  Any of the following occurs in respect of any
Obligor or a Material Subsidiary:

 

(i)                                     any of its Financial Indebtedness is not paid
when due after the expiry of any applicable grace periods; or

 

(ii)                                  any event of default, termination event,
early repayment event or prepayment event or circumstance howsoever described
occurs under any document relating to its Financial Indebtedness (other than
this Agreement) including, without limitation, under the High Yield Bonds; or

 

(iii)                               any of its Financial Indebtedness is (or
becomes capable of being) declared prematurely due and payable or placed on
demand as a result of an event of default, termination event, early repayment
event or prepayment event (howsoever described) under the document relating to
that Financial Indebtedness including, without limitation, under the High Yield
Bonds; or

 

(iv)                              any commitment for, or underwriting of, any
Financial Indebtedness is cancelled or suspended as a result of an event of
default, termination event, early repayment event or prepayment event
(howsoever described) under the document relating to that Financial
Indebtedness; or

 

(v)                                 any Security Interest securing Financial
Indebtedness over any of its asset(s) becomes enforceable,

 

(b)                                 Provided that there shall only be an Event of
Default under this Clause 11.6, (i) if the aggregate amount of Financial
Indebtedness which is not paid when due or after the expiry of any applicable
grace period and/or to which that event of default, termination event, early
repayment event or prepayment event relates and/or which is (or becomes capable
of being) declared prematurely due and payable or placed on demand in each case
under paragraph (a) above exceeds €15,000,000 (or the equivalent in other
currencies) and (ii) in the case of a prepayment event in respect of Financial
Indebtedness under the High Yield Bonds, where (A) such Financial Indebtedness
has become due and payable or placed on demand; and (B) such prepayment event
does not relate to Excess Proceeds as defined in and paid in accordance with
clause 4.10 of the High Yield Bonds and this Agreement.

 

11.7                        Insolvency

 

Any of the following occurs
in respect of an Obligor or a Material Subsidiary:

 

(a)                                  it is, or is deemed for the purposes of any
law to be, unable to pay its debts as they fall due or insolvent (including
without limitation “en état de cessation des
paiements”);

 

(b)                                 it admits inability to pay its debts as they
fall due;

 

(c)                                  it suspends making payments on all or of its
or any class of its debts or announces an intention to do so;

 

(d)                                 a moratorium is declared in respect of any of
its indebtedness;

 

(e)                                  by reason of financial difficulties, applies
for, or is subject to, an amicable settlement or a “réglement amiable” pursuant to Article L-611-3 of the Code de Commerce of France, or begins
negotiations with one or more of its creditors with a view to the readjustment
or rescheduling of any of its indebtedness; or

 

 

(f)                                    its situation becomes irremediably
compromised or it acts otherwise within the meaning of L-313-12 of the Code Monétaire et Financier.

 

11.8                        Insolvency proceedings

 

Any of the following occurs
in respect of an Obligor or a Material Subsidiary:

 

(a)                                  any step (including petition, proposal or
convening a meeting) is taken with a view to a composition, assignment or
arrangement with any of its creditors;

 

(b)                                 a meeting is convened for the purpose of
considering any resolution for (or to petition for) its winding-up,
administration or dissolution (including without limitation “dissolution, liquidation or redressement judiciaire”)
or any such resolution is passed;

 

(c)                                  any person presents a petition for its
winding-up or administration;

 

(d)                                 an order for its winding-up, administration,
dissolution or bankruptcy is made; or

 

(e)                                  a judgement is issued for the judicial
liquidation (“liquidation judiciaire”)
or the transfer of the whole of its business (“cession
de l’entreprise”); or

 

(f)                                    any other step (including petition, proposal
or convening a meeting) is taken with a view to its rehabilitation,
administration, custodianship, liquidation, winding-up or dissolution or any
other insolvency proceedings involving it.

 

11.9                        Appointment of receivers and
managers

 

Any of the following occurs
in respect of an Obligor or a Material Subsidiary:

 

(a)                                  any liquidator, trustee in bankruptcy,
judicial custodian, compulsory manager, receiver, administrative receiver,
administrator, administrateur judiciaire,
provisoire mandataire ad hoc, conciliateur or mandataire liquidateur or similar officer
is appointed in respect of it or any of its assets;

 

(b)                                 its directors or other officers request the
appointment of a liquidator, trustee in bankruptcy, judicial custodian,
compulsory manager, receiver, administrative receiver, administrator, administrateur judiciaire, provisoire mandataire ad
hoc, conciliateur or mandataire
liquidateur or similar officer; or

 

(c)                                  any other steps are taken to enforce any
Security Interest over any part of its assets.

 

11.10                 United States Bankruptcy
Laws

 

(a)                                  In this Subclause:

 

U.S. Bankruptcy Law means the United States Bankruptcy Code 1978 or any other United
States Federal or State bankruptcy, insolvency or similar law.

 

U.S. Obligor means an Obligor incorporated or organised under the laws of the
United States of America or any state of the United States of America
(including the District of Columbia).

 

Terms used in this Subclause
have the meanings given to them in the United States Bankruptcy Code 1978, as
amended, and applicable fraudulent conveyance laws in the United States of
America.

 

(b)                                 Any of the following occurs in respect of a
U.S. Obligor (other than Primester in the case of paragraphs (iv) or (v) below)
(on a consolidated basis):

 

(i)                                     it makes a general assignment for the benefit
of creditors;

 

(ii)                                  it commences a voluntary case or proceeding
under any U.S. Bankruptcy Law; or

 

 

(iii)                               an involuntary case under any U.S. Bankruptcy
Law is commenced against it and is not controverted within 21 days or is not
dismissed or stayed within 45 days after commencement of the case; or

 

(iv)                              the aggregate amount of its debts (including
its obligations (if any) under the Finance Documents and the Facility
Agreements) is greater than the aggregate value (being the lesser of fair present
valuation and present fair saleable value) of its assets (which for, avoidance
of doubt, include, without limitation, all rights of indemnification,
contribution and subrogation); or

 

(v)                                 its capital is unreasonably small to carry on
its business as it is being conducted; or

 

(vi)                              it incurs debts beyond its ability to pay as
they mature on the date on which the debts were incurred; or

 

(vii)                           it has made a transfer or incurred an
obligation under a Finance Document or a Facility Agreement with the intent to
hinder, delay or defraud any of its present or future creditors.

 

11.11                 Creditors’ process

 

Any attachment,
sequestration, distress execution or analogous event or circumstance affects
any material asset(s) of an Obligor or a Material Subsidiary and which in the
reasonable opinion of the Majority Lenders has or could be expected to have a
Material Adverse Effect.

 

11.12                 Analogous proceedings

 

There occurs, in relation to
an Obligor or a Material Subsidiary, any event or circumstance anywhere which,
in the opinion of the relevant Lender or the Majority Lenders (acting in good
faith), appears to correspond with any of those mentioned in Clauses 11.7
(Insolvency) to 11.11 (Creditors’ process) (inclusive).

 

11.13                 Cessation of business

 

Any Obligor or a Material
Subsidiary ceases, or threatens to cease, to carry on all or a substantial part
of its business except in respect of the Asset Disposal Programme.

 

11.14                 Effectiveness of Finance
Documents and Facility Agreements

 

(a)                                  It is or becomes unlawful for an Obligor or
any other person (other than a Finance Party) to perform any of its obligations
under the Finance Documents or the Facility Agreements.

 

(b)                                 Any Finance Document or Facility Agreement is
not effective or is alleged by an Obligor to be ineffective for any reason.

 

(c)                                  An Obligor repudiates a Finance Document or
Facility Agreement or evidences an intention to repudiate a Transaction
Document.

 

(d)                                 A Security Document does not create the
security it purports to create in any respect considered by the Majority
Lenders to be materially adverse to the interests of the Finance Parties under
the Finance Documents or the Facility Agreements.

 

(e)                                  A guarantee of any Obligor is invalid or
unenforceable in any respect considered by the Majority Lenders to be
materially adverse to the interests of the Finance Parties under the Finance
Documents or the Facility Agreements.

 

(f)                                    The subordination provisions under the
Subordination Agreement or the ranking of security under the Security Documents
is not effective.

 

(g)                                 The Rights Issue is not completed by the Term
Date or the Company repudiates, declares or states in writing that it cannot or
does not intend to, or it becomes unlawful for the Company to, complete the
Rights Issue by the Term Date.

 

(h)                                 The Asset Disposal Programme is not initiated
or implemented in accordance with the terms of the definition thereof or the
Company repudiates, declares or states in writing that it cannot or does not
intend to, or it becomes unlawful for the Company to, initiate or implement the
Asset Disposal Programme in accordance with the terms of the definition
thereof.

 

 

11.15                 Audit qualification

 

An Obligor’s auditors
qualify their report on any audited consolidated accounts of the relevant
Obligor in any manner whatsoever (except where such qualification is of a minor
technical or non-material nature) and (except in the case of the Company) where
that qualification is material in the context of the Group (taken as a whole).

 

11.16                 Shares and Dividends

 

A meeting of shareholders of
the Company is convened at which a resolution is passed to pay any dividend, or
other distribution (in cash or in kind) in respect of its share capital or any
management fees or charges in favour of its shareholders or its shareholders’
Affiliates.

 

11.17                 ERISA

 

(a)                                  Any Plan fails to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortisation period is sought or granted
under section 412 of the Code; or

 

(b)                                 a notice of intent to terminate any Plan is,
or is reasonably expected to be, filed with the PBGC or the PBGC institutes
proceedings under ERISA section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC notifies the Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings; or

 

(c)                                  the aggregate accumulated benefit obligations
(as defined in Statement of Financial Accounting Standards 87) under all Plans
exceeds the fair market value of all assets of such Plans allocable to such
benefits by more than US$50,000,000, all determined as of the date of the most
recent financial statements for such Plans; or

 

(d)                                 the Company or any ERISA Affiliate incurs or
is reasonably expected to incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans; or

 

(e)                                  the Company or any ERISA Affiliate withdraws
from any Multiemployer Plan; or

 

(f)                                    any member of the Group establishes or amends
any employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of any member of the
Group thereunder,

 

and such events (whether
individually or taken together) could reasonably be expected to have a Material
Adverse Effect.

 

11.18                 Litigation

 

Any litigation, arbitration
or administrative proceeding or claim is threatened, pending, commenced or
ongoing against any Obligor, any Material Subsidiary or any of the assets of
the Group which in the opinion of the Majority Lenders has or could reasonably
be expected to have by itself or together with any other such proceedings or
claims to have a Material Adverse Effect.

 

11.19                 Material adverse change

 

Any event or circumstance
occurs after the date of this Agreement, which, in the opinion of the Majority
Lenders (acting in good faith) has, or could reasonably be expected to have, a
Material Adverse Effect.

 

11.20                 Enforcement Action

 

(a)                                  On and at any time after the occurrence of an
Event of Default and whilst the same is outstanding:

 

(i)                                     a Lender may, upon the occurrence of an Event
of Default under Clause 11.3 (Non-payment) or under Clauses 11.7 (Insolvency)
through to 11.12 (Analogous proceedings) (inclusive) or under Clause 11.14
(Effectiveness of Finance Documents);

 

(ii)                                  a Lender to Rhodia Inc. may upon the
occurrence of an Event of Default occurring under Clause 11.6 (Cross-default)
with respect to the USPP and any enforcement action having been taken with
respect to the guarantee of the USPP by Rhodia Inc.;

 

(iii)                               a Lender to Rhodia Inc. may upon the
occurrence of an Event of Default occurring under Clause 11.6 (Cross-default)
as a result of any Financial Indebtedness of the Company and/or Rhodia Holdings
Inc. and/or Rhodia Inc. exceeding €30,000,000 (or its equivalent in other
currencies) becoming due and payable before its stated maturity by way of a
declared default under the document relating to that Financial Indebtedness
after expiry of any applicable grace period;

 

 

and

 

(iv)                              a Lender to Rhodia Inc. may if Rhodia Inc.
makes a payment or distribution on or after the date of this Agreement to the
Company with sale proceeds from disposals of its assets in an aggregate amount
exceeding €150,000,000 (or its equivalent in other currencies),

 

exercise any and all rights
and remedies (including without limitation subject to the Security Sharing
Agreement, taking any Enforcement Action) as it has under or in connection with
any Affected Facility subject to and in accordance with its terms.

 

(b)                                 On and at any time after notification by the
Intercreditor Agent of a Declared Default (which Intercreditor Agent shall
notify to all Parties if so instructed by the Majority Lenders) and whilst the
same is outstanding a Lender may:

 

(i)                                     exercise any and all rights and remedies
(including without limitation, subject to the Security Sharing Agreement, take
any Enforcement Action) as it has under or in connection with any Affected
Facility or otherwise; and/or

 

(ii)                                  take or instruct the Security Agent or
Intercreditor Agent to take such Enforcement Action as is permitted by and in
accordance with the Security Sharing Agreement and the other Finance Documents.

 

(c)                                  A Lender shall notify the Intercreditor Agent
before exercising the rights referred to in paragraphs (a) and (b) above.

 

(d)                                 The provisions of this Clause 11.20
(Enforcement Action) shall continue in full force and effect and shall survive
the termination of this Agreement with respect to any outstanding Default or
Declared Default notwithstanding the expiry of the Secured Intercreditor
Period.

 

12.                               THE ADMINISTRATIVE PARTIES

 

12.1                        Appointment and duties of
the Intercreditor Agent

 

(a)                                  Each Finance Party (other than the
Intercreditor Agent) irrevocably appoints the Intercreditor Agent to act as its
agent under the Finance Documents.

 

(b)                                 Each Finance Party (other than the
Intercreditor Agent) irrevocably authorises the Intercreditor Agent to:

 

(i)                                     perform the duties and to exercise the
rights, powers and discretions that are specifically given to it under the
Finance Documents, together with any other incidental rights, powers and
discretions; and

 

(ii)                                  execute each Finance Document in an agreed
form expressed to be executed by the Intercreditor Agent.

 

(c)                                  The Intercreditor Agent has only those duties
which are expressly specified in this Agreement. Those duties are solely of a
mechanical and administrative nature.

 

12.2                        The Members

 

Except as specifically
provided in the Finance Documents, no Member has any obligations of any kind to
any other Party in connection with any Finance Document.

 

12.3                        No fiduciary duties

 

Nothing in the Finance
Documents makes the Intercreditor Agent a trustee or fiduciary for any other
Party or any other person. The Intercreditor Agent need not hold in trust any
moneys paid to it for a Party or be liable to account for interest on those
moneys.

 

12.4                        Individual position of the
Intercreditor Agent

 

(a)                                  If it is also a Lender, the Intercreditor
Agent has the same rights and powers under the Finance Documents as any other
Lender and may exercise those rights and powers as though it were not an agent.

 

(b)                                 The Intercreditor Agent may:

 

(i)                                     carry on any business with any Obligor or its
related entities (including acting as an agent or a trustee for any other
financing); and

 

(ii)                                  retain any profits or remuneration it
receives under the Finance Documents or in relation to any other business it
carries on with any Obligor or its related entities.

 

 

12.5                        Reliance

 

The Intercreditor Agent may:

 

(a)                                  rely on any notice or document believed by it
to be genuine and correct and to have been signed by, or with the authority of,
the proper person;

 

(b)                                 rely on any statement made by any person
regarding any matters which may reasonably be assumed to be within his
knowledge or within his power to verify;

 

(c)                                  engage, pay for and rely on professional
advisers selected by it (including those representing a Party other than the
Intercreditor Agent); and

 

(d)                                 act under the Finance Documents through its
personnel and agents.

 

12.6                        Majority Lenders’
instructions

 

(a)                                  The Intercreditor Agent is fully protected if
it acts on the instructions of the Majority Lenders or where expressly required
by the terms of the Finance Documents, the Lenders in the exercise of any
right, power or discretion or any matter not expressly provided for in the
Finance Documents. Any such instructions given by the Majority Lenders or the
Lenders as the case may be will be binding on all the Lenders. In the absence
of instructions, the Intercreditor Agent may act as it considers to be in the
best interests of all the Lenders.

 

(b)                                 The Intercreditor Agent is not authorised to
act on behalf of a Lender (without first obtaining that Lender’s consent) in
any legal or arbitration proceedings in connection with any Finance Document.

 

(c)                                  The Intercreditor Agent may require the
receipt of security satisfactory to it, whether by way of payment in advance or
otherwise, against any liability or loss which it may incur in complying with
the instructions of the Majority Lenders.

 

12.7                        Responsibility

 

(a)                                  The Intercreditor Agent is not responsible to
any other Finance Party for the adequacy, accuracy or completeness of:

 

(i)                                     any Finance Document or any other document;
or

 

(ii)                                  any statement or information (whether written
or oral) made in or supplied in connection with any Finance Document.

 

(b)                                 Without affecting the responsibility of any
Obligor for information supplied by it or on its behalf in connection with any
Finance Document, each Lender confirms that it:

 

(i)                                     has made, and will continue to make, its own
independent appraisal of all risks arising under or in connection with the
Finance Documents (including the financial condition and affairs of each
Obligor and its related entities and the nature and extent of any recourse
against any Party or its assets); and

 

(ii)                                  has not relied exclusively on any information
provided to it by the Intercreditor Agent in connection with any Finance
Document.

 

12.8                        Exclusion of liability

 

(a)                                  The Intercreditor Agent is not liable to any
other Finance Party for any action taken or not taken by it in connection with
any Finance Document, unless directly caused by its negligence or wilful
misconduct.

 

(b)                                 No Party may take any proceedings against any
officer, employee or agent of the Intercreditor Agent in respect of any claim
it might have against the Intercreditor Agent or in respect of any act or
omission of any kind by that officer, employee or agent in connection with any
Finance Document. Any officer, employee or agent of the Intercreditor Agent may
rely on this Subclause.

 

 

12.9                        Default

 

(a)                                  The Intercreditor Agent is not obliged to
monitor or enquire whether a Default has occurred. The Intercreditor Agent is
not deemed to have knowledge of the occurrence of a Default.

 

(b)                                 If the Intercreditor Agent:

 

(i)                                     receives notice from a Party referring to
this Agreement, describing a Default and stating that the event is a Default;
or

 

(ii)                                  is aware of the non-payment of any principal
or interest or any fee payable to a Lender under this Agreement,

 

it must promptly notify the
Lenders.

 

12.10                 Information

 

(a)                                  The Intercreditor Agent must promptly forward
to the person concerned the original or a copy of any document which is
delivered to the Intercreditor Agent by a Party for that person.

 

(b)                                 Except where a Finance Document specifically
provides otherwise, the Intercreditor Agent is not obliged to review or check
the adequacy, accuracy or completeness of any document it forwards to another
Party.

 

(c)                                  Except as provided above, the Intercreditor
Agent has no duty:

 

(i)                                     either initially or on a continuing basis to
provide any Lender with any credit or other information concerning the risks
arising under or in connection with the Finance Documents (including any
information relating to the financial condition or affairs of any Obligor or
its related entities or the nature or extent of recourse against any Party or
its assets) whether coming into its possession before, on or after the date of
this Agreement; or

 

(ii)                                  unless specifically requested to do so by a
Lender in accordance with a Finance Document, to request any certificate or
other document from any Obligor.

 

(d)                                 In acting as the Intercreditor Agent, its
agency division is treated as a separate entity from its other divisions and
departments. Any information acquired by it which, in its opinion, is acquired
by it otherwise than in its capacity as the Intercreditor Agent may be treated
as confidential by the Intercreditor Agent and will not be treated as
information possessed by the Intercreditor Agent in its capacity as such.

 

(e)                                  Each Obligor irrevocably authorises the
Intercreditor Agent to disclose to the other Finance Parties any information
which, in its opinion (acting reasonably), is received by it in its capacity as
the Intercreditor Agent.

 

12.11                 Indemnities

 

(a)                                  Without limiting the liability of any Obligor
under the Finance Documents, each Lender must indemnify the Intercreditor Agent
for that share of any loss or liability incurred by it in acting as the
Intercreditor Agent, except to the extent that the loss or liability is caused
by its gross negligence or wilful misconduct. A Lender’s share of any loss or
liability is the proportion which the Exposure of the Lender bears to the
aggregate of the Exposures of all the Lenders.

 

(b)                                 The Intercreditor Agent may deduct from any
amount received by it for a Lender any amount due to the Intercreditor Agent
from that Lender under a Finance Document but unpaid.

 

12.12                 Compliance

 

The Intercreditor Agent may
refrain from doing anything (including the disclosure of any information) which
might, in its opinion, constitute a breach of any law or regulation or be otherwise
actionable at the suit of any person, and may do anything which, in its
opinion, is necessary or desirable to comply with any law or regulation.

 

12.13                 Resignation of the
Intercreditor Agent

 

(a)                                  The Intercreditor Agent may resign and
appoint any of its Affiliates as successor Intercreditor Agent by giving notice
to the Lenders and the Company.

 

 

(b)                                 Alternatively, the Intercreditor Agent may
resign by giving notice to the Lenders and the Company, in which case the
Majority Lenders (after prior consultation with the Company) may appoint a
successor Intercreditor Agent.

 

(c)                                  If no successor Intercreditor Agent has been
appointed under paragraph (b) above within 30 days after notice of resignation
was given, the Intercreditor Agent (after prior consultation with the Company)
may appoint a successor Intercreditor Agent.

 

(d)                                 The person(s) appointing a successor
Intercreditor Agent must, if practicable, consult with the Company prior to the
appointment.

 

(e)                                  The resignation of the Intercreditor Agent
and the appointment of any successor Intercreditor Agent will both become
effective only when the successor Intercreditor Agent notifies all the Parties
that it accepts its appointment. On giving the notification, the successor
Intercreditor Agent will succeed to the position of the retiring Intercreditor
Agent and Intercreditor Agent will
mean the successor Intercreditor Agent.

 

(f)                                    The retiring Intercreditor Agent must, at its
own cost, make available to the successor Intercreditor Agent such documents and
records and provide such assistance as the successor Intercreditor Agent may
reasonably request for the purposes of performing its functions as the
Intercreditor Agent under the Finance Documents.

 

(g)                                 Upon its resignation becoming effective, this
Clause will continue to benefit a retiring Intercreditor Agent in respect of
any action taken or not taken by it in connection with the Finance Documents
while it was the Intercreditor Agent, and, subject to paragraph (f) above, it
will have no further obligations under any Finance Document.

 

(h)                                 The Majority Lenders may, by notice to the
Intercreditor Agent, require it to resign under paragraph (b) above.

 

12.14                 Relationship with Lenders

 

(a)                                  The Intercreditor Agent may treat each Lender
as a Lender, entitled to payments under this Agreement and as acting through
its Facility Office(s) until it has received not less than five Business Days’
prior notice from that Lender to the contrary.

 

(b)                                 The Intercreditor Agent may at any time, and
must if requested to do so by the Majority Lenders, convene a meeting of the
Lenders.

 

12.15                 Intercreditor Agent’s
management time

 

If the Intercreditor Agent
requires, any amount payable to the Intercreditor Agent by any Party under any
indemnity or in respect of any costs or expenses incurred by the Intercreditor
Agent under the Finance Documents after the date of this Agreement may include
the cost of using its management time or other resources and will be calculated
on the basis of such reasonable daily or hourly rates as the Intercreditor
Agent may notify to the relevant Party. This is in addition to any amount in
respect of fees or expenses paid or payable to the Intercreditor Agent under
any other term of the Finance Documents.

 

13.                               EXPENSES

 

13.1                        Initial and special costs

 

The Company shall forthwith
on demand pay the amount of all costs and expenses (including legal fees)
properly incurred by any Lender and the Intercreditor Agent in connection with:

 

(a)                                  the negotiation, preparation, printing and
execution of:

 

(i)                                     this Agreement and any other documents
referred to in this Agreement; and

 

(ii)                                  any other Finance Document (other than an
Accession Agreement) executed after the date of this Agreement; and

 

(b)                                 any amendment, waiver, consent or suspension
of rights (or any proposal for any of the foregoing) requested by or on behalf
of an Obligor and relating to a Finance Document or a document referred to in
any Finance Document.

 

13.2                        Enforcement costs

 

The Company shall forthwith
on demand pay to each Finance Party the amount of all costs and expenses
(including legal fees) incurred in connection with the enforcement of, or the
preservation of any rights under, any Finance Document.

 

 

14.                               CHANGES TO THE PARTIES

 

14.1                        Transfer by Obligors

 

No Obligor may assign,
transfer or novate or dispose of any of, or any interest in, any of its rights
and/or obligations under the Finance Documents.

 

14.2                        Accession by Additional
Obligors

 

(a)                                  The Company must ensure that each Borrowing
Group Member (other than an Original Obligor) which is a party to an Affected
Facility becomes an Additional Obligor in the manner required by this Clause
14.2 as soon as reasonably practicable and in any event not later than 31st
January, 2004.

 

(b)                                 The relevant Borrowing Group Member will
become an Additional Obligor and be bound by all the obligations under the
Finance Documents as if it had been originally party to those documents as an
Obligor when the Intercreditor Agent notifies the other Finance Parties and the
Company that it has received all of the documents and evidence listed in Part 3
of Schedule 2 (Additional Obligor conditions precedent documents) in form and
substance satisfactory to it. The Intercreditor Agent must give this
notification as soon as reasonably practicable.

 

(c)                                  Delivery of an Accession Agreement, executed
by the relevant Borrowing Group Member and the Company, to the Facility Agent
constitutes confirmation by that Subsidiary and the Company that the
representations set out in Clause 8 which are to be repeated and under Clauses
8.19, 8.20 and 8.23 as if repeated are then correct.

 

(d)                                 Paragraph (a) does not apply to Primester for
as long as it has no loan outstanding under the Primester Facility.

 

14.3                        Transfers by Lenders

 

(a)                                  No Lender may assign, transfer or novate any
of its rights and/or obligations under any of the Finance Documents unless and
until the assignee or transferee has delivered a duly executed Accession
Agreement to the Intercreditor Agent.

 

(b)                                 Notwithstanding paragraph (a) above, no
Lender which is or is to become a party to the Refinancing Facilities Agreement
may assign, transfer or novate any of its rights and/or obligations under any
of the Finance Documents (except to an Affiliate which has delivered an
Accession Agreement pursuant to paragraph (a)) unless and until the Refinancing
Facilities Agreement has been executed by all parties thereto.

 

14.4                        Accession by Lenders

 

(a)                                  During the Secured Intercreditor Period, upon
the delivery to the Intercreditor Agent of a duly executed Accession Agreement
the bank or financial institution which is party to that Accession Agreement
will become a party to:

 

(i)                                     this Agreement; and, to the extent entered
into at that time,

 

(ii)                                  the Security Sharing Agreement;

 

(iii)                               the Subordination Agreement; and

 

(together the Agreements) as a Lender; or

 

(b)                                 Any person becoming a party to the Agreements
under paragraph (a) shall be entitled to the benefit of all the provisions and
bound by all of the obligations in the Agreements with effect from the date of
accession as if it had been an original party to those Agreements.

 

14.5                        Register

 

The Intercreditor Agent
shall keep a register of all the Parties and shall supply any other Party (at
that Party’s expense) with a copy of the register on request.

 

 

15.                               AMENDMENTS AND WAIVERS

 

15.1                        Procedure

 

(a)                                  Except as provided in this Clause, any term
of a Finance Document may be amended or waived with the agreement of the
Company, the Intercreditor Agent and the Majority Lenders. The Intercreditor
Agent may effect, on behalf of any Finance Party, an amendment or waiver
permitted under this Clause.

 

(b)                                 The Intercreditor Agent shall promptly notify
the other Parties of any amendment or waiver effected under paragraph (a), and
any such amendment or waiver shall be binding on all the Parties.

 

15.2                        Exceptions

 

(a)                                  An amendment or waiver not agreed by a
Finance Party which:

 

(i)                                     relates to the definition of Insolvency Event, Majority Lenders, Finance Documents, Transaction Documents, Exposure, Enforcement Action
or Term Date (other than as
expressly provided in the definition thereof) in Clause 1.1 (Definitions);

 

(ii)                                  an extension of the date of payment of any
amount to a Lender payable under the Finance Documents;

 

(iii)                               relates to a reduction in the amount of any
payment of fees or other amount payable to a Lender under the Finance Documents
or Facility Agreement to which that Party is a party;

 

(iv)                              relates to Clause 3 (Secured Intercreditor
Period), Clause 4.1 (Affected Facilities), Clause 7 (Mandatory prepayment and
cancellation), Clause 11.3 (Non-payment), Clause 11.7 (Insolvency) through to
11.12 (Analogous proceedings) (inclusive), Clause 11.14 (Effectiveness of
Finance Documents) or Clause 11.20(a) (Enforcement Action);

 

(v)                                 relates to Clause 14.1 (Transfer by Obligors)
and Clause 14.3 (Transfers by Lenders);

 

(vi)                              relates to Clause 4.11 (Amendments to
Affected Facilities);

 

(vii)                           relates to a guarantee under this Agreement
or a Security Document in favour of that Finance Party or any of the Agreed
Security Principles;

 

(viii)                        relates to this Clause 15 (Amendments and
waivers); or

 

(ix)                                relates to a term or satisfaction of a
condition of a Finance Document which expressly requires the consent or
determination of that Party,

 

is not binding on that
Party.

 

(b)                                 An amendment or waiver which affects the
rights and/or obligations of the Intercreditor Agent, or the rights of the
Co-ordinating Committee in respect of Clauses 12.2 (The Members) and 19
(Co-ordinating Committee) may not be effected without respectively the prior
written consent of the Intercreditor Agent or the Co-ordinating Committee as
applicable.

 

15.3                        Waivers and remedies
cumulative

 

The rights of each Finance
Party under this Agreement:

 

(a)                                  may be exercised as often as necessary;

 

(b)                                 are cumulative and not exclusive of its
rights under the general law; and

 

(c)                                  may be waived only in writing and
specifically.

 

Delay in exercising or
non-exercise of any such right is not a waiver of that right.

 

 

16.                               CONFIDENTIALITY

 

(a)                                  Each Finance Party must keep confidential the
terms of the Finance Documents and any information supplied to it by or on
behalf of any Obligor in connection with the Finance Documents. However, a
Finance Party is entitled to disclose information:

 

(i)                                     which is publicly available, other than as a
result of a breach by that Finance Party of this Clause;

 

(ii)                                  in connection with any legal, regulatory or
arbitration proceedings;

 

(iii)                               if required to do so under any law or
regulation;

 

(iv)                              to a government, banking, taxation or other
regulatory authority;

 

(v)                                 to its officers, directors, employees and
professional advisers;

 

(vi)                              to the extent allowed under paragraph (b)
below; or

 

(vii)                           with the agreement of the relevant Obligor.

 

The provisions of this
paragraph supersede and override any other confidentiality agreement or
undertaking signed between any Finance Party and any member of the Group in
respect of any information supplied pursuant to the Finance Documents except
information expressly provided to the Finance Parties prior to the date of this
Agreement subject to that other confidentiality agreement or undertaking.

 

(b)                                 A Finance Party may disclose to an Affiliate
or any person with whom it may enter, or has entered into, any kind of
transfer, participation or other agreement in relation to this Agreement (a participant):

 

(i)                                     a copy of this Agreement and any other
Finance Document to which it is a party; and

 

(ii)                                  any information which that Finance Party has
acquired under or in connection with any Finance Document.

 

However, before a
participant may receive any confidential information, it must agree with the
relevant Finance Party to keep that information confidential on the terms of
paragraph (a) above.

 

17.                               STAMP
DUTIES

 

The Company shall pay, and
forthwith on demand indemnify each Finance Party against any liability it
incurs in respect of, any stamp, registration and similar tax which is or
becomes payable in connection with the entry into, performance or enforcement
of any Finance Document.

 

18.                               INDEMNITIES

 

18.1                        Currency indemnity

 

(a)                                  Each Obligor must, as an independent
obligation, indemnify each Finance Party against any loss or liability
(including any exchange costs and taxes) which that Finance Party incurs as a
consequence of:

 

(i)                                     that Finance Party receiving an amount in
respect of an Obligor’s liability under the Finance Documents; or

 

(ii)                                  that liability being converted into a claim,
proof, judgement or order,

 

in a currency other than the
currency in which the amount is expressed to be payable under the relevant
Finance Document.

 

(b)                                 Unless otherwise required by law, each
Obligor waives any right it may have in any jurisdiction to pay any amount
under the Finance Documents in a currency other than that in which it is
expressed to be payable.

 

18.2                        Other indemnities

 

(a)                                  The Company must indemnify each Finance Party
against any loss or liability which that Finance Party incurs as a consequence
of:

 

(i)                                     the occurrence of any Default;

 

 

(ii)                                  any failure by an Obligor to pay any amount
due under a Finance Document on its due date, including any resulting from any
distribution or redistribution of any amount among the Lenders under this
Agreement or under the Subordination Agreement.

 

(b)                                 The Company must indemnify the Intercreditor
Agent against any loss or liability incurred by the Intercreditor Agent as a
result of:

 

(i)                                     investigating any event which the
Intercreditor Agent reasonably believes to be a Default; or

 

(ii)                                  acting or relying on any notice which the
Intercreditor Agent reasonably believes to be genuine, correct and
appropriately authorised.

 

19.                               CO-ORDINATING COMMITTEE

 

(a)                                  It is acknowledged by each Lender and by each
Borrowing Group Member that:

 

(i)                                     each Member will be entitled to receive and
retain for its own use and benefit from Borrowing Group Members the fees in
respect of the performance of its respective role as such which have been
agreed prior to the date upon which this Agreement becomes effective;

 

(ii)                                  in connection with this Agreement and the
matters the subject hereof or referred to herein no Lender has relied upon
information or advice provided by any Member and to the extent it has any
relationship with that party in its capacity as a Member, none of the Members
shall be liable to any signatory for any action taken or omitted to be taken or
for the exercise of any discretion by it in connection with any matter
contemplated hereby and shall not be responsible for the efficiency, validity,
enforceability or sufficiency of this Agreement or any matter the subject
hereof or referred to in this Agreement; and

 

(iii)                               the Borrowing Group Members shall be jointly
and severally liable to reimburse each Member for all out-of-pocket expenses
(including the fees of professional advisers appointed to advise the
Co-ordinating Committee) together with value added tax thereon, if any, incurred
by it in connection with the performance of its role as such.

 

(b)                                 The provisions of Clause 12.2 (The Members)
and this Clause 19 shall survive termination of this Agreement and each Member
may rely upon and enforce Clauses 12.2 (The Members), Clause 15.2(b) and this
Clause under the Contracts (Rights of Third Parties Act) 1999.

 

20.                               SEVERABILITY

 

If a provision of any
Finance Document is or becomes illegal, invalid or unenforceable in any
jurisdiction, that shall not affect:

 

(a)                                  the legality, validity or enforceability in
that jurisdiction of any other provision of the Finance Documents; or

 

(b)                                 the legality, validity or enforceability in
other jurisdictions of that or any other provision of the Finance Documents.

 

21.                               COUNTERPARTS

 

Each Finance Document may be
executed in any number of counterparts, and this has the same effect as if the
signatures on the counterparts were on a single copy of the Finance Document.

 

22.                               NOTICES

 

22.1                        Giving of Notices

 

(a)                                  All notices or other communications under or
in connection with the Finance Documents shall be given in writing and, unless
otherwise stated, may be given in person, by post, facsimile or e-mail. Any
such notice will be deemed to be given as follows:

 

(i)                                     if delivered in person, at the time of
delivery;

 

(ii)                                  if posted, five days after being deposited in
the post, postage prepaid, in a correctly addressed envelope;

 

(iii)                               if by facsimile, when received in legible
form; and

 

 

(iv)                              if by e-mail or any other electronic
communication, when received in legible form.

 

However, a notice given in
accordance with the above but received on a non-working day or after business
hours in the place of receipt will only be deemed to be given on the next
working day in that place.

 

(b)                                 For the purposes of the Finance Documents, an
electronic communication will be treated as being in writing.

 

(c)                                  Unless it is agreed to the contrary, any
consent or agreement required under a Finance Document must be given in
writing.

 

22.2                        Addresses for Notices

 

(a)                                  The address, facsimile number and e-mail
address of each Party (other than the Company and Intercreditor Agent) for all
notices under or in connection with the Finance Documents are those most
recently notified in writing by that Party for this purpose to the
Intercreditor Agent.

 

(b)                                 The contact details of the Company for this
purpose are:

 

Rhodia

26 quai Alphonse le Gallo

92100 Boulogne Billancourt Cedex

 

Facsimile number: +33 (1) 55
38 44 71 / 21

 

Attention: Chief Financial
Officer and General Counsel

 

(c)                                  The contact details of the Intercreditor
Agent for this purpose are:

 

BNP Paribas

European Agency/Middle Office Group

37, Place du Marché St. Honoré

75031 Paris Cedex 01

 

Facsimile number: + 33 (1)
42 98 43 17

 

Attention: Raymond
Banzon/Isabelle Blandin/Catherine Staneso

 

(d)                                 The Intercreditor Agent shall, promptly upon
request from any Party, give to that Party the address, facsimile number or
e-mail address of any other Party applicable at the time for the purposes of
this Clause.

 

22.3                        Obligors

 

(a)                                  All communications under the Finance
Documents to or from an Obligor must be sent through the Intercreditor Agent.

 

(b)                                 All communications under the Finance
Documents to or from an Obligor (other than the Company) must be sent through
the Company.

 

(c)                                  Each Obligor (other than the Company)
irrevocably appoints the Company to act as its agent:

 

(i)                                     to give and receive all communications under
the Finance Documents; and

 

(ii)                                  to sign all documents under or in connection
with the Finance Documents.

 

(d)                                 Any communication given to the Company in
connection with a Finance Document will be deemed to have been given also to
the other Obligors.

 

(e)                                  The Intercreditor Agent may assume that any
communication made by the Company is made with the consent of each other
Obligor.

 

 

23.                               LANGUAGE

 

(a)                                  Any notice given under or in connection with
any Finance Document shall be in English.

 

(b)                                 Any Existing Facility if not in English shall
if requested by the Intercreditor Agent (acting in good faith) be accompanied
by a certified English translation and, for the purposes of this Agreement
only, the English translation shall prevail unless the document is a statutory
or other official document.

 

(c)                                  All other documents provided under or in
connection with any Finance Document shall be:

 

(i)                                     in English; or

 

(ii)                                  if not in English, accompanied by a certified
English translation and, in this case, the English translation shall prevail
unless the document is a statutory or other official document.

 

24.                               JURISDICTION

 

24.1                        Submission

 

For
the benefit of each Finance Party, each Obligor agrees that:

 

(a)                                  the courts of England have exclusive
jurisdiction to settle any disputes in connection with the Finance Documents
and the English Courts are the most appropriate and convenient courts to settle
any such disputes.

 

(b)                                 Without prejudice to paragraph (a) above and
for the benefit of each Finance Party, each Obligor agrees that any New York
State Court or Federal Court sitting in New York has jurisdiction to settle any
disputes in connection with this Agreement and accordingly submits to the
jurisdiction of those courts.

 

24.2                        Service of process

 

Without
prejudice to any other mode of service, each Obligor not incorporated in
England and Wales:

 

(a)                                  irrevocably appoints Rhodia Limited as its
agent for service of process in relation to any proceedings before the English
courts in connection with any Finance Document;

 

(b)                                 irrevocably appoints Rhodia Inc. as its agent
for service of process, where required, in relation to any proceedings before
any courts located in the State of New York in connection with any Finance
Document;

 

(c)                                  agrees that failure by the process agent to
notify the relevant Obligor of the process will not invalidate the proceedings
concerned;

 

(d)                                 consents to the service of process relating
to any such proceedings by prepaid posting of a copy of the process to its
address for the time being notified under Clause 22 (Notices).

 

If any person appointed as
process agent is unable for any reason to act as agent for service of process,
the Company (on behalf of all the Obligors) must immediately appoint another
agent on terms acceptable to the Intercreditor Agent. Failing this, the
Intercreditor Agent may appoint another agent for this purpose.

 

24.3                        Forum convenience and
enforcement abroad

 

Each Obligor:

 

(a)                                  waives objection to the English and New York
State and Federal Courts on grounds of inconvenient forum or otherwise as
regards proceedings in connection with a Finance Document; and

 

(b)                                 agrees that a judgement or order of an
English or New York State or Federal Court in connection with a Finance
Document is conclusive and binding on it and may be enforced against it in the
courts of any other jurisdiction.

 

24.4                        Non-exclusivity

 

Nothing in this Clause 24
limits the right of any Finance Party to bring proceedings against an Obligor
in connection with the Finance Documents:

 

(a)                                  in any other court of competent jurisdiction;
or

 

(b)                                 concurrently in more than one jurisdiction.

 

 

25.                               WAIVER OF IMMUNITY

 

25.1                        Waiver of immunity

 

Each Obligor irrevocably and
unconditionally:

 

(a)                                  agrees that if a Finance Party brings
proceedings against it or its assets in relation to the Finance Documents, no
immunity from those proceedings (including, without limitation, suit,
attachment prior to judgement, other attachment, the obtaining of judgement,
execution or other enforcement) will be claimed by or on behalf of itself or
with respect to its assets;

 

(b)                                 waives any such right of immunity which it or
its assets now has or may subsequently acquire; and

 

(c)                                  consents generally in respect of any such
proceedings to the giving of any relief or the issue of any process in
connection with those proceedings, including, without limitation, the making,
enforcement or execution against any assets whatsoever (irrespective of its use
or intended use) of any order or judgment which may be made or given in those
proceedings.

 

25.2                        Waiver of trial by jury

 

THE OBLIGORS AND THE FINANCE
PARTIES WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL OR ANY CLAIM OR CAUSE OF
ACTION BASED ON OR ARISING FROM ANY FINANCE DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED BY THE FINANCE DOCUMENTS. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY THE COURT.

 

26.                               GOVERNING
LAW

 

This Agreement shall be
governed by English law.

 

This Agreement has been
entered into on the date stated at the beginning of this Agreement.

 

 

SCHEDULE 1

VARIOUS PARTIES

PART 1

THE
BORROWING GROUP

 

	
  Country

  	
   

  	
  Borrowing
  Group Member

  
	
   

  	
   

  	
   

  
	
  Algeria

  	
   

  	
  RHODIA ALGERIE SPA

  
	
  Belgium

  	
   

  	
  RHODIA BELGIUM (ex
  RHONE-POULENC BELGIQUE)

  
	
  Belgium

  	
   

  	
  RHODIA CHEMIE N.V. (ex
  RHONE-POULENC CHEMIE N.V.)

  
	
  Brazil

  	
   

  	
  RHODIA BRASIL LTDA

  
	
  Brazil

  	
   

  	
  RHODIA POLIAMIDA E
  ESPECIALIDADES LTDA.

  
	
  Canada

  	
   

  	
  RHODIA CANADA INC. (ex
  RHONE-POULENC SPECIALTY CHEMICALS LTD) (ex ALKARIL CANADA LTD)

  
	
  China

  	
   

  	
  RHODIA CHINA CO. LIMITED

  
	
  China

  	
   

  	
  BAOTOU RHODIA RARE EARTH
  COMPANY LTD (ex BAOTOU LUXI RHONE RARE EARTHS CO LTD)

  
	
  China

  	
   

  	
  BEIJING RHODIA EASTERN
  CHEMICAL Co. Ltd (ex Beijing Rhodia Eastern Chemical Co Ltd)

  
	
  China

  	
   

  	
  JADE FINE CHEMICALS (Wuxi)
  Co. Ltd

  
	
  China

  	
   

  	
  LIYANG RHODIA FOUNDER RARE
  EARTH NEW MATERIAL CO LTD

  
	
  China

  	
   

  	
  RHODIA HENGCHANG
  (ZHANGJIAGANG) SPECIALTY CHEMICAL CO. LTD

  
	
  China

  	
   

  	
  RHODIA INTERNATIONAL
  TRADING

  
	
  China

  	
   

  	
  RHODIA SILICA QINGDAO Co
  Ltd (ex Rhodia Qingdao Silica Co Ltd)

  
	
  China

  	
   

  	
  RHODIA SPECIALTY CHEMICALS
  WUXI Co Ltd (ex RHONE-POULENC SPECIALTY CHEMICALS WUXI Co Ltd)

  
	
  China

  	
   

  	
  RHODIA WUXI PHARMACEUTICAL
  CO. LTD

  
	
  China

  	
   

  	
  RUOHAI (ZHEJIANG) FINE
  CHEMICALS CO. LTD

  
	
  China

  	
   

  	
  SHANGHAI LONGMA
  ENGINEERING PLASTICS CO LTD

  
	
  China

  	
   

  	
  YINGKOU YINGLONG CHEMICAL FIBER
  COMPANY LIMITED

  
	
  Colombia

  	
   

  	
  RHODIA COLOMBIA LTDA

  
	
  Denmark

  	
   

  	
  RHODIA DANMARK A/S

  
	
  Egypt

  	
   

  	
  RHODIA EGYPT CHEMICALS
  S.A.E. (ex RP EGYPT CHEMICALS)

  
	
  Egypt

  	
   

  	
  RHODIA EGYPT DISTRIBUTION

  
	
  France

  	
   

  	
  RHODIA S.A.

  
	
  France

  	
   

  	
  NOVACARB (ex Rhod M)

  
	
  France

  	
   

  	
  ORELIS (ex TECH SEP)

  
	
  France

  	
   

  	
  RHODIA ACETOL (ex
  RHONE-POULENC ACETOL)

  
	
  France

  	
   

  	
  RHODIA CHIMIE (ex
  RHONE-POULENC CHIMIE)

  
	
  France

  	
   

  	
  RHODIA ECO SERVICES (ex
  RHODIA FIN)

  
	
  France

  	
   

  	
  RHODIA ELECTRONICS AND
  CATALYSIS (ex Rhodia Terres Rares)

  
	
  France

  	
   

  	
  RHODIA ENERGY (ex RHOD E)

  
	
  France

  	
   

  	
  RHODIA ENGINEERING
  PLASTICS S.A.S.

  
	
  France

  	
   

  	
  RHODIA ETANCHEITE (ex
  RHONE-POULENC ETANCHEITE FRANCE)

  
	
  France

  	
   

  	
  RHODIA FOOD (ex TEXEL)

  
	
  France

  	
   

  	
  RHODIA HPCII (ex RHOD C)

  
	
  France

  	
   

  	
  RHODIA INTERMEDIAIRES (ex
  RHOD F)

  
	
  France

  	
   

  	
  RHODIA ORGANIQUE (ex RHONE
  J)

  
	
  France

  	
   

  	
  RHODIA P.I. BELLE ETOILE
  (ex RHODIA BELLE ETOILE)

  
	
  France

  	
   

  	
  RHODIA P.I. CHALAMPE (ex
  RHODIA ALSACHIMIE)

  
	
  France

  	
   

  	
  RHODIA PERFORMANCE FIBRES

  
	
  France

  	
   

  	
  RHODIA POLYAMIDE
  INTERMEDIATES (ex RHODIA FIBER AND RESIN INTERMEDIATES)

  
	
  France

  	
   

  	
  RHODIA PPMC (ex BEVALOID)

  
	
  France

  	
   

  	
  RHODIA RECHERCHES (ex RP
  RECHERCHES)

  
	
  France

  	
   

  	
  RHODIA SERVICES (ex
  RHODIA)

  
	
  France

  	
   

  	
  RHODIA SILICES (ex RHOD B)

  
	
  France

  	
   

  	
  RHODIA SILICONES (ex RHOD
  A)

  
	
  France

  	
   

  	
  RHODIGAZ

  
	
  France

  	
   

  	
  RHODITECH (ex RHOD D)

  
	
  Germany

  	
   

  	
  RHODIA ACETOW GMBH (ex
  RHONE-POULENC RHODIA AG)

  
	
  Germany

  	
   

  	
  RHODIA DEUTSCHLAND GmbH
  (ex RHONE-POULENC DEUTSCHLAND GmbH)

  
	
  Germany

  	
   

  	
  RHODIA SILICON GmbH (ex
  RHONE-POULENC SILICON GMBH)

  
	
  Great-Britain

  	
   

  	
  RHODIA CONSUMER
  SPECIALTIES LIMITED (ex Albright & Wilson UK Ltd)

  
	
  Great-Britain

  	
   

  	
  RHODIA ECO SERVICES
  LIMITED (ex Staveley Chemicals Ltd)

  
	
  Great-Britain

  	
   

  	
  RHODIA FOOD UK LIMITED (ex
  Sisyphus 014 Ltd)

  
	
  Great-Britain

  	
   

  	
  RHODIA HPCII UK LIMITED
  (ex Sisyphus 013 Ltd)

  
	
  Great-Britain

  	
   

  	
  RHODIA INDUSTRIAL
  SPECIALTIES (ex Sisyphus 012 Ltd)

  
	
  Great-Britain

  	
   

  	
  RHODIA LIMITED (ex
  Rhône-Poulenc Chemicals Ltd)

  
	
  Great-Britain

  	
   

  	
  RHODIA ORGANIQUE FINE
  LIMITED (ex Sisyphus 011 Ltd)

  
	
  Great-Britain

  	
   

  	
  RHODIA PHARMA SOLUTIONS
  LIMITED (ex Rhodia Chirex Ltd)

  
	
  Great-Britain

  	
   

  	
  RHODIA SEALANTS LIMITED
  (ex Rhône-Poulenc Vispak Ltd)

  
	
  Greece

  	
   

  	
  RHODIA HELLAS SA (ex
  Rhône-Poulenc Hellas S.A.)

  
	
  Guatemala

  	
   

  	
  RHODIA DE CENTROAMERICA
  S/A (EX— RHODIA GUATEMALA)

  
	
  Hong Kong

  	
   

  	
  RHODIA HONG KONG LIMITED
  (ex Rhône-Poulenc Asia Ltd)

  
	
  India

  	
   

  	
  ALBRIGHT & WILSON
  CHEMICALS INDIA LIMITED (ex Albright Morarji and Pandit Ltd)

  
	
  India

  	
   

  	
  RHODIA CHEMICALS INDIA LTD
  (ex Rhône-Poulenc Chemicals (India) Ltd)

  
	
  Italy

  	
   

  	
  RHODIA ENGINEERING
  PLASTICS Srl

  
	
  Italy

  	
   

  	
  RHODIA GERONAZZO SpA (ex
  RHONE-POULENC GERONAZZO Spa)

  
	
  Italy

  	
   

  	
  RHODIA ITALIA S.p.A. (ex
  Rhône-Poulenc Chimica)

  
	
  Italy

  	
   

  	
  RHODIA PERF FIBRES s.r.l.

  
	
  Italy

  	
   

  	
  RHODIA SILICONI ITALIA

  
	
  Ivory Coast

  	
   

  	
  RHODIA OUEST AFRIQUE

  
	
  Japan

  	
   

  	
  ANAN KASEI CO., LTD

  
	
  Japan

  	
   

  	
  RHODIA JAPAN LTD

  
	
  Japan

  	
   

  	
  RHODIA NICCA Ltd (ex
  RHONE-POULENC NICCA)

  
	
  Korea (South)

  	
   

  	
  RHODIA SILICA KOREA (ex
  Rhodia Kofran Ltd)

  
	
  Korea (South)

  	
   

  	
  RHODIA KOREA LTD (ex
  Rhône-Poulenc Korea Ltd)

  
	
  Korea (South)

  	
   

  	
  RHODIA POLYAMIDE CO Ltd

  
	
  Lebanon

  	
   

  	
  RHODIA MASHREK (ex Rhodia
  Liban Sal)

  
	
  Malaysia

  	
   

  	
  ALBRIGHT & WILSON
  (MALAYSIA) Sdn Bhd (ex Josen Chemical Sdn Bhd) / Rhodia Consummer Specialties
  (?)

  
	
  Malaysia

  	
   

  	
  RHODIA MALAYSIA SDN.BHD
  (ex RHONE-POULENC MALAYSIA SDN.BHD)

  
	
  Malaysia

  	
   

  	
  RHODIA SILICONES MALAYSIA
  SDN BHD (formerly Rhône-Poulenc Malaysia Sdn Bhd)

  
	
  Mexico

  	
   

  	
  RHODIA FOSFATADOS DE
  MEXICO S.A. DE CV

  
	
  Morocco

  	
   

  	
  RHODIA MAROC (ex
  RHONE-POULENC MAROC)

  
	
  Peru

  	
   

  	
  RHODIA PERU S/A

  
	
  Philippines

  	
   

  	
  RHODIA PHILIPPINES INC.

  
	
  Poland

  	
   

  	
  RHODIA FOOD BIOLACTA
  Sp.z.o.o. (ex BIOLACTA TEXEL)

  
	
  Romania

  	
   

  	
  RHODIA ROMANIA SRL (ex
  Rhône-Poulenc Romania SRL)

  
	
  Singapore

  	
   

  	
  RHODIA ASIA PACIFIC PTE
  LTD (ex Rhodia Consumer Specialties Asia Pacific Pte Ltd)

  
	
  Singapore

  	
   

  	
  RHODIA SINGAPORE PTE LTD
  (ex Rhône-Poulenc Singapore Pte Ltd)

  
	
  Slovak Republic

  	
   

  	
  RHODIA INDUSTRIAL YARNS,
  a.s.

  
	
  South Africa

  	
   

  	
  RHODIA SOUTH AFRICA (PTY)
  Ltd (ex RHONE-POULENC SOUTH AFRICA (PTY) LTD)

  
	
  Spain

  	
   

  	
  RHODIA HOME, PERSONAL CARE
  AND INDUSTRIAL INGREDIENTS ESPANA SA

  
	
  Spain

  	
   

  	
  RHODIA IBERIA SA (ex
  RHONE-POULENC INDUSTRIAL SA)

  
	
  Spain

  	
   

  	
  RHODIA IBERLATEX

  
	
  Spain

  	
   

  	
  RHODIA SILICONAS ESPANA
  S.A.

  
	
  Sweden

  	
   

  	
  RHODIA SVERIGE AB (ex
  Rhône-Poulenc Sverige AB)

  
	
  Switzerland

  	
   

  	
  RHODIA CAPITAL MARKET (ex
  RHONE-POULENC (SUISSE) S.A.)

  
	
  Switzerland

  	
   

  	
  RHODIA INDUSTRIAL YARNS
  A.G. (ex RHODIA FILTEC A.G.)

  
	
  Taiwan

  	
   

  	
  RHODIA ENGINEERING
  PLASTICS Co, Ltd

  
	
  Thailand

  	
   

  	
  RHODIA PPMC THAILAND (ex
  Awat Thai Ltd)

  
	
  Thailand

  	
   

  	
  RHODIA THAI INDUSTRIES LTD
  (ex Rhône-Poulenc Thai Industries Ltd)

  
	
  Thailand

  	
   

  	
  RHODIA THAILAND LTD (ex
  Rhône-Poulenc Chemicals (Thailand) Ltd)

  
	
  United Arab Emirates

  	
   

  	
  RHODIA FZE (ex Rhodia
  Trading FZE)

  
	
  United States

  	
   

  	
  PRIMESTER

  
	
  United States

  	
   

  	
  RHODIA ELECTRONICS AND
  CATALYSIS INC.

  
	
  United States

  	
   

  	
  RHODIA INC

  
	
  Venezuela

  	
   

  	
  RHODIA ACETOW VENEZUELA
  C.A.

  
	
  Venezuela

  	
   

  	
  RHODIA SILICES DE
  VENEZUELA C.A.

  

 

 

PART 2

THE
ORIGINAL OBLIGORS

 

	
  Country

  	
   

  	
  Original
  Obligors

  
	
   

  	
   

  	
   

  
	
  Brazil

  	
   

  	
  RHODIA POLIAMIDA E
  ESPECIALIDADES LTDA.

  
	
  China

  	
   

  	
  RHODIA HENGCHANG
  (ZHANGJIAGANG) SPECIALTY CHEMICAL CO. LTD

  
	
  China

  	
   

  	
  RHODIA WUXI PHARMACEUTICAL
  CO. LTD

  
	
  China

  	
   

  	
  RHODIA CHINA CO. LIMITED

  
	
  France

  	
   

  	
  RHODIA S.A.

  
	
  Japan

  	
   

  	
  RHODIA JAPAN LTD

  
	
  Mexico

  	
   

  	
  RHODIA FOSFATADOS DE
  MEXICO S.A. DE CV

  
	
  Switzerland

  	
   

  	
  RHODIA CAPITAL MARKET (ex
  RHONE-POULENC (SUISSE) S.A.)

  
	
  Taiwan

  	
   

  	
  RHODIA ENGINEERING
  PLASTICS Co, Ltd

  
	
  United States

  	
   

  	
  RHODIA INC

  
	
  Venezuela

  	
   

  	
  RHODIA ACETOW VENEZUELA
  C.A.

  

 

 

PART 3

ORIGINAL
LENDERS

 

	
  BNP PARIBAS

  
	
  CRÉDIT LYONNAIS S.A.

  
	
  CRÉDIT INDUSTRIEL ET
  COMMERCIAL

  
	
  BANQUE DE L’ECONOMIE DU
  COMMERCE ET DE LA MONETIQUE

  
	
  CSFB

  
	
  WACHOVIA

  
	
  BAYERISCHE LANDESBANK

  
	
  SOCIÉTÉ GÉNÉRALE

  
	
  THE BANK OF
  TOKYO-MITSUBISHI, LTD.

  
	
  FORTIS BANK N.V.

  
	
  NATEXIS BANQUES POPULAIRES

  
	
  CCF

  
	
  STANDARD CHARTERED BANK

  
	
  THE ROYAL BANK OF SCOTLAND
  PLC

  
	
  BANCO BILBAO VIZCAYA
  ARGENTARIA

  
	
  JPMORGAN CHASE BANK

  
	
  ING BANK N.V.

  
	
  UNICREDITO ITALIANO

  
	
  UFJ BANK NEDERLAND N.V.

  
	
  UFJ BANK LIMITED

  
	
  CITIBANK INTERNATIONAL PLC

  
	
  LANDES GIROZENTRALE

  
	
  COMERICA

  

 

PART 4

FACILITY
AGENTS

 

BNP PARIBAS

 

 

SCHEDULE 2

CONDITIONS PRECEDENT DOCUMENTS

 

PART 1

CONDITIONS PRECEDENT DOCUMENTS TO BE PROVIDED IN FORM AND
SUBSTANCE SATISFACTORY

TO EACH ORIGINAL LENDER ARE MARKED WITH AN ASTERISK (*)

 

1.                                      Authorisations

 

1.1                                 A copy of the memorandum and articles of
association, certificate of incorporation and certificate of incorporation on
change of name (if any) or any other constitutional document of each Original
Obligor including, for any Original Obligor incorporated in France, a K-bis
extract from the Trade and Companies Registry related to it.

 

1.2                                 A copy of a resolution of the board of directors
of each Original Obligor authorising the entry into, execution and performance
of this Agreement and the Finance Documents to which it is a party, and related
or ancillary documents and authorising specified persons to execute those on
its behalf.

 

1.3                                 A certificate of an authorised signatory of
each Original Obligor or the Company on behalf of each Original Obligor
certifying:

 

(a)                                  that each document delivered under this
Schedule is correct, complete and in full force and effect as at a date no earlier
than the date of this Agreement;

 

(b)                                 that the execution of and assumption of
obligations under the Finance Documents will not result in any breach of any
restriction binding on that Obligor;

 

(c)                                  as to the identity and specimen signatures of
the directors and signatories of that Original Obligor;

 

(d)                                 that no Default is outstanding relating to
it; and

 

(e)                                  that the representations and warranties made
by it in the Finance Documents are correct.

 

 

2.                                      Financial Information

 

(a)                                  A copy of the Original Financial Statements.

 

(b)                                 Consolidated management accounts, consisting
of a balance sheet, profit and loss account and cashflow for the Company.

 

(c)                                  * The final version (updated from the draft of
November, 2003) of the due diligence report of Ernst & Young dated 28th
November, 2003 together with confirmation from Ernst & Young that it can be
relied upon by the Finance Parties in form and substance satisfactory to the
Lenders.

 

3.                                      Agreements and documents

 

(a)                                  An original of this Agreement executed by each
Party.

 

(b)                                 An original of the Fee Letter(s) and the
letter attaching the agreed form of the Refinancing Facilities Term Sheet and
each Affected Facilities Agreement listed under heading “Committed Bank lines”
in Schedule 3, Securitisation Programme and Lease Facilities.

 

(c)                                  * An original of the agreed form of the
Refinancing Facilities Term Sheet.

 

(d)                                 Evidence that the amendments referred to in
Schedule 9 (Agreed Lease Amendments Principles) have become effective or waiver
and consent letters (and notices of satisfaction with conditions precedent
thereto where applicable) from each of the lessors under the Lease Facilities
to (i) this Agreement, (ii) the Agreed Lease Amendment Principles, (iii) the
Agreed Security Principles and (iv) the Refinancing Facilities Term Sheet.

 

4.                                      Legal opinions

 

* A legal opinion in the agreed form of
Shearman & Sterling LLP, legal advisers to the Company and the Obligors,
addressed to the Finance Parties in respect of the Company and Rhodia Inc.

 

5.                                      Miscellaneous

 

(a)                                  Confirmation that no insolvency proceedings
of the type referred to in Clauses 11.7 (Insolvency) and 11.12 (Analogous
proceedings) have been commenced against any Obligor or Material Subsidiary.

 

(b)                                 Evidence that any process agent referred to
in Clause 24.2 (Service of process) has accepted its appointment to be
appointed under this Agreement.

 

(c)                                  Evidence that all fees, expenses and costs
properly incurred and then due to any of the Finance Parties, the Lenders, the
Members and their legal advisors have been paid in full.

 

(d)                                 * Evidence that (A) an amount equal to 5 per
cent. of the Exposure under each of the Affected Facilities listed under the
heading “Prepayable” in Schedule 3 and calculated by reference to the amount
set out under the heading “Exposure” in Schedule 3 in respect of each Affected
Facility has been prepaid and corresponding commitment cancelled; and (B) the
Derivative Deposit (if any) in respect of each Lender (or Affiliate) which has
executed this Agreement has been deposited with the relevant Lender (or its
Affiliate).

 

(e)                                  * A copy of the Original Business Plan
(including liquidity/analysis).

 

(f)                                    A copy of the Group Structure Chart.

 

(g)                                 * Evidence of the status of the renegotiation
for the maintenance of and relevant waivers of covenants under the
Securitisation Programmes and back-up lines and USPP amendment discussions.

 

(h)                                 Due diligence reports with respect to the
Facility Agreements by Shearman & Sterling and Jones Day.

 

(i)                                     Information regarding cash pooling.

 

(j)                                     A copy of any other authorisation or other
document, opinion or assurance which the Intercreditor Agent has notified the
Company is considered in good faith to be necessary at that time in connection
with the entry into and performance of, and the transactions contemplated by,
any Transaction Document or for the validity and enforceability of any
Transaction Document.

 

 

PART 2

CONDITIONS
PRECEDENT DOCUMENTS

 

In respect of the Security
Documents, Security Sharing Agreement or Subordination Agreement as the case
may be (the Relevant Documents)

 

1.                                      Relevant Documents

 

An original of each executed
Relevant Document.

 

2.                                      Authorisations

 

2.1                                 A copy of the memorandum and articles of
association, certificate of incorporation and certificate of incorporation on
change of name (if any) or any other constitutional document of each member of
the Group party to the Relevant Document including, for any party incorporated
in France, a K-bis extract from the Trade and Companies Registry related to it
(to the extent not already supplied under Schedule 2 Part 1).

 

2.2                                 A copy of a resolution of the board of
directors of each member of the Group party to the Relevant Documents
authorising the entry into, execution and performance of the Relevant Documents
to which it is a party, and related or ancillary documents and authorising
specified persons to execute those on its behalf.

 

2.3                                 A certificate of an authorised signatory of
each member of the Group party to the Relevant Documents certifying:

 

(a)                                  that each document delivered under this
Schedule is correct, complete and in full force and effect as at a date no
earlier than the date of the Relevant Document;

 

(b)                                 that the execution of and assumption of its
obligations under the Relevant Documents will not result in any breach of any
restriction binding on it;

 

(c)                                  as to the identity and specimen signatures of
its directors and signatories;

 

(d)                                 that no Default is outstanding relating to
it; and

 

(e)                                  that the representations and warranties made
by it in the Relevant Documents are correct.

 

3.                                      Security Documents

 

(a)                                  At least 2 copies (or, if required in the
relevant jurisdiction, such additional copies as are requested by the Finance
Parties) of the Security Documents to be entered into in accordance with the
Agreed Security Principles, each duly executed by the parties to it.

 

(b)                                 Registration requirements of Security
Documents effected.

 

(c)                                  Documents necessary for perfection of
Security Documents.

 

(d)                                 A copy of all notices required to be sent
under the Security Documents.

 

(e)                                  A copy of all transfers, share certificates
and stock transfer forms or equivalent relating to assets charged by the
Security Documents.

 

(f)                                    Evidence that each creditor has waived in
writing any negative pledge or other restriction in its favour that would or
could be breached by any member of the Group entering into the Security
Documents.

 

(g)                                 Copies of the Secured Intra Group Loans in an
agreed form.

 

4.                                      Legal opinions

 

(a)                                  A legal opinion in the agreed form of
Shearman & Sterling, legal advisers to the Company and the Obligors,
addressed to the Finance Parties.

 

(b)                                 Other legal opinions in the agreed form from
legal advisors to the Company or the Lenders with respect to the Security
Documents to be entered into as the Intercreditor Agent or Security Agent
considers desirable (acting in good faith).

 

5.                                      Miscellaneous

 

(a)                                  Evidence that any process agent referred to
in the Relevant Document has accepted its appointment to be appointed
thereunder.

 

(b)                                 Evidence that all fees, expenses and costs
properly incurred and then due to any of the Finance Parties, or other
creditors party to a Relevant Document, the Members and their legal advisors
have been paid in full.

 

(c)                                  A copy of any other authorisation or other
document, opinion or assurance which the Intercreditor Agent or Security Agent
(as the case may be) has notified the Company is considered in good faith to be
necessary in connection with the entry into and performance of, and the
transactions contemplated by, any Relevant Document or for the validity and
enforceability of any Relevant Document.

 

 

Any text removed pursuant to Rhodia S.A.'s
confidential treatment request has been separately submitted with the U.S.
Securities and Exchange Commission and is marked ["***"] herein.

 

PART 3

ADDITIONAL OBLIGOR CONDITIONS PRECEDENT DOCUMENTS

 

1.                                      An Accession Agreement duly executed by the
Company and the Additional Obligor.

 

2.                                      Authorisations

 

2.1                                 A copy of the memorandum and articles of
association, certificate of incorporation and certificate of incorporation on
change of name (if any) or any other constitutional document of each Additional
Obligor including, for any Additional Obligor incorporated in France, a K-bis
extract from the Trade and Companies Registry related to it.

 

2.2                                 A copy of a resolution of the board of
directors of each Additional Obligor authorising the entry into, execution and
performance of this Agreement and the Finance Documents to which it is a party,
and related or ancillary documents and authorising specified persons to execute
those on its behalf.

 

2.3                                 A certificate of an authorised signatory of
each Additional Obligor certifying:

 

(a)                                  that each document delivered under this
Schedule is correct, complete and in full force and effect as at a date no
earlier than the date of the Accession Agreement;

 

(b)                                 that the execution of and assumption of
obligations under the Finance Documents will not result in any breach of any
restriction binding on that Obligor;

 

(c)                                  as to the identity and specimen signatures of
the directors and signatories of that Additional Obligor;

 

(d)                                 that no Default is outstanding relating to
it; and

 

(e)                                  that the representations and warranties made
by it in the Finance Documents are correct.

 

3.                                      A legal opinion from legal advisers to the
Company with respect to the entry into of the Finance Documents by that
Additional Obligor with respect to the law of the place of its incorporation.

 

4.                                      Miscellaneous

 

(a)                                  Evidence that any process agent referred to
in the Finance Documents has accepted its appointment to be appointed
thereunder.

 

(b)                                 Evidence that all fees, expenses and costs
properly incurred and then due to any of the Finance Parties, or other
creditors party to a Finance Document, the Members and their legal advisors
have been paid in full.

 

(c)                                  A copy of any other authorisation or other
document, opinion or assurance which the Intercreditor Agent or Security Agent
(as the case may be) has notified the Company is considered in good faith to be
necessary in connection with the entry into and performance of, and the
transactions contemplated by, any Finance Document or for the validity and
enforceability of any Finance Document.

 

SCHEDULE 3

THE EXISTING FACILITIES, AFFECTED FACILITIES AND EXPOSURES

 

[***]

 

[***]—THE
SCHEDULE ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED SCHEDULE.

 

 

Any text removed pursuant to Rhodia S.A.'s
confidential treatment request has been separately submitted with the U.S.
Securities and Exchange Commission and is marked ["***"] herein.

 

SCHEDULE 4

SECURITY—EXISTING SECURITY INTERESTS

 

[***]

 

[***]—THE SCHEDULE ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED SCHEDULE.

 

 

SCHEDULE 5

ACCESSION AGREEMENT

 

	
  To:

  	
  [INTERCREDITOR AGENT] as
  Intercreditor Agent

  
	
  From:

  	
  [PROPOSED
  LENDER][ADDITIONAL OBLIGOR] [and Company]

  

 

 

RHODIA
S.A.-Secured Co-ordination Agreement dated
[          ] (the Secured
Co-ordination Agreement).

 

We refer to the Secured Co-ordination
Agreement. This is an Accession Agreement.

 

Capitalised terms used in this Accession
Agreement have the same meaning as in the Secured Co-ordination Agreement.

 

We [Lender][Additional Obligor] hereby agree
to become a party to:

 

(a)                                  the Secured Co-ordination Agreement;

 

(b)                                 the Security Sharing Agreement; and

 

(c)                                  the Subordination Agreement.

 

(together the Agreements),

 

as * [a Lender][an Additional Obligor] and to
be bound by and comply with the terms of the Agreements as a [Lender][Additional
Obligor] in accordance with the terms of the Secured Co-ordination Agreement.

 

[We confirm that as at
[                    ]
[today’s date] the following principal amounts were owing [to/by us] under the
following Facilities.

 

Details of Facility Principal Exposure

 

[                        ]
[                        ]
[**]

 

Our address for notices for the purposes of
the Secured Co-ordination Agreement is:

 

[                                                   ]

 

This Agreement is governed by English law.

 

[Appropriate execution provision for
Lender]***

 

Company

 

RHODIA S.A.

 

By:

 

* Complete as applicable

 

 

Any text removed pursuant to Rhodia S.A.'s
confidential treatment request has been separately submitted with the U.S.
Securities and Exchange Commission and is marked ["***"] herein.

 

SCHEDULE 6

BUSINESS PLAN INCLUDING LIQUIDITY ANALYSIS

PART 1

RHODIA BUSINESS PLAN AFTER DISPOSALS

 

[***]

 

[***]—THE
PART OF THE SCHEDULE ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PART OF THE SCHEDULE. 

 

 

Any text removed pursuant to Rhodia S.A.'s
confidential treatment request has been separately submitted with the U.S.
Securities and Exchange Commission and is marked ["***"] herein.

 

PART 2

LIQUIDITY
ANALYSIS

 

[***]

 

[***]—THE
PART OF THE SCHEDULE ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PART OF THE SCHEDULE. 

 

 

SCHEDULE 7

INTER-COMPANY LOANS

 

PART 1

INTERCOMPANY
LOANS/BORROWINGS BETWEEN RHODIA S.A. AND ITS SUBSIDIARIES

 

	
  Transaction

  	
   

  	
  Consolidation
  method

  	
   

  	
  Subsidiary

  	
   

  	
  Drawdown

  	
   

  	
  Maturity

  	
   

  	
  Interest

  	
   

  	
  Nominal
  Amount

  	
   

  	
  Currency

  Rate

  	
   

  	
  Closing
  Price

  	
   

  	
  Closing Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Albright & Wilson
  Chemicals Pty Ltd

  	
   

  	
  21/11/03

  	
   

  	
  19/12/03

  	
   

  	
  5.07

  	
   

  	
  15,633,693.18

  	
   

  	
  AUD

  	
   

  	
  /1.65830

  	
   

  	
  9,427,542.17

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Performance Fibres
  GmbH

  	
   

  	
  28/11/03

  	
   

  	
  30/01/04

  	
   

  	
  2.645

  	
   

  	
  63,355.78

  	
   

  	
  CAD

  	
   

  	
  /1.55520

  	
   

  	
  40,738.03

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Non-conslidated

  	
   

  	
  Rhodia Financial Services

  	
   

  	
  21/11/03

  	
   

  	
  19/12/03

  	
   

  	
  0.055

  	
   

  	
  800,262.28

  	
   

  	
  CHF

  	
   

  	
  /1.54840

  	
   

  	
  516,831.75

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Industrial Yarns AG

  	
   

  	
  21/11/03

  	
   

  	
  15/12/03

  	
   

  	
  0.06333

  	
   

  	
  29,418,426.88

  	
   

  	
  CHF

  	
   

  	
  /1.54840

  	
   

  	
  18,999,242.37

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Industrial Yarns AG

  	
   

  	
  28/11/03

  	
   

  	
  15/12/03

  	
   

  	
  0.18

  	
   

  	
  3,500,000.00

  	
   

  	
  CHF

  	
   

  	
  /1.54840

  	
   

  	
  2,260,397.83

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Industrial Yarns AG

  	
   

  	
  27/11/03

  	
   

  	
  03/12/03

  	
   

  	
  0.05167

  	
   

  	
  15,000,000.00

  	
   

  	
  CHF

  	
   

  	
  /1.54840

  	
   

  	
  9,687,419.27

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Industrial Yarns AG

  	
   

  	
  28/11/03

  	
   

  	
  15/12/03

  	
   

  	
  0.04833

  	
   

  	
  1,066,139.70

  	
   

  	
  CHF

  	
   

  	
  /1.54840

  	
   

  	
  688,542.82

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Participation Et de Gestion

  	
   

  	
  30/06/03

  	
   

  	
  30/12/03

  	
   

  	
  0.01

  	
   

  	
  21,337,992.07

  	
   

  	
  CHF

  	
   

  	
  /1.54840

  	
   

  	
  13,780,671.71

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Chem Italia S.P.A.

  	
   

  	
  07/11/03

  	
   

  	
  01/12/03

  	
   

  	
  3.579

  	
   

  	
  15,500,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  15,500,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Iberia

  	
   

  	
  21/11/03

  	
   

  	
  19/12/03

  	
   

  	
  1.94

  	
   

  	
  10,034,730.51

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  10,034,730.51

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Engineering Plastics
  NV

  	
   

  	
  04/11/03

  	
   

  	
  04/12/03

  	
   

  	
  1.969

  	
   

  	
  17,637,894.77

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  17,637,894.77

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Acetow AG

  	
   

  	
  16/10/03

  	
   

  	
  16/01/04

  	
   

  	
  2.963

  	
   

  	
  5,000,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  5,000,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Acetow AG

  	
   

  	
  16/10/03

  	
   

  	
  16/01/04

  	
   

  	
  2.963

  	
   

  	
  5,000,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  5,000,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Chem Italia S.P.A.

  	
   

  	
  03/11/03

  	
   

  	
  01/12/03

  	
   

  	
  3.044

  	
   

  	
  40,000,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  40,000,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Chimie

  	
   

  	
  09/10/03

  	
   

  	
  07/10/04

  	
   

  	
  2

  	
   

  	
  185,000,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  185,000,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Finance

  	
   

  	
  01/08/03

  	
   

  	
  29/12/03

  	
   

  	
  1.818

  	
   

  	
  66,581,152.76

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  66,581,152.76

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Hpcii Espagne

  	
   

  	
  27/11/03

  	
   

  	
  29/12/03

  	
   

  	
  1.968

  	
   

  	
  2,742,946.03

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  2,742,946.03

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Deutschland GmbH

  	
   

  	
  28/11/03

  	
   

  	
  01/12/03

  	
   

  	
  1.968

  	
   

  	
  3,000,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  3,000,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Energy SAS

  	
   

  	
  28/11/03

  	
   

  	
  05/12/03

  	
   

  	
  3.393

  	
   

  	
  8,801.36

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  8,801.36

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Deutschland GmbH

  	
   

  	
  28/11/03

  	
   

  	
  01/12/03

  	
   

  	
  1.968

  	
   

  	
  1,800,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  1,800,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Siliconas Espana SA

  	
   

  	
  27/11/03

  	
   

  	
  29/12/03

  	
   

  	
  1.943

  	
   

  	
  2,172,626.25

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  2,172,626.25

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Iberlatex Espana

  	
   

  	
  27/11/03

  	
   

  	
  29/12/03

  	
   

  	
  1.943

  	
   

  	
  2,177,134.78

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  2,177,134.78

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Iberlatex Espana

  	
   

  	
  28/11/03

  	
   

  	
  29/12/03

  	
   

  	
  1.943

  	
   

  	
  4,390,455.29

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  4,390,455.29

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Iberia

  	
   

  	
  27/11/03

  	
   

  	
  10/12/03

  	
   

  	
  1.943

  	
   

  	
  8,000,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  8,000,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Intl Holdings BV

  	
   

  	
  28/11/03

  	
   

  	
  15/01/04

  	
   

  	
  1.9805

  	
   

  	
  21,034,469.41

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  21,034,469.41

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Siliconas Espana SA

  	
   

  	
  28/11/03

  	
   

  	
  29/12/03

  	
   

  	
  1.943

  	
   

  	
  4,401,007.82

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  4,401,007.82

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Deutschland GmbH

  	
   

  	
  27/11/03

  	
   

  	
  04/12/03

  	
   

  	
  1.988

  	
   

  	
  18,000,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  18,000,000.00

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Chimie

  	
   

  	
  02/09/03

  	
   

  	
  02/12/03

  	
   

  	
  2.026

  	
   

  	
  91,170,904.99

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  91,170,904.99

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Limited

  	
   

  	
  21/11/03

  	
   

  	
  19/12/03

  	
   

  	
  4.72031

  	
   

  	
  17,185,145.28

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  24,652,338.66

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Limited

  	
   

  	
  26/11/03

  	
   

  	
  19/12/03

  	
   

  	
  4.71781

  	
   

  	
  195,087.29

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  279,855.53

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Reorganisation Ltd

  	
   

  	
  28/11/03

  	
   

  	
  31/12/03

  	
   

  	
  4.7025

  	
   

  	
  223,026,510.90

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  319,934,745.23

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Limited

  	
   

  	
  28/11/03

  	
   

  	
  01/12/03

  	
   

  	
  3.43719

  	
   

  	
  1,042,050.00

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  1,494,835.75

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Limited

  	
   

  	
  28/11/03

  	
   

  	
  19/12/03

  	
   

  	
  4.68

  	
   

  	
  4,477,089.82

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  6,422,449.89

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Limited

  	
   

  	
  28/11/03

  	
   

  	
  19/12/03

  	
   

  	
  4.68

  	
   

  	
  1,848,000.00

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  2,650,982.64

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia ind. Yarns
  Daugavpils

  	
   

  	
  24/10/03

  	
   

  	
  03/12/03

  	
   

  	
  2.725

  	
   

  	
  2,510,547.87

  	
   

  	
  LVL

  	
   

  	
  /0.65550

  	
   

  	
  3,829,973.87

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Participations Chimiques
  c/o Sefige

  	
   

  	
  30/09/03

  	
   

  	
  29/12/03

  	
   

  	
  1.035

  	
   

  	
  481,569.65

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  401,508.80

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Performance Fibres
  GmbH

  	
   

  	
  28/11/03

  	
   

  	
  30/12/03

  	
   

  	
  0.99375

  	
   

  	
  138,766.10

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  115,696.26

  	
   

  
	
  Subsidiary Lender

  	
   

  	
  Fully consolidated

  	
   

  	
  Alaver

  	
   

  	
  25/06/03

  	
   

  	
  22/12/03

  	
   

  	
  1.49

  	
   

  	
  8,076,904.30

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  6,734,120.64

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Canada Inc

  	
   

  	
  30/09/03

  	
   

  	
  03/12/03

  	
   

  	
  4.93833

  	
   

  	
  14,278,400.00

  	
   

  	
  CAD

  	
   

  	
  /1.55520

  	
   

  	
  9,181,069.96

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Canada Inc

  	
   

  	
  28/10/03

  	
   

  	
  03/12/03

  	
   

  	
  4.98667

  	
   

  	
  2,000,000.00

  	
   

  	
  CAD

  	
   

  	
  /1.55520

  	
   

  	
  1,286,008.23

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Industrial Yarns AG

  	
   

  	
  21/11/03

  	
   

  	
  15/12/03

  	
   

  	
  0.06333

  	
   

  	
  2,000,000.00

  	
   

  	
  CHF

  	
   

  	
  /1.54840

  	
   

  	
  1,291,655.90

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Gesmo

  	
   

  	
  18/09/03

  	
   

  	
  18/12/03

  	
   

  	
  3

  	
   

  	
  5,362,224.53

  	
   

  	
  CHF

  	
   

  	
  /1.54840

  	
   

  	
  3,463,074.48

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Equity method

  	
   

  	
  Nylstar SAS

  	
   

  	
  30/09/03

  	
   

  	
  03/12/03

  	
   

  	
  3.153

  	
   

  	
  -300,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  -300,000.00

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Energy SAS

  	
   

  	
  07/11/03

  	
   

  	
  05/12/03

  	
   

  	
  3.393

  	
   

  	
  4,531,190.42

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  4,531,190.42

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Nederland

  	
   

  	
  21/11/03

  	
   

  	
  19/12/03

  	
   

  	
  3.365

  	
   

  	
  506,826.31

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  506,826.31

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Non-consolidated

  	
   

  	
  Rhodia Consomer Spec. BV

  	
   

  	
  31/10/03

  	
   

  	
  30/01/04

  	
   

  	
  3.453

  	
   

  	
  584,066.84

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  584,066.84

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Particitions

  	
   

  	
  29/10/03

  	
   

  	
  30/04/04

  	
   

  	
  3.508

  	
   

  	
  62,252,844.16

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  62,252,844.16

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Equity method

  	
   

  	
  Nylstar NV

  	
   

  	
  28/11/03

  	
   

  	
  29/12/03

  	
   

  	
  3.093

  	
   

  	
  17,037,219.65

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  17,037,219.65

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Engineering Plastics
  NV

  	
   

  	
  07/11/03

  	
   

  	
  08/11/04

  	
   

  	
  8.5

  	
   

  	
  15,500,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  15,500,000.00

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Finance Intl

  	
   

  	
  28/11/03

  	
   

  	
  29/12/03

  	
   

  	
  2.993

  	
   

  	
  67,063,725.17

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  67,063,725.17

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Eco Services
  Nederland B.V

  	
   

  	
  21/11/03

  	
   

  	
  19/12/03

  	
   

  	
  3.365

  	
   

  	
  4,500,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  4,500,000.00

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Industrial Yarns
  Slovakia A.S.

  	
   

  	
  28/11/03

  	
   

  	
  31/12/03

  	
   

  	
  3.393

  	
   

  	
  3,788,920.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  3,788,920.00

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Equity method

  	
   

  	
  Nylstar SAS

  	
   

  	
  03/09/03

  	
   

  	
  03/12/03

  	
   

  	
  3.153

  	
   

  	
  2,800,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  2,800,000.00

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Germany International

  	
   

  	
  31/12/02

  	
   

  	
  05/07/04

  	
   

  	
  5.2

  	
   

  	
  753,350,235.35

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  753,350,235.35

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Germany
  International

  	
   

  	
  30/06/03

  	
   

  	
  01/06/11

  	
   

  	
  9.345

  	
   

  	
  65,820,102.42

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  65,820,102.42

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Deutschland GMBH

  	
   

  	
  30/09/03

  	
   

  	
  30/12/03

  	
   

  	
  9.345

  	
   

  	
  44,000,000.00

  	
   

  	
  EUR

  	
   

  	
  1

  	
   

  	
  44,000,000.00

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Limited

  	
   

  	
  27/11/03

  	
   

  	
  19/12/03

  	
   

  	
  4.72031

  	
   

  	
  1,500,000.00

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  2,151,771.63

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Limited

  	
   

  	
  25/11/03

  	
   

  	
  19/12/03

  	
   

  	
  4.72031

  	
   

  	
  1,761,080.13

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  2,526,294.84

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Holding Limited

  	
   

  	
  02/01/02

  	
   

  	
  04/01/10

  	
   

  	
  6.301

  	
   

  	
  58,724,352.50

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  84,240,930.28

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Holding Limited

  	
   

  	
  02/01/02

  	
   

  	
  05/01/09

  	
   

  	
  6.295

  	
   

  	
  62,438,838.28

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  89,569,413.69

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Chirex Holdings Ltd

  	
   

  	
  03/09/01

  	
   

  	
  03/01/07

  	
   

  	
  6.28

  	
   

  	
  18,784,593.91

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  26,946,770.78

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Holding Limited

  	
   

  	
  03/09/01

  	
   

  	
  03/01/07

  	
   

  	
  6.28

  	
   

  	
  50,573,906.67

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  72,548,998.24

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Holding Limited

  	
   

  	
  03/09/01

  	
   

  	
  03/01/08

  	
   

  	
  6.3

  	
   

  	
  47,528,828.10

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  68,180,789.13

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Holding Limited

  	
   

  	
  03/09/01

  	
   

  	
  03/01/06

  	
   

  	
  6.25

  	
   

  	
  53,815,799.10

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  77,199,539.66

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Chirex Holdings Ltd

  	
   

  	
  03/09/01

  	
   

  	
  03/01/06

  	
   

  	
  6.25

  	
   

  	
  19,988,725.38

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  28,674,114.73

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Chirex Holdings Ltd

  	
   

  	
  03/09/01

  	
   

  	
  04/01/05

  	
   

  	
  5.63

  	
   

  	
  21,653,612.00

  	
   

  	
  GBP

  	
   

  	
  /0.69710

  	
   

  	
  31,062,418.59

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Japan Ltd

  	
   

  	
  10/11/03

  	
   

  	
  05/12/03

  	
   

  	
  1.36

  	
   

  	
  1,000,236,250

  	
   

  	
  JPY

  	
   

  	
  /131.24000

  	
   

  	
  7,621,428.30

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Japan Ltd

  	
   

  	
  06/11/03

  	
   

  	
  05/12/03

  	
   

  	
  1.36

  	
   

  	
  1,900,448,875

  	
   

  	
  JPY

  	
   

  	
  /131.24000

  	
   

  	
  14,480,713.77

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Fosfatados de Mexico

  	
   

  	
  17/10/03

  	
   

  	
  19/12/03

  	
   

  	
  1.64

  	
   

  	
  -4,100,000.00

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  -3,418,375.85

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Energy SAS

  	
   

  	
  14/11/03

  	
   

  	
  05/12/03

  	
   

  	
  2.41

  	
   

  	
  200,000.00

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  166,750.04

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Inc

  	
   

  	
  13/11/03

  	
   

  	
  04/12/03

  	
   

  	
  2.16

  	
   

  	
  5,002,000.00

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  4,170,418.54

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia China

  	
   

  	
  10/11/03

  	
   

  	
  20/05/04

  	
   

  	
  2.55

  	
   

  	
  1,100,000.00

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  917,125.23

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Mexicana SA

  	
   

  	
  08/10/03

  	
   

  	
  18/12/03

  	
   

  	
  1.64

  	
   

  	
  2,774,186.25

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  2,312,978.36

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia de Mexico

  	
   

  	
  30/09/03

  	
   

  	
  18/12/03

  	
   

  	
  1.66

  	
   

  	
  20,343,655.03

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  16,961,526.62

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Fosfatados de Mexico

  	
   

  	
  30/09/03

  	
   

  	
  18/12/03

  	
   

  	
  1.66

  	
   

  	
  68,309,434.00

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  56,953,004.84

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Especialidados

  	
   

  	
  30/09/03

  	
   

  	
  18/12/03

  	
   

  	
  1.66

  	
   

  	
  2,643,403.97

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  2,203,938.61

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Engineering Plastics
  Co, LTD

  	
   

  	
  28/11/03

  	
   

  	
  30/01/04

  	
   

  	
  2.6675

  	
   

  	
  1,003,051.92

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  836,294.75

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Engineering Plastics
  Co, LTD

  	
   

  	
  18/09/03

  	
   

  	
  18/12/03

  	
   

  	
  2.64

  	
   

  	
  2,011,192.38

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  1,676,832.07

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Non-consolidated

  	
   

  	
  Rhodia Uruguay

  	
   

  	
  04/09/03

  	
   

  	
  04/12/03

  	
   

  	
  2.44563

  	
   

  	
  763,906.79

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  636,907.45

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Deutschland GmbH

  	
   

  	
  20/06/03

  	
   

  	
  22/12/03

  	
   

  	
  2.33875

  	
   

  	
  13,038,289.69

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  10,870,676.75

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Fully consolidated

  	
   

  	
  Rhodia Fosfatados de Mexico

  	
   

  	
  19/09/03

  	
   

  	
  19/12/03

  	
   

  	
  1.64

  	
   

  	
  39,142,502.53

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  32,635,069.64

  	
   

  
	
  Subsidiary Borrower

  	
   

  	
  Non-consolidated

  	
   

  	
  Rhodia Argentina S.A.

  	
   

  	
  15/09/03

  	
   

  	
  15/12/03

  	
   

  	
  1.64

  	
   

  	
  1,258,586.19

  	
   

  	
  USD

  	
   

  	
  /1.19940

  	
   

  	
  1,049,346.50

  	
   

  

 

 

PART 2

INTERCOMPANY LOANS/BORROWINGS BETWEEN THE RHODIA SUBSIDIARIES

(AS OF 30th NOVEMBER, 2003)

 

	
  Lending
  entity

  	
   

  	
  Borrowing entity

  	
   

  	
  Amount (KEUR)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rhodia Finances

  	
   

  	
  Rhodia Inc.

  	
   

  	
  175,088

  	
   

  
	
  Rhodia Inc.

  	
   

  	
  Rhodia Holding Inc.

  	
   

  	
  148,187

  	
   

  
	
  Rhodia Ltd

  	
   

  	
  Rhodia Chirex Holdings Ltd

  	
   

  	
  64,800

  	
   

  
	
  Rhodia Financial Services
  Inc.

  	
   

  	
  Rhodia Inc.

  	
   

  	
  38,528

  	
   

  
	
  Rhodia Inc.

  	
   

  	
  Rhodia Pharma Solutions
  Inc.

  	
   

  	
  27,887

  	
   

  
	
  Rhodia Japan

  	
   

  	
  Anan Kasei Co Ltd

  	
   

  	
  16,417

  	
   

  
	
  Rhodia Acetow GmbH

  	
   

  	
  Alexil

  	
   

  	
  13,685

  	
   

  
	
  Rhodia Benelux

  	
   

  	
  Rhodia Finance
  International BV

  	
   

  	
  13,059

  	
   

  
	
  Rhodia Deutschland GmbH

  	
   

  	
  Rhodia Acetow GmbH

  	
   

  	
  10,871

  	
   

  
	
  Rhodia Inc.

  	
   

  	
  Rhodia Electronics &
  Catalysis Inc.

  	
   

  	
  6,542

  	
   

  
	
  Rhodia Financial Services
  Inc.

  	
   

  	
  Rhodia Ltd

  	
   

  	
  5,402

  	
   

  
	
  Rhodia Financial Services
  Inc.

  	
   

  	
  Rhodia Engineering
  Plastics Corp—USA

  	
   

  	
  5,003

  	
   

  
	
  Rhodia Iberia SA

  	
   

  	
  Rhodia HPCII—Espagne

  	
   

  	
  4,000

  	
   

  
	
  Rhodia China Co Ltd

  	
   

  	
  Beijing RP Eastern
  Chemical Ltd

  	
   

  	
  3,212

  	
   

  
	
  Rhodia China Co Ltd

  	
   

  	
  Rhodia Wuxi Pharmaceutical
  Co Ltd

  	
   

  	
  2,992

  	
   

  
	
  Rhodia Trading Australia

  	
   

  	
  Rhodia Australia Pty

  	
   

  	
  2,662

  	
   

  
	
  Rhodia Silicones Shangai
  Co Ltd

  	
   

  	
  Rhodia China Co Ltd

  	
   

  	
  2,153

  	
   

  
	
  Rhodia China Co Ltd

  	
   

  	
  Rhodia Silica Qingdao

  	
   

  	
  2,034

  	
   

  
	
  Rhodia Polyamide
  Intermediates

  	
   

  	
  Rhodia Recherches

  	
   

  	
  1,878

  	
   

  
	
  Rhodia Ltd

  	
   

  	
  Rhodia Asia-Pacific

  	
   

  	
  1,842

  	
   

  
	
  Rhodia Silicones Australia
  Pty Ltd

  	
   

  	
  Rhodia Australia Pty

  	
   

  	
  1,618

  	
   

  
	
  Rhodia Organique

  	
   

  	
  Rhodia Recherches

  	
   

  	
  1,585

  	
   

  
	
  Rhodia Inc.

  	
   

  	
  Rhodia Engineering
  Plastics Corp—USA

  	
   

  	
  1,537

  	
   

  
	
  Rhodia Brésil

  	
   

  	
  Rhodia Poliamida Brasil

  	
   

  	
  1,511

  	
   

  
	
  Conuben SL

  	
   

  	
  Rhodia Iberia SA

  	
   

  	
  1,350

  	
   

  
	
  Rhodia Acetow Venezuela SA

  	
   

  	
  Rhodia Silices de
  Venezuela C.A.

  	
   

  	
  1,302

  	
   

  
	
  Rhodia Hengchang Spec Chem

  	
   

  	
  Rhodia China Co Ltd

  	
   

  	
  1,169

  	
   

  
	
  Rhodia China Co Ltd

  	
   

  	
  Ruohai Fine Chemicals Co
  Ltd

  	
   

  	
  1,158

  	
   

  
	
  Rhodia Poliamida Ltda

  	
   

  	
  Rhodia Brésil

  	
   

  	
  1,090

  	
   

  
	
  Rhodia Silicones

  	
   

  	
  Rhodia Recherches

  	
   

  	
  1,039

  	
   

  
	
  A&W Thai Holding

  	
   

  	
  Rhodia Thai Industries Ltd

  	
   

  	
  1,003

  	
   

  
	
  Rhodia Food SAS

  	
   

  	
  Rhodia Recherches

  	
   

  	
  933

  	
   

  
	
  Rhodia Iberia SA

  	
   

  	
  Rhodia Iberlatex

  	
   

  	
  800

  	
   

  
	
  Rhodia Silicones

  	
   

  	
  GIE Osiris

  	
   

  	
  758

  	
   

  
	
  Rhodia Nicca

  	
   

  	
  Rhodia Japan

  	
   

  	
  621

  	
   

  
	
  Rhodia Brésil

  	
   

  	
  Alexil

  	
   

  	
  469

  	
   

  
	
  Rhodia PPMC SAS

  	
   

  	
  Rhodia Recherches

  	
   

  	
  468

  	
   

  
	
  Rhodia China Co Ltd

  	
   

  	
  Rhodia Specialty Chemicals
  Wuxi

  	
   

  	
  403

  	
   

  
	
  Rhodia Cons Spec Malaysia

  	
   

  	
  Rhodia Malaysia SDN BHD

  	
   

  	
  373

  	
   

  
	
  Rhodia China Co Ltd

  	
   

  	
  Baotou Rhodia Rare Earths
  Co., Ltd

  	
   

  	
  302

  	
   

  
	
  Rhoia Intern. Trading Co
  Ltd

  	
   

  	
  Rhodia China Co Ltd

  	
   

  	
  235

  	
   

  
	
  Rhodia Organique

  	
   

  	
  Rhodia Food SAS

  	
   

  	
  186

  	
   

  
	
  Rhodia HPCII

  	
   

  	
  Rhodia Recherches

  	
   

  	
  181

  	
   

  
	
  A&W Asia Pacific
  Holding

  	
   

  	
  Rhodia Asia Pacific Pte
  Ltd

  	
   

  	
  169

  	
   

  
	
  Rhodia Poliamida Ltda

  	
   

  	
  Rhodia Poliamida Brasil

  	
   

  	
  166

  	
   

  
	
  Rhodia Electronics &
  Catalysis

  	
   

  	
  Rhodia Recherches

  	
   

  	
  158

  	
   

  
	
  Rhodia Eco Services

  	
   

  	
  Rhodia Recherches

  	
   

  	
  100

  	
   

  
	
  Rhodia P.I. Belle Etoile

  	
   

  	
  Rhodia Recherches

  	
   

  	
  8

  	
   

  

 

 

SCHEDULE 8

ERISA EVENTS

 

For the purpose of this Agreement, an ERISA Event means:

 

	
  (a)

  	
   

  	
  (i)

  	
   

  	
  the occurrence of a
  reportable event, within the meaning of Section 4043 of ERISA, with respect
  to any Plan unless the 30-day notice requirement with respect to such event
  has been waived by the PBGC or

  
	
   

  	
   

  	
  (ii)

  	
   

  	
  the requirements of
  Section 4043(b) of ERISA apply with respect to a contributing sponsor, as
  defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in
  paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
  reasonably expected to occur with respect to such Plan within the following
  30 days;

  
	
  (b)

  	
   

  	
  the application pursuant
  to Section 412(d) of the Code or Section 303 of ERISA for a minimum funding
  waiver with respect to a Plan;

  
	
  (c)

  	
   

  	
  the provision by the
  administrator of any Plan of a notice of intent to terminate such Plan,
  pursuant to Section 4041(a)(2) of ERISA (including any such notice with
  respect to a plan amendment referred to in Section 4041(e) of ERISA);

  
	
  (d)

  	
   

  	
  the cessation of
  operations at a facility of any Obligor or any ERISA Affiliate in the
  circumstances described in Section 4062(e) of ERISA;

  
	
  (e)

  	
   

  	
  the withdrawal by any Obligor
  or any ERISA Affiliate from a Multiple Employer Plan during a plan year for
  which it was a substantial employer, as defined in Section 4001(a)(2) of
  ERISA;

  
	
  (f)

  	
   

  	
  the imposition of a lien
  under Section 302(f) of ERISA with respect to any Plan;

  
	
  (g)

  	
   

  	
  the adoption of an
  amendment to a Plan requiring the provision of security to such Plan pursuant
  to Section 307 of ERISA; or

  
	
  (h)

  	
   

  	
  the institution by the
  PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or
  the occurrence of any event or condition described in Section 4042 of ERISA
  that constitutes grounds for the termination of, or the appointment of a
  trustee to administer, such Plan, provided, however, that the occurrence of
  the event or condition described in Section 4042(a)(4) of ERISA shall be an
  ERISA Event only if the PBGC has notified any Obligor or ERISA Affiliate that
  it intends to institute proceedings to terminate a Plan pursuant to such
  subsection.

  

 

 

SCHEDULE 9

AGREED LEASE AMENDMENT PRINCIPLES

 

Leases will be renegotiated and amended on a
bilateral basis within the framework of the arrangements under this Agreement
in accordance with the Term Sheets to be provided to the Intercreditor Agent on
or prior to the Commencement Date to include:

 

1.                                      Reduction:

 

(a)                                  5% at the time the consent and waiver letter
is supplied to the Intercreditor Agent on or prior to the Commencement Date;

 

(b)                                 5% on the Term Date;

 

(c)                                  Lease Term unchanged or shortened to be
co-terminus with the Refinancing Facilities Agreement.

 

2.                                      Security:

 

(a)                                  Guarantee of Rhodia S.A. on 100% of total
lease obligation (same as the one existing today);

 

(b)                                 to share in security offered to Finance
Parties under the Shared Security Documents in respect of 80% of obligations of
Rhodia S.A. under its guarantee, subject to and in accordance with the Agreed
Security Sharing Principles.

 

3.                                      Fees:

 

70bp payable at the signing
of the lease amendment or consent and waiver letter referred to above.

 

4.                                      Margin:

 

305bp on the debt component
of the lease up to March 2006.

 

5.                                      Covenants:

 

To be amended or
supplemented in line with agreed covenants under this Agreement and thereafter
the Refinancing Facilities Agreement.

 

 

SCHEDULE 10

FORM OF COMPLIANCE CERTIFICATE

 

[To be reviewed, completed by Chief
Financial Officer/Auditors and to include details of definitions and
computations of financial covenants]

 

To: [AGENT]

 

From: [to be completed]

 

[DATE]

 

Dear Sirs

 

RHODIA
S.A.—Secured Co-ordination Agreement (the Secured Co-ordination Agreement)

 

I refer to the Secured Co-ordination
Agreement and in particular to Clause 10.1 (Financial covenant definitions),
Clause 10.2 (Ratio of Consolidated Net Indebtedness to Adjusted EBITDAR) and
Clause 10.3 (Ratio of EBITDAR to Net Financial Expenses) thereof.

 

Terms defined in the Secured Co-ordination
Agreement shall have the same meaning when used in this certificate.

 

I certify as follows:

 

1.                                       For the Ratio Period ending on [  •  ]:

 

(a)                                  the Borrower’s EBITDAR was
[          ];

 

(b)                                 the Borrower’s Adjusted EBITDAR was [            ];

 

(c)                                  the Borrower’s Consolidated Net Indebtedness
was [            ]; and

 

(d)                                 the Borrower’s Net Financial Expenses were
[            ].

 

Accordingly for the Ratio
Period referred to above:

 

(i)                                     the ratio of the Borrower’s EBITDAR to its
Net Financial Expenses was: [           
]; and

 

(ii)                                  the ratio of the Borrower’s Consolidated Net
Indebtedness to Adjusted EBITDAR was: [            ].

 

2.                                       The following table sets out the information
in relation to Relevant Entities used in the calculation of Adjusted EBITDAR referred
to at paragraph 1(b):

 

 

	
  Relevant Entity and place of

  incorporation/establishment

  	
   

  	
  Relevant
  Entity

  EBITDAR

  	
   

  	
  Borrower’s
  participation in the capital of the

  Relevant Entity

  	
   

  	
  Amount of
  adjustment to

  Borrower’s EBITDAR

  for Relevant Entity

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

3.                                       The following components were used in the
calculation of the Borrower’s Consolidated Net Indebtedness:

 

(a)                                  Gross debt = [            ];

 

(b)                                 Cash position = [            ];

 

(c)                                  Sale of receivables = [            ];

 

(d)                                 Securitisation outstanding = [            ]; and

 

(e)                                  Leasing = [            ].

 

4.                                       The following components were used in the
calculation of the Borrower’s Net Financial Expenses:

 

(a)                                  Interest Expense including interest portion
of lease rentals = [            ]; and

 

(b)                                 Interest income = [            ].

 

 

Chief Financial Officer/Auditors

 

 

SCHEDULE 11

AGREED SECURITY PRINCIPLES

 

PART 1

GENERAL

 

	
  Value:

  	
   

  	
  Based on a value-to-loan
  ratio of 2.5x (LTV Test);

  
	
  Secured
  Assets:

  	
   

  	
  Assets listed in Part 2 of
  this Schedule AND any additional assets of the Group required to obtain a
  Valuation Report confirming compliance with the LTV Test on the Security
  Testing Date;

  
	
  Valuation
  report:

  	
   

  	
  Report provided by a third
  party reputable international Corporate Finance Advisory firm appointed by
  Rhodia confirming the value of the Secured Assets (listed in Part 2 and any
  additional assets) on a going concern basis, on terms satisfactory to the
  Majority Secured Creditors;

  
	
  Security
  Testing Date:

  	
   

  	
  Date on which the Shared Security
  provided for in the SCA is Effective;

  
	
  Effective:

  	
   

  	
  Security package effective
  as per SCA;

  
	
  Beneficiaries:

  	
   

  	
  See Part 3 of this
  Schedule;

  
	
  Amount of
  Exposure secured:

  	
   

  	
  €1.2bn;

  
	
  Security
  Sharing:

  	
   

  	
  Beneficiaries
  of Security shall be party to a Security Sharing Agreement which shall
  legislate for limitations on and a procedure for Enforcement Action and a
  procedure for sharing of security between different creditor groups as set
  out tin Part 4.

  

 

 

 

 

Any text removed pursuant to Rhodia S.A.'s
confidential treatment request has been separately submitted with the U.S.
Securities and Exchange Commission and is marked ["***"] herein.

 

PART 2

 

SECURED
ASSETS

 

[***]

 

[***]—THE
PART OF THE SCHEDULE ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PART OF THE SCHEDULE. 

 

 

PART 3

BENEFICIARIES

 

	
  Affected Facilities (as per

  Schedule 3 of the SCA)

  	
   

  	
  Pre-term
  date(5)

  Exposure secured by shared

  security

  	
   

  	
  Post-term
  date

  Secured by

  Exposure

  shared security

  	
   

  	
  Pre-term
  date

  Non-shared security

  	
   

  	
  Post-term
  date

  Non-shared security

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Committed Bank lines/Refinancing Facilities Agreement

  	
   

  	
  100% of Exposure as set
  out in Schedule 3 of SCA

  	
   

  	
  As under the Refinancing
  Facilities Agreement

  	
   

  	
  Existing Security, if any,
  as per Part 1 of Schedule 4 of SCA under relevant Facility Agreement

  	
   

  	
  Existing security, if any,
  as per Part 1 of Schedule 4 of SCA under relevant Facility Agreement where
  not refinanced under the Refinancing Facilities Agreement

  
	
  Uncommitted Facilities including Overdraft Facilities

  	
   

  	
  100% of Exposure as set
  out in Schedule 3 of SCA as reduced in accordance with the SCA

  	
   

  	
  100% of Exposure at Term
  Date, not to exceed 100% of Exposure as set out in Schedule 3 of SCA as reduced
  in accordance with the SCA

  	
   

  	
  Existing security, if any,
  as per Part 1 of Schedule 4 of SCA under relevant Facility Agreement

  	
   

  	
  Existing security, if any,
  as per Part 1 of Schedule 4 of SCA under relevant Facility Agreement

  
	
  Leases

  	
   

  	
  80% of Exposure as set out
  in Schedule 3 of SCA (to include equity/recourse obligations) [as reduced in
  accordance with the SCA]

  	
   

  	
  80% of Exposure as set out
  in Schedule 3 of SCA as reduced in accordance with the SCA(6) [and after
  taking into account permitted lease payments during SCA]

  	
   

  	
  Existing security as per
  Part 1 of Schedule 4 of SCA under relevant Facility Agreement and where
  applicable 5% Lessor Reduction in accordance with Agreed Lease Agreeement
  Principles

  	
   

  	
  Existing security as per
  Part 1 of SCA under relevant Facility Agreement and where applicable 5%
  Lessor Reduction on Term Date

  
	
  Letters of credit/banking guarantees

  	
   

  	
  30% of Exposure as set out
  in Schedule 3 of SCA and 100% of that Exposure in respect of a claim made by
  a Lender following a payment under that letter of credit or guarantee by that
  Lender (except in respect of a payment under an “extend or pay” letter of
  creditor or guarantee made at the time of its maturity

  	
   

  	
  30% of Exposure as set out
  in Schedule 3 of SCA except for letters of credit/banking guarantees (i)
  maturing post-Term Date to be negotiated on a bilateral basis upwards or
  downwards on or around the maturity date or (ii) counter-indemnified under
  the Refinancing Facilities Agreement

  	
   

  	
  Existing security as per
  Part 1 of Schedule 4 of SCA under relevant Facility Agreement

  	
   

  	
  Existing security as per
  Part 1 of Schedule 4 of SCA under relevant Facility Agreement and cash
  collateral and/or a counter-guarantee under the Refinancing Facilities
  Agreement up to a maximum aggregate amount to be agreed

  
	
  Derivative Instruments

  	
   

  	
  100% of its Derivative
  Liability up to the maximum Exposure under that Derivative Instrument as set
  out in Schedule 3 of SCA

  	
   

  	
  100% of its Derivative
  Liability up to the maximum Exposure under that Derivative Instrument as set
  out in Schedule 3 of the SCA

  	
   

  	
  Derivative Deposit as per
  the SCA up to a maximum aggregate amount for all Derivative Instruments not
  exceeding Euros 40,000,000

  	
   

  	
  Derivative Deposit as per
  the SCA up to a maximum aggregate amount for all Derivative Instruments not
  exceeding the amount secured at the Term Date

  

 

 

	
  Non-Affected Facilities (as

  per Schedule 3 of the SCA)

  	
   

  	
  Pre-term
  date(5)

  Exposure secured by shared

  security

  	
   

  	
  Post-term
  date

  Secured by

  Exposure

  shared security

  	
   

  	
  Pre-term
  date

  Non-shared security

  	
   

  	
  Post-term
  date

  Non-shared security

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  High Yield Bonds

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  USPP

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
   

  
	
  EMTN

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Credit facilities (committed and uncommitted bank lines and
  overdrafts)

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Securitisations

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Sales of receivables/forfeiting

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Operating leases

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Letters of credit/banking guarantees

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Forfeiting programmes

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  

 

(5)                                  Dilution percentage Secured Debt to Shared
Security approximately 91/98%.

 

(6)                                  Schedule 3 will be updated to reflect agreed
commercial terms and Exposure as reduced.

 

 

PART 4

SECURITY
SHARING PRINCIPLES

 

1.                                       Parties to the Security
Sharing Agreement:  The Company, the Senior Secured Creditors
(and relevant Facility/Security Agents), the Security Agent and the
Intercreditor Agent. The USPP Noteholders shall not be parties to, but may have
the benefit of, the provisions of the Security Sharing Agreement.

 

2.                                       Senior Secured Creditors:  The
creditors listed in the attached Schedule pre/post Term Date (as defined in the
SCA) including beneficiaries of both the Shared Security and the Non-Shared
Security.

 

3.                                       Majority Secured Creditors: 
Senior Secured Creditors who together represent 66.67% of outstanding
Exposure of the Senior Secured Creditors (including after the Term Date (but
not before) the commitments/outstandings under the Refinancing Facilities
Agreement).

 

4.                                       Security Agent:  To
be agreed.

 

5.                                      Security:

 

•                                          Shared Security-The Secured Assets as listed in Part 2 of
Schedule 11 of the SCA (including for these purposes the new Company Guarantee)
and any other assets designated as Shared Security by the Company and the
Intercreditor Agent in accordance with the SCA.

 

•                                          Non-Shared Security-The security listed in the attached Schedule
pre/post Term Date (as defined in the SCA) being the Existing Security (as
defined in the SCA) and any existing guarantees (including any existing
guarantees from the Company but excluding the Rhodia Inc and the Rhodia Holding
Inc. guarantee of the USPP) and any security interests/guarantees permitted to
be created by the SCA in respect of each Facility (other than the Shared
Security) and including equipment/assets subject to a lease but excluding, for
the avoidance of doubt, receivables under securitisation programmes.

 

6.                                      Secured Debt:

 

•                                          The aggregate amount of Exposure under each
Facility which is to be secured by the Shared Security up to the maximum amount
per Facility set out in the attached Schedule pre/post Term Date.

 

•                                          The maximum aggregate amount of Secured Debt
has been determined having regard to security interests permitted under the
senior High Yield Bonds being Euros 1.3 billion minus (i) up to €40 million of
Derivative Deposit permitted by SCA and (ii) up to €60 million of additional
non-Shared Security permitted by SCA.

 

•                                          The maximum aggregate amount of the present
value of net rental payments under leases(7) which can be secured as Secured
Debt is € 150 million.

 

 

(7)                                  Only including Cranbury, SG Synthetic Lease
and Leasing “Chase”.

 

•                                          The USPP will not be Secured Debt for the
purposes of the Security Sharing Agreement and Security Documents (see point 12
below for treatment of USPP).

 

•                                          It is intended that the Shared Security will
secure any Exposure which was secured on the Shared Security and which is
replaced, refinanced, refunded or renewed to the fullest extent legally
possible.

 

7.                                      Ranking of Secured Debt:

 

•                                          The Senior Secured Creditors (including the
Participants in the Rhodia Inc Synthetic Lease) will rank pari passu in right of priority and
payment in respect of the Secured Debt secured by the Shared Security.

 

•                                          The pari
passu ranking of the Secured Debt secured by the Shared Security
will apply regardless of any matter or thing whatsoever which might otherwise
impact that ranking including, for example, the order of registration, notice
or execution of any document any fluctuation in the outstanding amount of, or
any intermediate discharge of, any Secured Debt.

 

8.                                      Consents:  The
Senior Secured Creditors will:

 

•                                          consent to the granting of the Shared
Security both pre-Term Date and post-Term Date;

 

•                                          co-operate (but not take or refrain from
taking action otherwise prejudicial to it) so that the Secured Debt continues
to be secured on the Shared Security until the Senior Discharge Date; and

 

•                                          consent to the granting of new security
permitted to be granted by the SCA and intended to benefit the lenders under
the Refinancing Facilities Agreement.

 

9.                                      Security Discharge
Date/Release:

 

•                                          The Security Sharing Agreement will apply
from the date of signature through to the Security Discharge Date as regards
the Security except that it will cease to apply to Non-Shared Security after
the Term Date (unless a default under the SCA is outstanding at such date) or
if all obligations in respect of the USPP have not been unconditionally paid or
discharged in full.

 

•                                          Security Discharge Date means the date on
which the Intercreditor Agent notifies the Company (acting on the instructions
of the Secured Creditors) in writing that all Secured Debt has been
unconditionally paid or discharged in full and that the total commitments under
the secured Facilities have been cancelled in full. Notwithstanding the
foregoing and with exceptions to be agreed, the Security shall not be released
except to the extent that all obligations in respect of the USPP have been
unconditionally paid or discharged in full.

 

•                                          The Security Sharing Agreement will provide a
release mechanism (to be agreed) for Shared Security assets on and to the
extent of a disposal permitted under and in accordance with the SCA pre-Term
date and/or the Refinancing Facilities Agreement post-Term Date and/or for the
purpose of the paragraph above.

 

•                                          For the purposes of the Shared Security, the
release date means the date on which the Security Agent notifies the Company
(acting on the instructions of the Secured Creditors) in writing that the long
term credit rating for the Company quoted by both Moody’s and S&P has
reached investment grade and provided that other security for all other
facilities (other than Non-Shared Security and existing guarantees) has been or
is simultaneously released.

 

 

10.                               Enforcement of Shared
Security:

 

•                                          Until the Security Discharge Date, the
Security Agent and /or the Majority Secured Creditors shall have the exclusive
right to enforce the Shared Security and to give instructions to the Security
Agent to do the same, irrespective of whether any event of default or declared
default has occurred under any Facility.

 

•                                          The USPP Noteholders shall have no voting
rights under the Security Sharing Agreement nor any right to direct the
Security Agent or any Senior Secured Creditor in respect of any action relating
to the Shared Security and/or the Non-Shared Security.

 

11.                               Enforcement of Non-Shared
Security:

 

•                                          Until the Term Date (but not thereafter
unless a Default is outstanding under the SCA) no Senior Secured Creditor shall
enforce any Non-Shared Security or generally take any Enforcement Action (as
defined in the SCA) (other than as permitted by and in accordance with the SCA)
unless (i) the Majority Secured Creditors have agreed to the same in writing or
(ii) one or other of the following Events of Default is outstanding: a payment
default, an insolvency event, unenforceability, invalidity/failure to grant
priority ranking of lease security, failure to maintain required insurances or
lessor/participants good faith opinion that non-exercise of rights in respect
of non-shared security would jeopardise recovery of uncovered portion (20%) of
Secured Debt under the Shared Security. For the avoidance of doubt, the prior
written consent of the Majority Secured Creditors is not required by the USPP
Noteholders to claim on or enforce the Rhodia Inc. or Rhodia Holding Inc.
guarantees.

 

•                                          Rights and remedies shall be exercised and
enforcement action taken(8) against the Non-Shared Security (where such
Security has become enforceable) by the Senior Secured Creditor benefiting
therefrom prior to being entitled to receive any proceeds of any Shared
Security.

 

(8)                                  Time period to be agreed.

 

•                                          There may be a limited number of exceptions
to the above principle, for example with respect to Leases and/or Derivative
Instruments where the Company cannot provide the required amount of Derivative
Deposit or a creditor action required to preserve a claim in
insolvency/liquidation.

 

12.                               USPP Noteholders/Trustee:

 

•                                          USPP Noteholders will benefit from the credit
enhancement of Rhodia Inc. and Rhodia Holding Inc. (the “USPP Guarantors”) (to
be agreed) and benefit from the provisions of the Security Sharing Agreement
but will not be Senior Secured Creditors or parties thereto.

 

•                                          The contractual turnover mechanism would
provide that the Senior Secured Creditors agree to turnover an amount of net
enforcement proceeds with regard to the Shared Security to the USPP Noteholders
calculated by reference to the relevant Exposures/recoveries (to be agreed) to
the extent the USPP Noteholders have been unable to recover any debt through
their recourse to any guarantor of the notes.

 

•                                          No Senior Secured Creditor would have any
obligation to turnover any amount which would otherwise become due under the
Security Sharing Agreement to the USPP noteholders where in its good faith
opinion it would not be able to maintain and/or enforce an unsecured claim for
the full amount otherwise to be turned-over (whether as a result of a clawback
risk or otherwise).

 

 

•                                          The Company will indemnify and hold harmless
each Secured Senior Creditor in a form to be agreed for any amounts turned over
by it to the USPP Noteholders (such indemnity claim will not be secured as
Secured Debt). Standard subrogation/assignment provisions to be included in the
Security Sharing Agreement in respect of amounts turned over to USPP
Noteholders.

 

•                                          No representation or warranty would be made
by any Senior Secured Creditor (or relevant Facility/Security Agents), the
Security Agent or the Intercreditor Agent to the USPP noteholders as to the
legality, enforceability, collectibility or value, maintenance, enforcement,
release or discharge of the Security.

 

•                                          No Senior Secured Creditor (nor relevant
Facility/Security Agents), the Security Agent or the Intercreditor Agent would
have any obligation to the USPP noteholders to monitor business, assets,
condition, operations, prospects, credit or the Security and USPP noteholders
will expressly waive any rights/recourse in respect thereof.

 

•                                          The USPP Noteholders will exercise rights and
remedies and take enforcement action(9) against Rhodia Inc and any other
guarantor prior to being entitled to receive any amount of the turnover
proceeds in respect of the Shared Security mentioned above (see
Payments/distributions below).

 

(9)                                  Time period to be agreed.

 

•                                          The prior written consent of the Majority
Secured Creditors is not required by the USPP Noteholders to claim on or
enforce the USPP Guarantors’ guarantees.

 

13.                               Payments/distributions:

 

•                                          Enforcement proceeds of Shared Security will
be paid to and distributed by the Intercreditor Agent/Security Agent.

 

•                                          Enforcement proceeds of Non-Shared Security
will be paid to and distributed by the relevant Facility Agent or paid to the
relevant Secured Creditor.

 

•                                          An escrow arrangement will need to be
established pending receipt of proceeds of enforcement of Shared Security to
ensure that proceeds are not distributed prior to enforcement action(10)
against Non-Shared Security/existing guarantees and to preserve Senior Secured
Creditors net entitlement to any distribution such that Senior Secured
Creditors benefiting from Non-Shared Security are not disadvantaged in relation
to any other Secured Creditors.

 

(10)                            Time period to be agreed.

 

•                                          The order of application of enforcement
proceeds is to be agreed.

 

14.                               Loss Sharing:

 

•                                          Each Senior Secured Creditor must account for
and deduct the amount of proceeds received from the enforcement of the
Non-Shared Security/existing guarantees from its global individual Exposure for
the purposes of determining its pro rata
entitlement to any proceeds of enforcement from the Shared Security.

 

•                                          No obligation on a Senior Secured Creditor to
share proceeds received from the enforcement of the Non-Shared
Security/existing guarantees.

 

•                                          Recoveries from enforcement over secured
Intercompany Loans will be treated on a pari
passu basis between Secured Senior Creditors having Shared Security
notwithstanding that if taken by way of a French law security (Loi Dailly) assignment this can only
secure the direct borrowing obligations of the Company and cannot secure its’
obligations as guarantor.

 

•                                          For the purposes of the Security Sharing
Agreement, set-off against deposits shall be dealt with in the same way as if
Shared/non-Shared Security, as the case may be.

 

•                                          General principle of loss-sharing in respect
of Shared Security as per the SCA.

 

•                                          The loss-sharing provisions in respect of
Shared Security only shall also be for the benefit of the USPP Noteholders.

 

 

15.                                 Security Agent: 
Customary provisions for the appointment of Security Agent and standard
indemnity and other protections to be included.

 

16.                                 Co-operation between Senior
Secured Creditors:  Customary provisions concerning notification
of default, termination events, prepayment events, notification of amount of
Secured Debt under each Facility and authorisation by the Company for Senior
Secured Creditors to disclose information to each other.

 

17.                                 Transfers: 
Customary provisions to ensure that any transferee from a Secured Senior
Creditor accedes to and is bound by the Security Sharing Agreement.

 

18.                                 Several obligations:  The
obligations of each Senior Secured Creditor are several and no liability for
the obligations of any other Senior Secured Creditor; failure by one Senior
Secured Creditor to perform not affect rights/obligations of any other person.

 

19.                                 Amendments/waivers: 
Appropriate quorum for amendments/waivers to Security Sharing
Agreement/release of security to be agreed. Certain amendments (to be agreed)
to be subject to the approval of the Required Holders (as defined in the USPP)

 

20.                                 Governing law and
Jurisdiction:  English law by way of deed. Jurisdiction
clause to track SCA.

 

	
  Affected Facilities (as per

  Schedule 3 of the SCA)

  	
   

  	
  Pre-term
  date(11)

  Exposure secured by shared

  security

  	
   

  	
  Post-term
  date

  Exposure

  secured by

  shared security

  	
   

  	
  Pre-term
  date

  Non-shared security

  	
   

  	
  Post-term
  date

  Non-shared security

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Committed Bank lines/Refinancing Facilities Agreement

  	
   

  	
  100% of Exposure as set
  out in Schedule 3 of SCA

  	
   

  	
  As under the Refinancing
  Facilities Agreement

  	
   

  	
  Existing Security, if any,
  as per Part 1 of Schedule 4 of SCA under relevant Facility Agreement

  	
   

  	
  Existing security, if any,
  as per Part 1 of Schedule 4 of SCA under relevant Facility Agreement where
  not refinanced under the Refinancing Facilities Agreement

  
	
  Uncommitted Facilities including Overdraft Facilities

  	
   

  	
  100% of Exposure as set
  out in Schedule 3 of SCA as reduced in accordance with the SCA

  	
   

  	
  100% of Exposure at Term
  Date, not to exceed 100% of Exposure as set out in Schedule 3 of SCA as
  reduced in accordance with the SCA

  	
   

  	
  Existing security, if any,
  as per Part 1 of Schedule 4 of SCA under relevant Facility Agreement

  	
   

  	
  Existing security, if any,
  as per Part 1 of Schedule 4 of SCA under relevant Facility Agreement

  
	
  Leases

  	
   

  	
  80% of Exposure as set out
  in Schedule 3 of SCA (to include equity/recourse obligations) [as reduced in
  accordance with the SCA]

  	
   

  	
  80% of Exposure as set out
  in Schedule 3 of SCA as reduced in accordance with the SCA(12) [and after
  taking into account permitted lease payments during SCA]

  	
   

  	
  Existing security as per
  Part 1 of Schedule 4 of SCA under relevant Facility Agreement and where
  applicable 5% Lessor Reduction in accordance with Agreed Lease Agreement
  Principles

  	
   

  	
  Existing security as per
  Part 1 of SCA under relevant Facility Agreement and where applicable 5%
  Lessor Reduction on Term Date

  
	
  Letters of credit/banking guarantees

  	
   

  	
  30% of Exposure as set out
  in Schedule 3 of SCA and 100% of that Exposure in respect of a claim made by
  a Lender following a payment under that letter of credit or guarantee by that
  Lender (except in respect of a payment under an “extend or pay” letter of
  creditor or guarantee made at the time of its maturity

  	
   

  	
  30% of Exposure as set out
  in Schedule 3 of SCA except for letters of credit/banking guarantees (i)
  maturing post-Term Date to be negotiated on a bilateral basis upwards or
  downwards on or around the maturity date or (ii) counter-indemnified under
  the Refinancing Facilities Agreement

  	
   

  	
  Existing security as per
  Part 1 of Schedule 4 of SCA under relevant Facility Agreement

  	
   

  	
  Existing security as per
  Part 1 of Schedule 4 of SCA under relevant Facility Agreement and cash
  collateral and/or a counter-guarantee under the Refinancing Facilities
  Agreement up to a maximum aggregate amount to be agreed

  
	
  Derivative Instruments

  	
   

  	
  100% of its Derivative
  Liability up to the maximum Exposure under that Derivative Instrument as set
  out in Schedule 3 of SCA

  	
   

  	
  100% of its Derivative
  Liability up to the maximum Exposure under that Derivative Instrument as set
  out in Schedule 3 of the SCA

  	
   

  	
  Derivative Deposit as per
  the SCA up to a maximum aggregate amount for all Derivative Instruments not
  exceeding Euros 40,000,000

  	
   

  	
  Derivative Deposit as per
  the SCA up to a maximum aggregate amount for all Derivative Instruments not
  exceeding the amount secured at the Term Date

  

 

 

	
  Non-Affected Facilities (as

  per Schedule 3 of the SCA)

  	
   

  	
  Pre-term
  date(11)

  Exposure secured by shared

  security

  	
   

  	
  Post-term
  date

  Exposure

  secured by

  shared security

  	
   

  	
  Pre-term
  date

  Non-shared security

  	
   

  	
  Post-term
  date

  Non-shared security

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  High Yield Bonds

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  USPP

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
   

  
	
  EMTN

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Credit facilities (committed and uncommitted bank lines and
  overdrafts)

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Securitisations

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Sales of receivables/forfeiting

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Operating leases

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Letters of credit/banking guarantees

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  
	
  Forfeiting programmes

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  

 

(11)                            Dilution percentage Secured Debt to Shared
Security approximately 91/98%.

 

(12)                            Schedule 3 will be updated to reflect agreed
commercial terms and Exposure as reduced.

 

 

SIGNATORIES

 

	
  The
  Company

  
	
   

  
	
  RHODIA S.A.

  
	
   

  
	
  By:

  
	
   

  
	
  Original
  Obligors

  
	
   

  
	
  RHODIA POLIAMIDA E
  ESPECIALIDADES LTDA.

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA HENGCHANG
  (ZHANGJIAGANG) SPECIALTY CHEMICAL CO. LTD

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA WUXI PHARMACEUTICAL
  CO. LTD

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA S.A.

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA JAPAN LTD

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA FOSFATADOS DE
  MEXICO S.A. DE CV

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA CAPITAL MARKET (ex
  RHONE-POULENC (SUISSE) S.A.)

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA ENGINEERING
  PLASTICS Co, Ltd

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA INC

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA ACETOW VENEZUELA
  C.A.

  
	
   

  
	
  By:

  
	
   

  
	
  RHODIA CHINA CO. LIMITED

  
	
   

  
	
  By:

  
	
   

  
	
  The
  Guarantor

  
	
   

  
	
  RHODIA S.A.

  
	
   

  
	
  By:

  
	
   

  
	
  Original
  Lenders

  
	
   

  
	
  BNP PARIBAS

  
	
   

  
	
  By:

  
	
   

  
	
  CRÉDIT LYONNAIS S.A.

  
	
   

  
	
  By:

  
	
   

  
	
  CRÉDIT INDUSTRIEL ET
  COMMERCIAL

  
	
   

  
	
  By:

  
	
   

  
	
  BANQUE DE L’ECONOMIE DU
  COMMERCE ET DE LA MONETIQUE

  
	
   

  
	
  By:

  
	
   

  
	
  CSFB

  
	
   

  
	
  By:

  
	
   

  
	
  WACHOVIA

  
	
   

  
	
  By:

  
	
   

  
	
  BAYERISCHE LANDESBANK

  
	
   

  
	
  By:

  
	
   

  
	
  SOCIÉTÉ GÉNÉRALE

  
	
   

  
	
  By:

  
	
   

  
	
  THE BANK OF
  TOKYO-MITSUBISHI, LTD.

  
	
   

  
	
  By:

  
	
   

  
	
  FORTIS BANK N.V.

  
	
   

  
	
  By:

  
	
   

  
	
  NATEXIS BANQUES POPULAIRES

  
	
   

  
	
  By:

  
	
   

  
	
  CCF

  
	
   

  
	
  By:

  
	
   

  
	
  STANDARD CHARTERED BANK

  
	
   

  
	
  By:

  
	
   

  
	
  THE ROYAL BANK OF SCOTLAND
  PLC

  
	
   

  
	
  By:

  
	
   

  
	
  BANCO BILBAO VIZCAYA
  ARGENTARIA

  
	
   

  
	
  By:

  
	
   

  
	
  JPMORGAN CHASE BANK

  
	
   

  
	
  By:

  
	
   

  
	
  ING BANK N.V.

  
	
   

  
	
  By:

  
	
   

  
	
  UNICREDITO ITALIANO

  
	
   

  
	
  By:

  
	
   

  
	
  UFJ NEDERLAND N.V.

  
	
   

  
	
  By:

  
	
   

  
	
  UFJ BANK LIMITED

  
	
   

  
	
  By:

  
	
   

  
	
  CITIBANK INTERNATIONAL PLC

  
	
   

  
	
  By:

  
	
   

  
	
  LANDES GIROZENTRALE

  
	
   

  
	
  By:

  
	
   

  
	
  COMERICA

  
	
   

  
	
  By:

  
	
   

  
	
  Intercreditor
  Agent

  
	
   

  
	
  BNP PARIBAS

  
	
   

  
	
  By:

  
	
   

  
	
  Agents
  under Affected Facilities

  
	
   

  
	
  BNP PARIBAS

  
	
   

  
	
  By:Exhibit 4.1

 

PROMISSORY NOTE

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call /
  Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
  $

  	
  1,300,000.00

  	
   

  	
  03-18-2004

  	
   

  	
  02-28-2009

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  References in the shaded area are for Lender’s use only and do not
  limit the applicability of this document to any particular loan or item. Any
  item above containing “ * * * ” has been omitted due to text length
  limitations.

  	
   

  
																	

 

	
  Borrower:

  	
   

  	
  Quality Products, Inc.

  2222 South Third Street

  Columbus, OH 43207

  	
   

  	
  Lender:

  	
   

  	
  THE HUNTINGTON NATIONAL BANK

  Columbus Commercial Banking

  P. O. Box 341470 - HZ0325

  Columbus, OH 43234-9429

  

 

	
  Principal Amount:  $1,300,000.00

  	
   

  	
  Initial Rate:  3.490%

  	
   

  	
  Date of Note:  March 18, 2004

  

 

PROMISE TO PAY. Quality Products, Inc. (“Borrower”) promises
to pay to THE HUNTINGTON NATIONAL BANK (“Lender”), or order, in lawful money of
the United States of America, the principal amount of One Million Three Hundred
Thousand & 00/100 Dollars ($1,300,000.00), together with interest on the
unpaid principal balance from March 18, 2004, until paid in full.

 

PAYMENT.
Subject to any payment changes resulting from changes in the Index, Borrower
will pay this loan in 59 principal payments of $21,666.67 each and one final
principal and interest payment of $21,725.28. Borrower’s first principal payment
is due March 31, 2004, and all subsequent principal payments are due on the
same day of each month after that. In addition, Borrower will pay regular
monthly payments of all accrued unpaid interest due as of each payment date,
beginning March 31, 2004, with all subsequent interest payments to be due on
the same day of each month after that. Borrower’s final payment due February
28, 2009, will be for all principal and all accrued interest not yet paid.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any accrued unpaid interest; then to principal; then to any unpaid
collection costs; and then to any late charges. The annual interest rate for
this Note is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender’s address shown
above or at such other place as Lender may designate in writing.

 

VARIABLE
INTEREST RATE. The
interest rate on this Note is subject to change from time to time based on
changes in an independent index which is the LIBO Rate. As used herein, LIBO
Rate shall mean the rate obtained by dividing: (1) the actual or estimated per
annum rate, or the arithmetic mean of the per annum rates, of interest for
deposits in U.S. dollars for the related LIBO Rate Interest Period (as
hereinafter defined), as determined by Lender in its discretion based upon
reference to information which appears on page LIBOR01, captioned British
Bankers Assoc. Interest Settlement Rates, of the Reuters America Network, a
service of Reuters America Inc. (or such other page that may replace that page
on that service for the purpose of displaying London interbank offered rates;
or, if such service ceases to be available or ceases to be used by Lender, such
other reasonably comparable money rate service as Lender may select) or upon
information obtained from any other reasonable procedure, as of two Banking
Days (as hereinafter defined) prior to the first day of a LIBO Rate Interest
Period; by (2) an amount equal to one minus the stated maximum rate (expressed
as a decimal), if any, of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
that is specified on the first day of each LIBO Rate Interest Period by the
Board of Governors of the Federal Reserve System (or any successor agency
thereto) for determining the maximum reserve requirement with respect to
eurocurrency funding (currently referred to as “Eurocurrency liabilities” in
Regulation D of such Board) maintained by a member bank of such System, or any
other regulations of any governmental authority having jurisdiction with
respect thereto as conclusively determined by the Lender. Subject to any
maximum or minimum interest rate limitation specified herein or by applicable
law, any variable rate of interest on the obligation evidenced hereby shall change
automatically without notice to the Borrower on the first day of each LIBO Rate
Interest Period (the “Index”). The Index is not necessarily the lowest rate
charged by Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notice to
Borrower. Lender will tell Borrower the current Index rate upon Borrower’s
request. The interest rate change will not occur more often than each month
(the “rate change event”). Borrower understands that Lender may make loans
based on other rates as well. The initial
rate is based on the Index as of March 15, 2004 which was 1.090% per annum.
Initially, the interest rate to be applied to the unpaid principal balance of
the Note is 3.490%. After the first rate change event, the interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 2.400
percentage points over the Index. NOTICE: Under no circumstances
will the interest rate on this Note be more than the maximum rate allowed by
applicable law.

 

PREPAYMENT. Borrower agrees that all loan fees and other
prepaid finance charges are earned fully as of the date of the loan and will
not be subject to refund upon early payment (whether voluntary or as a result
of default), except as otherwise required by law. Except for the foregoing,
Borrower may pay without penalty all or a portion of the amount owed earlier
than it is due. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower’s obligation to continue to make payments under
the payment schedule. Rather, early payments will reduce the principal balance
due and may result in Borrower’s making fewer payments. Borrower agrees not to
send Lender payments marked “paid in full”, “without recourse”, or similar
language. If Borrower sends such a payment, Lender may accept it without losing
any of Lender’s rights under this Note, and Borrower will remain obligated to
pay any further amount owed to Lender. All written communications concerning
disputed amounts, including any check or other payment instrument that
indicates that the payment constitutes “payment in full” of the amount owed or
that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: The Huntington National
Bank, Commercial Customer Support, 7450 Huntington Park Drive - HZ0326
Columbus, OH 43235.

 

LATE CHARGE. If a payment is 11 days or more late,
Borrower will be charged 5.000% of the
regularly scheduled payment.

 

INTEREST
AFTER DEFAULT. Upon
default, including failure to pay upon final maturity, Lender, at its option,
may, if permitted under applicable law, increase the variable interest rate on
this Note to 5.400 percentage points over the Index. The interest rate will not
exceed the maximum rate permitted by applicable law.

 

DEFAULT. Each of the following shall constitute an
event of default (“Event of Default”) under this Note:

 

Payment
Default. Borrower
fails to make any payment when due under this Note.

 

Other Defaults. Borrower fails to comply with or to perform
any other term, obligation, covenant or condition contained in this Note or in
any of the related documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.

 

False
Statements. Any
warranty, representation or statement made or furnished to Lender by Borrower
or on Borrower’s behalf under this Note or the related documents is false or
misleading in any material respect, either now or at the time made or furnished
or becomes false or misleading at any time thereafter.

 

Insolvency. The dissolution or termination of Borrower’s
existence as a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Borrower.

 

Creditor or
Forfeiture Proceedings.
Commencement of foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by any creditor
of Borrower or by any governmental agency against any collateral securing the
loan. This includes a garnishment of any of Borrower's accounts, including
deposit accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower gives Lender written notice of the creditor or
forfeiture proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender, in its
sole discretion, as being an adequate reserve or bond for the dispute.

 

Events
Affecting Guarantor. Any of the preceding events
occurs with respect to any Gurantor of any of the indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or liability
under, any guaranty of the indebtedness evidenced by this Note.

 

Change
In Ownership. Any change in ownership of twenty-five
percent (25%) or more of the common stock of Borrower.

 

Adverse
Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of this Note is impaired.

 

Insecurity.
Lender in good faith believes itself insecure.

 

LENDER'S
RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.

 

ATTORNEYS'
FEES; EXPENSES. Lender may hire or pay someone else to
collect this Note if Borrower does not pay. Borrower will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit,
including attorneys' fees, exenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), and appeals. If
not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.

 

 

JURY WAIVER.
Lender and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower against the
other.

 

GOVERNING
LAW. This Note will be governed by, construed and enforced in accordance with
federal law and the laws of the State of Ohio. This Note has been accepted by
Lender in the State of Ohio.

 

CONFESSION
OF JUDGMENT. Borrower
hereby irrevocably authorizes and empowers any attorney-at-law, including an
attorney hired by Lender, to appear in any court of record and to confess
judgment against Borrower for the unpaid amount of this Note as evidenced by an
affidavit signed by an officer of Lender setting forth the amount then due,
attorneys’ fees plus costs of suit, and to release all errors, and waive all
rights of appeal. If a copy of this Note, verified by an affidavit, shall have
been filed in the proceeding, it will not be necessary to file the original as
a warrant of attorney. Borrower waives the right to any stay of execution and
the benefit of all exemption laws now or hereafter in effect. No single
exercise of the foregoing warrant and power to confess judgment will be deemed
to exhaust the power, whether or not any such exercise shall be held by any
court to be invalid, voidable, or void; but the power will continue
undiminished and may be exercised from time to time as Lender may elect until
all amounts owing on this Note have been paid in full. Borrower waives any
conflict of interest that an attorney hired by Lender may have in acting on
behalf of Borrower in confessing judgment against Borrower while such attorney
is retained by Lender. Borrower expressly consents to such attorney acting for
Borrower in confessing judgment.

 

DISHONORED
ITEM FEE. Borrower
will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s
loan and the check or preauthorized charge with which Borrower pays is later
dishonored.

 

RIGHT OF
SETOFF. To the extent
permitted by applicable law, Lender reserves a right of setoff in all
Borrower’s accounts with Lender (whether checking, savings, or some other
account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does hot
include any IRA or Keogh accounts, or any trust accounts for which setoff would
be prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the indebtedness against
any and all such accounts.

 

FINANCIAL
STATEMENTS. Borrower
agrees to furnish from time to time on the request of the Lender true and
complete financial statements and such other information as the Lender may
reasonably require.

 

PROCESSING
FEE. Borrower shall
pay to Lender on the date of this Note a processing fee in the amount of $0.00.
Lender and Borrower agree that the fee shall be fully earned by Lender on the
date of this Note.

 

PAYMENT
DATES. If the due date
of any payment under this Note shall be a day that is not a Banking Day (as
defined herein), the due date shall be extended to the next succeeding Banking
Day; provided, however, that if such next succeeding Banking Day occurs in the
following calendar month, then the due date shall be the immediately preceding
Banking Day.

 

ADDITIONAL
DEFAULT. In addition
to those events described as Events of Default in the Section of this Note
captioned DEFAULT, it shall constitute an Event of Default under this Note if
Borrower fails to comply with or to perform any term, obligation, covenant or
condition contained in any
interest rate protection agreement, foreign currency exchange agreement,
commodity price protection agreement or other interest or currency exchange rate or commodity price hedging
arrangement between Borrower and Lender.

 

ADDITIONAL
LIBO RATE PROVISIONS.
As used herein, Banking Day shall mean any day other than a Saturday or a
Sunday on which banks are open for business in Columbus, Ohio, and on which
banks in London, England, settle payments.

 

As used herein, LIBO Rate
Interest Period shall mean one (1) month, provided that: (1) if any LIBO Rate
Interest Period would otherwise expire on a day which is not a Banking Day, the
LIBO Rate Interest Period shall be extended to the next succeeding Banking Day
(provided, however, that if such next succeeding Banking Day occurs in the
following calendar month, then the LIBO Rate Interest Period shall expire on
the immediately preceding Banking Day).

 

In
the event that Lender reasonably determines that by reason of (1) any change
arising after the date of this Note affecting the interbank eurocurrency market
or affecting the position of the Lender with respect to such market, adequate
and fair means do not exist for ascertaining the applicable interest rates by
reference to which the LIBO Rate then being determined is to be fixed, (2) any
change arising after the date of this Note in any applicable law or
governmental rule, regulation or order (or any interpretation thereof,
including the introduction of any new law or governmental rule, regulation or
order), or (3) any other circumstance affecting the Lender or the interbank
market (such as, but not limited to, official reserve requirements required by
Regulation D of the Board of Governors of the Federal Reserve System), the LIBO
Rate plus the applicable spread shall not represent the effective pricing to
the Lender of accruing interest hereunder based upon the LIBO Rate, then, and
in any such event, the accruing of interest hereunder based upon the LIBO Rate
shall be suspended until Lender shall notify the Borrower that the
circumstances causing such suspension no longer exist. In such case, beginning
on the date of such suspension interest shall accrue hereunder at a variable
rate of interest per annum, which shall change in the manner set forth below,
equal to         percentage points
in excess of the Prime Commercial Rate (as hereinafter defined).

 

In
the event that on any date Lender shall have reasonably determined that
accruing interest hereunder based upon the LIBO Rate has become unlawful by
compliance by the Lender in good faith with any law, governmental rule,
regulation or order, then, and in any such event, the Lender shall promptly
give notice thereof to the Borrower. In such case, accruing interest hereunder
based upon the LIBO Rate shall be terminated and the Borrower shall, at the
earlier of the end of each LIBO Rate Interest Period then in effect or when required
by law, repay the advances based upon the LIBO Rate, together with all interest
accrued thereon. In such case, when required by law, interest shall accrue
hereunder at a variable rate of interest per annum, which shall change in the
manner set forth below, equal
to           percentage
points in excess of the Prime Commercial Rate.

 

As used herein, Prime
Commercial Rate shall mean the rate established by Lender from time to time
based on its consideration of economic, money market, business and competitive
factors, and it is not necessarily the Lender’s most favored rate. Subject to
any maximum or minimum interest rate limitation specified herein or by
applicable law, any variable rate of interest on the obligation evidenced
hereby based upon the Prime Commercial Rate shall change automatically without
notice to the Borrower immediately with each change in the Prime Commercial
Rate. If during any period of time while interest is accruing hereunder based
upon the Prime Commercial Rate the obligation evidenced by this Note is not
paid at maturity, whether maturity occurs by lapse of time, demand,
acceleration or otherwise, the unpaid principal balance and any unpaid interest
thereon shall, thereafter until paid, bear interest at a rate equal to          percentage
points (which shall be 0.00 percentage points, unless completed) in excess of
the rate indicated in the immediately preceding two paragraphs.

 

If, due to (1) the
introduction of or any change in or in the interpretation of any law or
regulation, (2) the compliance with any guideline or request from any central
bank or other public authority (whether or not having the force of law), or (3)
the failure of the Borrower to repay any advance when required by the terms of
this Note, there shall be any loss or increase in the cost to the Lender of
accruing interest hereunder based upon the LIBO Rate, then the Borrower agrees
that the Borrower shall, from time to time, upon demand by the Lender, pay to
the Lender additional amounts sufficient to compensate the Lender for such loss
or increased cost. A certificate as to the amount of such loss or increase
cost, submitted to the Borrower by the Lender, shall be conclusive evidence,
absent manifest error, of the correctness of such amount.

 

Notwithstanding the section
above captioned PREPAYMENT, during any period of time while interest is
accruing hereunder based upon the LIBO Rate Borrower may not prepay any portion
of the outstanding principal balance prior to the expiration of the then
current LIBO Rate Interest Period.

 

DETERMINATION
OF INDEX. This Note expresses an initial interest rate
and an initial index value to 3 places to the right of the decimal point. This
expression is done solely for convenience. The reference sources for the index
used by Lender, as stated in this Note, may actually quote the Index on any
given day to as many as 5 places to the right of the decimal point. Therefore,
the actual index value used to calculate the interest rate on and the amount of
interest due under this Note will be to 5 places to the right of the decimal
point.

 

IMPORTANT
INFORMATION ABOUT PROCEDURES REQUIRED BY THE USA PATRIOT ACT.
To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each entity or person who opens an
account or establishes a relationship with the Lender.

 

What this
means: When an entity or person opens an account or establishes a relationshiop
with the Lender, the Lender may ask for the name, address, date of birth, and
other information that will allow the Lender to identify the entity or person
who opens an account or establishes a relationship with the Lender.  The Lender may also ask to see indentifying
documents for the entity or person.

 

SUCCESSOR
INTERESTS. The terms of this Note shall be binding
upon Borrower, and upon Borrower's heirs, personal representatives, successors
and assigns, and shall inure to the benefit of Lender and its successors and
assigns.

 

GENERAL
PROVISIONS. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Borrower does not
agree or intend to pay, and Lender does not agree or intend to contract for,
charge, collect, take, reserve or receive (collectively referred to herein as
"charge or collect"), any amount in the nature of interest or in the
nature of a fee for this loan, which would in any way or event (including
demand, prepayment, or acceleration) cause Lender to charge or collect more for
this loan than the maximum Lender would be permitted to charge or collect by
federal law or the law of the State of Ohio (as applicable).Any such excess
interest or unauthorized fee shall, instead of anything stated to the contrary,
be applied first to reduce the principal balance of this loan, and when the
principal has been paid in full, be refunded to Borrower. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive presentment, demand for payment, and
notice of dishonor.  Upon any change in
the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or
release any party or guarantor or collateral; or impair, fail to realize upon
or perfect Lender's security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is made.
The obligations under this Note are joint and several.

2

 

PRIOR TO
SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE
TERMS OF THE NOTE.

 

BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

NOTICE:  FOR THIS NOTICE “YOU” MEANS THE BORROWER AND
“CREDITOR” AND “HIS” MEANS LENDER.

 

WARNING
- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF
YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.

 

 

	
  BORROWER:

  
	
   

  
	
   

  
	
  QUALITY PRODUCTS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Richard A. Drexler, Chief Executive Officer of

  Quality Products, Inc.

  	
   

  

 

3

 

PROMISSORY NOTE

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call /
  Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
  $

  	
  200,000.00

  	
   

  	
  03-18-2004

  	
   

  	
  03-31-2005

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  References in the shaded area are for Lender’s use only and do not
  limit the applicability of this document to any particular loan or item. Any
  item above containing “ * * * ” has been omitted due to text length
  limitations.

  	
   

  
																	

 

	
  Borrower:

  	
   

  	
  Quality Products, Inc.

  2222 South Third Street

  Columbus, OH 43207

  	
   

  	
  Lender:

  	
   

  	
  THE HUNTINGTON NATIONAL BANK

  Columbus Commercial Banking

  P. O. Box 341470 - HZ0325

  Columbus, OH 43234-9429

  

 

	
  Principal Amount:  $ 200,000.00

  	
   

  	
  Initial Rate:  3.490%

  	
   

  	
  Date of Note:  March 18, 2004

  

 

PROMISE TO
PAY. Quality Products, Inc. (“Borrower”) promises to pay to THE HUNTINGTON
NATIONAL BANK (“Lender”), or order, in lawful money of the United States of
America, the principal amount of Two Hundred Thousand & 00/100 Dollars
($200,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.

 

PAYMENT.
Borrower will pay this loan in one payment of all outstanding principal plus
all accrued unpaid interest on March 31, 2005. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment
date, beginning March 31, 2004, with all subsequent interest payments to be due
on the same day of each month after that. Unless otherwise agreed or required
by applicable law, payments will be applied first to any accrued unpaid
interest; then to principal; then to any unpaid collection costs; and then to
any late charges. The annual interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Borrower
will pay Lender at Lender’s address shown above or at such other place as
Lender may designate in writing.

 

VARIABLE
INTEREST RATE. The
interest rate on this Note is subject to change from time to time based on
changes in an independent index which is the Daily Fluctuating LIBO Rate. As
used herein, Daily Fluctuating LIBO Rate shall mean the rate obtained by
dividing: (1) the actual or estimated per annum rate, or the arithmetic mean of
the per annum rates, of interest for deposits in U.S. dollars for one (1) month
periods, as offered and determined by Lender in its sole discretion based upon
information which appears on page LIBOR01, captioned British Bankers Assoc.
Interest Rate Settlement Rates, of the Reuters America Network, a service of
Reuters America Inc. (or such other page that may replace that page on that
service for the purpose of displaying LIBO rates; or, if such service ceases to
be available or ceases to be used by Lender, such other reasonably comparable money
rate service as Lender may select) or upon information obtained from any other
reasonable procedure, on each date the Daily Fluctuating LIBO Rate is
determined; by (2) an amount equal to one minus the stated maximum rate
(expressed as a decimal), if any, of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) that is specified on each date the Daily Fluctuating LIBO Rate is
determined by the Board of Governors of the Federal Reserve System (or any
successor agency thereto) for determining the maximum reserve requirement with
respect to eurocurrency funding (currently referred to as “Eurocurrency
liabilities” in Regulation D of such Board) maintained by a member bank of such
System, or any other regulations of any governmental authority having
jurisdiction with respect thereto, all as conclusively determined by Lender,
absent manifest error, such result to be rounded up, if necessary, to the
nearest whole multiple of one-sixteenth of one percent (1/16 of 1.0%) per
annum. Subject to any maximum or minimum interest rate limitation specified
herein or by applicable law, the interest rate shall change automatically
without notice to Borrower immediately on each day with each change in the Daily
Fluctuating LIBO Rate or the reserve requirement, as applicable, with any
change thereto effective as of the opening of business on the day of the change
(the “Index”). The Index is not necessarily the lowest rate charged by Lender
on its loans. If the Index becomes unavailable during the term of this loan,
Lender may designate a substitute index after notice to Borrower. Lender will
tell Borrower the current Index rate upon Borrower’s request. The interest rate
change will not occur more often than each day (the “rate change event”).
Borrower understands that Lender may make loans based on other rates as well. The initial rate is based on the Index as of March 15,
2004 which was 1.090% per annum. Initially, the interest rate to be applied to
the unpaid principal balance of the Note is 3.490%. After the first rate change
event, the interest rate to be applied to the unpaid principal balance of this
Note will be at a rate of 2.400 percentage points over the Index. NOTICE:
Under no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.

 

PREPAYMENT. Borrower may pay without penalty all or a
portion of the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower’s
obligation to continue to make payments of accrued unpaid interest. Rather,
early payments will reduce the principal balance due. Borrower agrees not to
send Lender payments marked “paid in full”, “without recourse”, or similar language.
If Borrower sends such a payment, Lender may accept it without losing any of
Lender’s rights under this Note, and Borrower will remain obligated to pay any
further amount owed to Lender. All written communications concerning disputed
amounts, including any check or other payment instrument that indicates that
the payment constitutes “payment in full” of the amount owed or that is
tendered with other conditions or limitations or as full satisfaction of a
disputed amount must be mailed or delivered to: The Huntington National Bank,
Commercial Customer Support, 7450 Huntington Park Drive - HZ0326 Columbus, OH
43235.

 

LATE CHARGE. If a payment is 11 days or more late,
Borrower will be charged 5.000% of the
regularly scheduled payment.

 

INTEREST
AFTER DEFAULT. Upon
default, including failure to pay upon final maturity, Lender, at its option,
may, if permitted under applicable law, increase the variable interest rate on
this Note to 5.400 percentage points over the Index. The interest rate will not
exceed the maximum rate permitted by applicable law.

 

DEFAULT. Each of the following shall constitute an
event of default (“Event of Default”) under this Note:

 

Payment
Default. Borrower
fails to make any payment when due under this Note.

 

Other
Defaults. Borrower
fails to comply with or to perform any other term, obligation, covenant or
condition contained in this Note or in any of the related documents or to
comply with or to perform any term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.

 

False
Statements. Any
warranty, representation or statement made or furnished to Lender by Borrower
or on Borrower’s behalf under this Note or the related documents is false or
misleading in any material respect, either now or at the time made or furnished
or becomes false or misleading at any time thereafter.

 

Insolvency. The dissolution or termination of Borrower’s
existence as a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Borrower.

 

Creditor or
Forfeiture Proceedings.
Commencement of foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by any creditor of
Borrower or by any governmental agency against any collateral securing the
loan. This includes a garnishment of any of Borrower’s accounts, including
deposit accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower gives Lender written notice of the creditor or
forfeiture proceeding and deposits with Lender monies or a surety bond
for the creditor or forfeiture proceeding, in an amount determined by Lender,
in its sole discretion, as being an adequate reserve or bond for the dispute.

 

Events
Affecting Guarantor. Any of the preceding events
occurs with respect to any gurantor, endorser, surety, or accommodation party
of any of the indebtedness or any guarantor, endorser, surety, or accomodation
party dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any guaranty of the indebtedness evidenced by this Note.

 

Change
In Ownership. Any change in ownership of twenty-five
percent (25%) or more of the common stock of Borrower.

 

Adverse
Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of this Note is impaired.

 

Insecurity.
Lender in good faith believes itself insecure.

 

LENDER'S
RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.

 

ATTORNEYS'
FEES; EXPENSES. Lender may hire or pay someone else to
collect this Note if Borrower does not pay. Borrower will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit,
including attorneys' fees, exenses for bankruptcy proceedings(including efforts
to modify or vacate any automatic stay or injunction), and appeals.  If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all other sums provided
by law.

 

JURY WAIVER.
Lender and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower against the
other.

 

 

GOVERNING
LAW. This Note will be governed by, construed and enforced in accordance with
federal law and the laws of the State of Ohio. This Note has been accepted by
Lender in the State of Ohio.

 

CONFESSION
OF JUDGMENT. Borrower
hereby irrevocably authorizes and empowers any attorney-at-law, including an
attorney hired by Lender, to appear in any court of record and to confess
judgment against Borrower for the unpaid amount of this Note as evidenced by an
affidavit signed by an officer of Lender setting forth the amount then due,
attorneys’ fees plus costs of suit, and to release all errors, and waive all
rights of appeal. If a copy of this Note, verified by an affidavit, shall have
been filed in the proceeding, it will not be necessary to file the original as
a warrant of attorney. Borrower waives the right to any stay of execution and
the benefit of all exemption laws now or hereafter in effect. No single
exercise of the foregoing warrant and power to confess judgment will be deemed
to exhaust the power, whether or not any such exercise shall be held by any
court to be invalid, voidable, or void; but the power will continue
undiminished and may be exercised from time to time as Lender may elect until
all amounts owing on this Note have been paid in full. Borrower waives any
conflict of interest that an attorney hired by Lender may have in acting on
behalf of Borrower in confessing judgment against Borrower while such attorney
is retained by Lender. Borrower expressly consents to such attorney acting for
Borrower in confessing judgment.

 

DISHONORED
ITEM FEE. Borrower
will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s
loan and the check or preauthorized charge with which Borrower pays is later
dishonored.

 

RIGHT OF
SETOFF. To the extent
permitted by applicable law, Lender reserves a right of setoff in all
Borrower’s accounts with Lender (whether checking, savings, or some other
account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does not
include any IRA or Keogh accounts, or any trust accounts for which setoff would
be prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the indebtedness against
any and all such accounts.

 

LINE OF
CREDIT. This Note
evidences a revolving line of credit. Advances under this Note, as well as
directions for payment from Borrower’s accounts, may be requested orally or in
writing by Borrower or by an authorized person. Lender may, but need not,
require that all oral requests be confirmed in writing. Borrower agrees to be
liable for all sums either: (A) advanced in accordance with the instructions of
an authorized person or (B) credited to any of Borrower’s accounts with Lender.
The unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender’s internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (A) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (B) Borrower or
any guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor’s
guarantee of this Note or any other loan with Lender; (D) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized
by Lender; or (E) Lender in good faith believes itself insecure.

 

FINANCIAL STATEMENTS. Borrower agrees to furnish from time to time
on the request of the Lender true and complete financial statements and such
other information as the Lender may reasonably require.

 

PROCESSING
FEE. Borrower shall
pay to Lender on the date of this Note a processing fee in the amount of $0.00.
Lender and Borrower agree that the fee shall be fully earned by Lender on the
date of this Note.

 

SPECIAL LIBO
RATE PROVISION. In the
event that Lender reasonably determines that by reason of (a) any change arising
after the date of this Note affecting the interbank eurocurrency market or
affecting the position of Lender with respect to such market, adequate and fair
means do not exist for ascertaining the applicable interest rates by reference
to which the Daily Fluctuating LIBO Rate then being determined is to be fixed,
(b) any change arising after the date of this Note in any applicable law or
governmental rule, regulation or order (or any interpretation thereof,
including the introduction of any new law or governmental rule, regulation or
order), or (c) any other circumstance affecting Lender or the interbank
eurocurrency market (such as, but not limited to, official reserve requirements
required by Regulation D of the Board of Governors of the Federal Reserve System),
the Daily Fluctuating LIBO Rate plus the applicable spread shall not represent
the effective pricing to Lender of accruing interest based upon the Daily
Fluctuating LIBO Rate, then, and in any such event, the accrual of interest
hereunder based upon the Daily Fluctuating LIBO Rate shall be suspended until
Lender shall notify Borrower that the circumstances causing such suspension no
longer exist and beginning on the date of such suspension interest shall accrue
hereunder at a variable rate of interest per annum, which shall change in the
manner set forth below, equal
to           percentage
points (which shall be 0.00 percentage points, unless completed) in excess of
the

Prime Commercial Rate (as
hereinafter defined).

 

In the event that on any date
Lender shall have reasonably determined that accruing interest hereunder based
upon the Daily Fluctuating LIBO Rate has become unlawful by compliance by
Lender in good faith with any law, governmental rule, regulation or order,
then, and in any such event, Lender shall promptly give notice thereof to
Borrower. In such case, when required by law, interest shall accrue hereunder
at a variable rate of interest per annum, which shall change in the manner set
forth below, equal to            percentage
points (which shall be 0.00 percentage points, unless completed) in excess of
the Prime Commercial Rate.

 

As used herein, Prime
Commercial Rate shall mean the rate established by Lender from time to time
based on its consideration of economic, money market, business and competitive
factors, and it is not necessarily Lender’s most favored rate. Subject to any
maximum or minimum interest rate limitation specified herein or by applicable
law, any variable rate of interest on the obligation evidenced hereby based
upon the Prime Commercial Rate shall change automatically without notice to
Borrower immediately with each change in the Prime Commercial Rate with any
change thereto effective as of the opening of business on the day of the
change. If during any period of time while interest is accruing hereunder based
upon the Prime Commercial Rate the obligation evidenced by this Note is not
paid at maturity, whether maturity occurs by lapse of time, demand,
acceleration or otherwise, the unpaid principal balance and any unpaid interest
thereon shall, thereafter until paid, bear interest at a rate equal to
            
percentage points (which shall be 0.00 percentage points, unless completed) in
excess of the rate indicated in the immediately preceding two paragraphs.

 

If, due to (a) the
introduction of or any change in or in the interpretation of any law or
regulation, (b) the compliance with any guideline or request from any central
bank or other public authority (whether or not having the force of law), or (c)
the failure of Borrower to pay any amount when required by the terms of this
Note, there shall be any loss or increase in the cost to Lender of accruing
interest hereunder based upon the Daily Fluctuating LIBO Rate, then Borrower
agrees that Borrower shall, from time to time, upon demand by Lender, pay to
Lender additional amounts sufficient to compensate Lender for such loss or
increased cost. A certificate as to the amount of such loss or increase cost,
submitted to Borrower by Lender, shall be conclusive evidence, absent manifest
error, of the correctness of such amount.

 

IMPORTANT
INFORMATION ABOUT PROCEDURES REQUIRED BY THE USA PATRIOT ACT. To help the government fight the funding of  terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each entity or person who opens an
account or establishes a relationship with the Lender.  What this means: When an entity or person
opens an account or establishes a relationship with the Lender, the Lender may
ask for the name, address, date of birth, and other information that will allow
the Lender to identify the entity or person who opens an account or establishes
a relationship with the Lender. The Lender may also ask to see identifying documents
for the entity or person.

 

SUCCESSOR
INTERESTS. The terms
of this Note shall be binding upon Borrower, and upon Borrower’s heirs,
personal representatives, successors and assigns, and shall inure to the
benefit of Lender and its successors and assigns.

 

GENERAL
PROVISIONS. If
any part of this Note cannot be enforced, this fact will not affect the rest of
the Note. Borrower does not agree or intend to pay, and Lender does not agree
or intend to contract for, charge, collect, take, reserve or receive
(collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause
Lender to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Ohio
(if applicable).  Any such excess
interest or unauthorized fee shall, instead of anything stated to the contrary,
be applied first to reduce the principal balance of this loan, and when the
principal has been paid in full, be refunded to Borrower. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive presentment, demand for payment, and
notice of dishonor.  Upon any change in
the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or
release any party or guarantor or collateral; or impair, fail to realize upon
or perfect Lender's security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is made.
The obligations of this Note are joint and several.

 

2

 

PRIOR
TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE
TERMS OF THE NOTE.

 

BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

NOTICE:   FOR THIS NOTICE “YOU” MEANS THE BORROWER
AND “CREDITOR” AND “HIS” MEANS LENDER.

 

WARNING
- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF
YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.

 

 

	
  BORROWER:

  
	
   

  
	
   

  
	
  QUALITY PRODUCTS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Richard A. Drexler, Chief Executive Officer of

  Quality Products, Inc.

  	
   

  
	
   

  

 

3

 

BUSINESS LOAN AGREEMENT

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call /
  Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
  $

  	
  1,300,000.00

  	
   

  	
  03-18-2004

  	
   

  	
  02-28-2009

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  References in the shaded area are for Lender’s use only and do not
  limit the applicability of this document to any particular loan or item. Any
  item above containing “ * * * ” has been omitted due to text length
  limitations.

  	
   

  
																	

 

	
  Borrower:

  	
   

  	
  Quality Products, Inc.

  2222 South Third Street

  Columbus, OH 43207

  	
   

  	
  Lender:

  	
   

  	
  THE HUNTINGTON NATIONAL BANK

  Columbus Commercial Banking

  P.O. Box 341470 - HZ0325

  Columbus, OH 43234-9429

  

 

THIS
BUSINESS LOAN AGREEMENT dated March 18, 2004, is made and executed between
Quality Products, Inc. (“Borrower”) and THE HUNTINGTON NATIONAL BANK (“Lender”)
on the following terms and conditions. Borrower has received prior commercial
loans from Lender or has applied to Lender for a commercial loan or loans or
other financial accommodations, including those which may be described on any
exhibit or schedule attached to this Agreement (“Loan”). Borrower understands
and agrees that: (A) in granting, renewing, or extending any Loan, Lender is
relying upon Borrower’s representations, warranties, and agreements as set
forth in this Agreement; (B) the granting, renewing, or extending of any Loan
by Lender at all times shall be subject to Lender’s sole judgment and
discretion; and (C) all such Loans shall be and remain subject to the terms and
conditions of this Agreement.

 

TERM. This Agreement shall be effective as of March
18, 2004, and shall continue in full force and effect until such time as all of
Borrower’s Loans in favor of Lender have been paid in full, including
principal, interest, costs, expenses, attorneys’ fees, and other fees and
charges, or until such time as the parties may agree in writing to terminate
this Agreement.

 

CONDITIONS
PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent
Advance under this Agreement shall be subject to the fulfillment to Lender’s
satisfaction of all of the conditions set forth in this Agreement and in the
Related Documents.

 

Loan
Documents. Borrower
shall provide to Lender the following documents for the Loan: (1) the Note; (2)
Security Agreements granting to Lender security interests in the Collateral;
(3) financing statements and all other documents perfecting Lender’s Security
Interests; (4) evidence of insurance as required below; (5) guaranties; (6) together
with all such Related Documents as Lender may require for the Loan; all in form
and substance satisfactory to Lender and Lender’s counsel.

 

Borrower’s
Authorization.
Borrower shall have provided in form and substance satisfactory to Lender
properly certified resolutions, duly authorizing the execution and delivery of
this Agreement, the Note and the Related Documents. In addition, Borrower shall
have provided such other resolutions, authorizations, documents and instruments
as Lender or its counsel, may require.

 

Payment of
Fees and Expenses.
Borrower shall have paid to Lender all fees, charges, and other expenses which
are then due and payable as specified in this Agreement or any Related
Document.

 

Representations
and Warranties. The
representations and warranties set forth in this Agreement, in the Related
Documents, and in any document or certificate delivered to Lender under this
Agreement are true and correct.

 

No Event of
Default. There shall
not exist at the time of any Advance a condition which would constitute an
Event of Default under this Agreement or under any Related Document.

 

REPRESENTATIONS
AND WARRANTIES.
Borrower represents and warrants to Lender, as of the date of this Agreement,
as of the date of each disbursement of loan proceeds, as of the date of any
renewal, extension or modification of any Loan, and at all times any
Indebtedness exists:

 

Organization. Borrower is a corporation for profit which
is, and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Delaware. Borrower is
duly authorized to transact business in the State of Ohio and Borrower
maintains an office at 2222 South Third Street, Columbus, OH 43207. Unless
Borrower has designated otherwise in writing, the principal office is the
office at which Borrower keeps its books and records including its records
concerning the Collateral. Borrower will notify Lender prior to any change in
the location of Borrower’s state of organization or any change in Borrower’s
name.

 

Assumed
Business Names.
Borrower has filed or recorded all documents or filings required by law
relating to all assumed business names used by Borrower. Excluding the name of
Borrower, the following is a complete list of all assumed business names under
which Borrower does business: None.

 

Authorization. Borrower’s execution, delivery, and
performance of this Agreement and all the Related Documents have been duly
authorized by all necessary action by Borrower and do not conflict with, result
in a violation of, or constitute a default under (1) any provision of
Borrower’s articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Borrower or (2) any law,
governmental regulation, court decree, or order applicable to Borrower or to
Borrower’s properties.

 

Properties. Except as contemplated by this Agreement or
as previously disclosed in Borrower’s financial statements or in writing to
Lender and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all of
Borrower’s properties free and clear of all liens and security interests, and
has not executed any security documents or financing statements relating to
such properties. All of Borrower’s properties are titled in Borrower’s legal
name, and Borrower has not used or filed a financing statement under any other
name for at least the last five (5) years.

 

AFFIRMATIVE
COVENANTS. Borrower
covenants and agrees with Lender that, so long as this Agreement remains in
effect, Borrower will:

 

Notices of
Claims and Litigation.
Promptly inform Lender in writing of (1) all material adverse changes in
Borrower’s financial condition, and (2) all existing and all threatened
litigation, claims, investigations, administrative proceedings or similar
actions affecting Borrower or any Guarantor which could materially affect the
financial condition of Borrower or the financial condition of any Guarantor.

 

Financial
Records. Maintain its
books and records in accordance with accounting principles acceptable to
Lender, applied on a consistent basis, and permit Lender to examine and audit
Borrower’s books and records at all reasonable times.

 

Financial
Statements. Furnish
Lender with such financial statements and other related information at such
frequencies and in such detail as Lender may reasonably request.

 

Guaranties. Prior to disbursement of any Loan proceeds,
furnish executed guaranties of the Loans in favor of Lender, executed by the
guarantors named below, on Lender’s forms, and in the amounts and under the
conditions set forth in those guaranties.

 

	
  Names of Guarantors

  	
   

  	
  Amounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  QPI
  Multipress, Inc.

  	
   

  	
  Unlimited

  	
   

  
	
  Columbus
  Jack Corporation

  	
   

  	
  Unlimited

  	
   

  
	
  A-1
  Specialty & Gov’t Packaging Inc.

  	
   

  	
  Unlimited

  	
   

  

 

Loan
Proceeds. Use all Loan proceeds solely for Borrower's
business operations, unless specifically consented to the contrary by Lender in
writing.

 

Taxes,
Charges and Liens. Pay and discharge when due all of
its indebtedness and obligations, including without limitation, all
assessments, taxes, governmental charges, levies and liens, of every kind and
nature, imposed upon Borrower or its properties, income, or profits, prior to
the date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties, income
or profits.

 

Performance.
Perform and comply, in a timely manner, with all terms, conditions, and
provisions set forth in this agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender. Borrower shall
notify Lender immediately in writing of any default in connection with any
agreement.

 

Operations.
Maintain executive and management personnel with substantially the same qualifications
and experience as the present executive and management personnel; provide
written notice to Lender of any change in executive and management personnel;
conduct its business affairs in a reasonable and prudent manner.

 

Compliance
with Governmental Requirements. Comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all governmental
authorities applicable to the conduct of Borrower's properties, businesses and
operations, and to the use or occupancy of the Collateral, including without
limitation, the Americans With Disabilities Act. Borrower may contest in good
faith any such law, ordinance, or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Borrower has notified
Lender in writing prior to doing so and so long as, in Lender's sole opinoin,
Lender's interests in the Collateral are not jeopardized. Lender may require
Borrower to post adequate security or surety bond, reasonably satisfactory to
Lender, to protect Lender's interest.

 

Inspection.  Permit employees or agents of Lender at any
reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties and to examine or
audit Borrower’s books, accounts, and records and to make copies and memoranda
of Borrower’s books, accounts, and records. If Borrower now or at any time
hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of Lender,
shall notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower’s expense.

 

LENDER’S EXPENDITURES. If any action or proceeding is commenced that
would materially affect Lender’s interest in the Collateral or if Borrower
fails to comply with any provision of this Agreement or any Related Documents,
including but not limited to Borrower’s failure to discharge or pay when due
any amounts Borrower is required to discharge or pay under this Agreement or
any Related Documents, Lender on Borrower’s behalf may (but shall not be
obligated to) take any action that Lender deems appropriate on any Collateral
and paying all costs for insuring, maintaining and preserving any Collateral.
All such expenditures incurred or paid by Lender for such purposes will then
bear interest at the rate charged under the Note from the date incurred or paid
by Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender’s option, will (A) be payable on
demand; (B) be added to the balance of the Note and be apportioned among and be
payable with any installment payments to become due during either (1) the term
of any applicable insurance policy; or (2) the remaining term of the Note; or
(C) be treated as a balloon payment which will be due and payable at the Note’s
maturity.

 

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is
in effect, Borrower shall not, without the prior written consent of Lender:

 

Continuity
of Operations. (1)
Engage in any business activities substantially different than those in which
Borrower is presently engaged, (2) cease operations, liquidate, merge,
transfer, acquire or consolidate with any other entity, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of business,
or (3) pay any dividends on Borrower’s stock (other than dividends payable in
its stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result from
the payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined
in the Internal Revenue Code of 1986, as amended), Borrower may pay cash
dividends on its stock to its shareholders from time to time in amounts
necessary to enable the shareholders to pay income taxes and make estimated
income tax payments to satisfy their liabilities under federal and state law
which arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of Borrower’s stock, or
purchase or retire any of Borrower’s outstanding shares or alter or amend
Borrower’s capital structure.

 

Agreements. Borrower will not enter into any agreement
containing any provisions which would be violated or breached by the
performance of Borrower’s obligations under this Agreement or in connection
herewith.

 

CESSATION OF
ADVANCES. If Lender
has made any commitment to make any Loan to Borrower, whether under this
Agreement or under any other agreement, Lender shall have no obligation to make
Loan advances or to disburse Loan proceeds if: (A) Borrower or any guarantor is
in default under the terms of this Agreement or any other agreement that
Borrower or any guarantor has with Lender; (B) Borrower or any guarantor dies,
becomes incompetent or, becomes insolvent, files a petition in bankruptcy or
similar proceedings, or is adjudged a bankrupt; (C) there occurs a material
adverse change in Borrower’s financial condition, in the financial condition of
any guarantor, or in the value of any collateral securing any Loan; or (D) any
guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender
in good faith deems itself insecure, even though no Event of Default shall have
occurred.

 

RIGHT OF
SETOFF. To the extent
permitted by applicable law, Lender reserves a right of setoff in all
Borrower’s accounts with Lender (whether checking, savings, or some other
account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does not
include any IRA or Keogh accounts, or any trust accounts for which setoff would
be prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.

 

DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:

 

Payment
Default. Borrower
fails to make any payment when due under the Loan.

 

Other
Default. Borrower
fails to comply with any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents.

 

False
Statements. Any
representation or statement made by Borrower to Lender is false in any material
respect.

 

Insolvency. The dissolution or termination of Borrower’s
existence as a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Borrower.

 

Creditor or
Forfeiture Proceedings.
Commencement of foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by any creditor of
Borrower or by any governmental agency against any collateral securing the
Loan.

 

Events
Affecting Guarantor.
Any of the preceding events occurs with respect to any Guarantor of any of the
Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.

 

Change in
Ownership. Any change
in ownership of twenty-five percent (25 %) or more of the common stock of
Borrower.

 

Insecurity. Lender in good faith believes itself
insecure.

 

EFFECT OF AN
EVENT OF DEFAULT. If
any Event of Default shall occur, except where otherwise provided in this
Agreement or the Related Documents, all commitments and obligations of Lender
under this Agreement immediately will terminate (including any obligation to
make further Loan Advances or disbursements), and, at Lender’s option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the “Insolvency” subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender’s
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender’s
right to declare a default and to exercise its rights and remedies.

 

TANGIBLE NET
WORTH. Borrower shall
maintain tangible net worth of not less than $1,100,000.00 at all times during
the current fiscal year. Thereafter, as of the first day of each fiscal year
commencing after the date of this Agreement, Borrower shall maintain tangible
net worth in an amount equal to the sum of (a) the tangible net worth required
hereunder for the preceding fiscal year, plus (b) fifty percent (50%) of the
net income earned during the preceding fiscal year (but no less than $0.00).

 

ANNUAL
REVIEWED FINANCIAL STATEMENTS OF BORROWER. Borrower shall furnish Lender with, as soon
as available, but in no event later than ninety (90) days after the end of each
fiscal year, Borrower’s financial statement, including a balance sheet and
income statement for the year ended, reviewed by an independent certified
public accountant satisfactory to Lender.

 

INTERIM
FINANCIAL STATEMENTS.
Borrower shall furnish Lender with, as soon as available, but in no event later
than forty-five (45) days after the end of each fiscal quarter, Borrower’s
financial statement, including a balance sheet and income statement and statement
of cash flow for the period ended, prepared by Borrower and certified by
Borrower's president, chief financial officer or other officer or person
acceptable to Lender as fairly representing Borrower's financial condition and
results of operations as of the end of such period.

 

ACCOUNTS
RECEIVABLE AGING REPORT. Borrower shall deliver or
cause to be delivered to Lender within thirty (30) days after the end of each
fiscal month, a report signed by Borrower's president, chief financial officer
or other office or person acceptable to Lender setting forth the number and
dollar total of all accounts receivable, the number and dollar total past due
for not more than 30 days, the number and dollar total past due for not more
than 60 days, the number and dollar total past due for not more than 90 days,
and the number and dollar total past due for more than 90 days.

 

FIXED
CHARGE COVERAGE RATIO. Commencing as of March 31,
2004, Borrower shall at all times maintain a minimum Fixed Charge Coverage
ratio of at least 1.00 to 1.00. Commencing as of March 31, 2005, Borrower shall
at all times maintain a minimum Fixed Charge Coverage ratio of at least 1.10 to
1.00. Commencing as of September 30, 2005, Borrower shall at all times maintain
a minimum Fixed Charge Coverage ratio of at least 1.20 to 1.00.  The Fixed Charge Coverage ratio of the
Borrower shall be determined as of the last day of each quarter for the twelve
month period ending on such date. As used herein, Fixed Charge Coverage Ratio
shall mean the ratio of EBITDAR (as defined below) to the sum of (1) interest
expense, (2) current maturities of long term debt, and capitalized leases, and
(3) lease and rental expense, as determined as of the last day of each fiscal
quarter for the immediately preceding four (4) fiscal quarters ending on said
day. As used herein, EBITDAR shall mean the sum of Borrower's net income, plus
(to the extent deducted in computing net income) interest expense, plus any
provision for federal, state and local income taxes, plus depreciation expense,
plus amortization expense, plus lease and rental expense, minus capital
expenditures and dividends and distributions to stockholders.

 

DEPOSIT
ACCOUNT. Borrower shall maintain all operating deposit
accounts with Lender.

 

NO
MERGER OR ACQUISITIONS. Borrower will not without
Lender's prior written consent consolidate with or merge into any other entity,
or permit any other entity to consolidate with or merge into it.

2

 

LOANS
TO OTHERS.  At
all times during the term of this Agreement, Borrower shall not have
outstanding total loans and advances to other persond or entities in excess of
$250,000.00 in the aggregate.

 

DEFINITIONS. The following capitalized words and terms
shall have the following meanings when used in this Agreement. Unless
specifically stated to the contrary, all references to dollar amounts shall
mean amounts in lawful money of the United States of America. Words and terms
used in the singular shall include the plural, and the plural shall include the
singular, as the context may require. Words and terms not otherwise defined in
this Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code. Accounting words and terms not otherwise defined in this Agreement
shall have the meanings assigned to them in accordance with generally accepted
accounting principles as in effect on the date of this Agreement:

 

Advance. The word “Advance” means a disbursement of
Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line
of credit or multiple advance basis under the terms and conditions of this
Agreement.

 

Agreement. The word “Agreement” means this Business Loan
Agreement, as this Business Loan Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this Business
Loan Agreement from time to time.

 

Borrower. The word “Borrower” means Quality Products,
Inc. and includes all co-signers and co-makers signing the Note.

 

Collateral. The word “Collateral” means all property and
assets granted as collateral security for a Loan, whether real or personal
property, whether granted directly or indirectly, whether granted now or in the
future, and whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law, contract, or
otherwise.

 

Event of
Default. The words
“Event of Default” mean any of the events of default set forth in this
Agreement in the default section of this Agreement.

 

Grantor. The word “Grantor” means each and all of the
persons or entities granting a Security Interest in any Collateral for the
Loan, including without limitation all Borrowers granting such a Security
Interest.

 

Guarantor. The word “Guarantor” means any guarantor,
surety, or accommodation party of any or all of the Loan.

 

Guaranty. The word “Guaranty” means the guaranty from
Guarantor to Lender, including without limitation a guaranty of all or part of
the Note.

 

Indebtedness. The word “Indebtedness” means the
indebtedness evidenced by the Note or Related Documents, including all
principal and interest together with all other indebtedness and costs and
expenses for which Borrower is responsible under this Agreement or under any of
the Related Documents.

 

Lender. The word “Lender” means THE HUNTINGTON
NATIONAL BANK, its successors and assigns.

 

Loan. The word “Loan” means any and all loans and
financial accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit or
schedule attached to this Agreement from time to time.

 

Note. The word “Note” means the Note executed by
Quality Products, Inc. in the principal amount of $1,300,000.00 dated March 18,
2004, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or credit
agreement.

 

Related
Documents. The words
“Related Documents” mean all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, security deeds, collateral mortgages, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Loan.

 

Security
Agreement. The words
“Security Agreement” mean and include without limitation any agreements,
promises, covenants, arrangements, understandings or other agreements, whether
created by law, contract, or otherwise, evidencing, governing, representing, or
creating a Security Interest.

 

Security
Interest. The words
“Security Interest” mean, without limitation, any and all types of collateral
security, present and future, whether in the form of a lien, charge,
encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop
pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s
lien, equipment trust, conditional sale, trust receipt, lien or title retention
contract, lease or consignment intended as a security device, or any other
security or lien interest whatsoever whether created by law, contract, or
otherwise.

 

BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND
BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED MARCH 18,
2004.

 

BORROWER:

 

 

	
  QUALITY
  PRODUCTS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Richard A. Drexler, Chief Executive Officer of

  Quality Products, Inc.

  
	
   

  
	
  LENDER:

  
	
   

  
	
   

  
	
  THE
  HUNTINGTON NATIONAL BANK

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Authorized Signer

  

 

3

 

COMMERCIAL SECURITY AGREEMENT

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call /
  Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
  $

  	
  1,300,000.00

  	
   

  	
  03-18-2004

  	
   

  	
  02-28-2009

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  References in the shaded area are for Lender’s use only and do not
  limit the applicability of this document to any particular loan or item. Any
  item above containing “ * * * ” has been omitted due to text length
  limitations.

  	
   

  
																	

 

	
  Grantor:

  	
   

  	
  Quality Products, Inc.

  2222 South Third Street

  Columbus, OH 43207

  	
   

  	
  Lender:

  	
   

  	
  THE HUNTINGTON NATIONAL BANK

  Columbus Commercial Banking

  P. O. Box 341470 - HZ0325

  Columbus, OH 43234-9429

  

 

THIS
COMMERCIAL SECURITY AGREEMENT dated March 18, 2004, is made and executed
between Quality Products, Inc. (“Grantor”) and THE HUNTINGTON NATIONAL BANK
(“Lender”).

 

GRANT OF
SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a
security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.

 

COLLATERAL
DESCRIPTION. The word
“Collateral” as used in this Agreement means the following described property,
whether now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located, in which Grantor is giving to Lender a security
interest for the payment of the Indebtedness and performance of all other
obligations under the Note and this Agreement:

 

All
inventory, equipment, accounts (including but not limited to all
health-care-insurance receivables), chattel paper, instruments (including but
not limited to all promissory notes), letter-of-credit rights, letters of
credit, documents, deposit accounts, investment property, money, other rights
to payment and performance, and general intangibles (including but not limited
to all software and all payment intangibles); all oil, gas and other minerals
before extraction; all oil, gas, other minerals and accounts constituting
as-extracted collateral; all fixtures; all timber to be cut; all attachments,
accessions, accessories, fittings, increases, tools, parts, repairs, supplies,
and commingled goods relating to the foregoing property, and all additions,
replacements of and substitutions for all or any part of the foregoing
property; all insurance refunds relating to the foregoing property; all good
will relating to the foregoing property; all records and data and embedded
software relating to the foregoing property, and all equipment, inventory and
software to utilize, create, maintain and process any such records and data on
electronic media; and all supporting obligations relating to the foregoing
property; all whether now existing or hereafter arising, whether now owned or
hereafter acquired or whether now or hereafter subject to any rights in the
foregoing property; and all products and proceeds (including but not limited to
all insurance payments) of or relating to the foregoing property.

 

In addition, the word
“Collateral” also includes all the following, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever located:

 

(A) All accessions,
attachments, accessories, tools, parts, supplies, replacements of and additions
to any of the collateral described herein, whether added now or later.

 

(B) All products and produce of any of the property described in this
Collateral section.

 

(C) All accounts, general
intangibles, instruments, rents, monies, payments, and all other rights,
arising out of a sale, lease, consignment or other disposition of any of the
property described in this Collateral section.

 

(D) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the property described in this Collateral
section, and sums due from a third party who has damaged or destroyed the
Collateral or from that party’s insurer, whether due to judgment, settlement or
other process.

 

(E) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor’s right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.

 

Despite any other provision
of this Agreement, Lender is not granted, and will not have, a nonpurchase
money security interest in household goods, to the extent such a security
interest would be prohibited by applicable law. In addition, if because of the
type of any Property, Lender is required to give a notice of the right to
cancel under Truth in Lending for the Indebtedness, then Lender will not have a
security interest in such Collateral unless and until such a notice is given.

 

CROSS-COLLATERALIZATION. In addition to the Note, this Agreement
secures all obligations, debts and liabilities, plus interest thereon, of
Grantor to Lender, or any one or more of them, as well as all claims by Lender
against Grantor or any one or more of them, whether now existing or hereafter
arising, whether related or unrelated to the purpose of the Note, whether
voluntary or otherwise, whether due or not due, direct or indirect, determined
or undetermined, absolute or contingent, liquidated or unliquidated whether
Grantor may be liable individually or jointly with others, whether obligated as
guarantor, surety, accommodation party or otherwise, and whether recovery upon
such amounts may be or hereafter may become barred by any statute of
limitations, and whether the obligation to repay such amounts may be or
hereafter may become otherwise unenforceable.

 

RIGHT OF
SETOFF. To the extent
permitted by applicable law, Lender reserves a right of setoff in all Grantor’s
accounts with Lender (whether checking, savings, or some other account). This
includes all accounts Grantor holds jointly with someone else and all accounts
Grantor may open in the future. However, this does not include any IRA or Keogh
accounts, or any trust accounts for which setoff would be prohibited by law.
Grantor authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts.

 

GRANTOR’S
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantor
represents and promises to Lender that:

 

Perfection
of Security Interest.
Grantor agrees to execute financing statements and to take whatever other
actions are requested by Lender to perfect and continue Lender’s security
interest in the Collateral. Upon request of Lender, Grantor will deliver to
Lender any and all of the documents evidencing or constituting the Collateral,
and Grantor will note Lender’s interest upon any and all chattel paper if not
delivered to Lender for possession by Lender.

 

Notices to
Lender. Grantor will
promptly notify Lender in writing at Lender’s address shown above (or such
other addresses as Lender may designate from time to time) prior to any (1) change
in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change
in the management of the Corporation Grantor; (4) change in the authorized
signer(s); (5) change in Grantor’s principal office address; (6) change in
Grantor’s state of organization; (7) conversion of Grantor to a new or
different type of business entity; or (8) change in any other aspect of Grantor
that directly or indirectly relates to any agreements between Grantor and
Lender. No change in Grantor’s name or state of organization will take effect
until after Lender has received notice.

 

No
Violation. The execution and delivery of this Agreement will not violate any law or agreement
governing Grantor or to which Grantor is a party, and its certificate or
articles of incorporation and bylaws do not prohibit any term or condition of
this Agreement.

 

Enforceability
of Collateral. To the
extent the Collateral consists of accounts, chattel paper, or general
intangibles, as defined by the Uniform Commerical Code, the Collateral is
enforceable in accordance with its terms, is genuine, and fully complies with
all applicable laws and regulations concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact obligated as
they appear to be on the Collateral. At the time any Account becomes subject to
a security interest in favor of Lender, the Account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
previously shipped or delivered pursuant to a contract of sale, or for services
previously performed by Grantor with or for the account debtor. So long as this
Agreement remains in effect, Grantor shall not, without Lender's prior written
consent, compromise, settle, adjust, or extend payment under or with regard to
any such Accounts. There shall be no setoffs or counterclaims against any of
the Collateral, and no agreement shall have been made under which any
deductions or discounts may be claimed concerning the Collateral except those
disclosed to Lender in writing.

 

Location of
Collateral. Except in
the ordinary course of Grantor's business, Grantor agrees to keep the
Collateral (or to the extent the Collateral consists of intangible property
such as accounts or general intangibles, the records concerning the Collateral)
at Grantor's address shown above or at such other locations as are acceptable
to Lender. Upon Lender's request, Grantor will deliver to Lender in form
satisfactory to Lender a schedule of real properties and Collateral locations
relating to Grantor's operations, including without limitation the following:
(1) all real property Grantor owns or is purchasing; (2) all real property
Grantor is renting or leasing; (3) all storage facilities Grantor owns, rents,
leases, or uses, and (4) all other properies where Collateral is or may be
located.

 

Removal of
the Collateral. Except
in the ordinary course of Grantor's business, including the sales of inventory,
Grantor shall not remove the Collateral from its existing location without
Lender's prior written consent. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or permit any action
which would require application for certificates of title for the vehicles 

 

 

outside the State of Ohio,
without Lender’s prior written consent. Grantor shall, whenever requested,
advise Lender of the exact location of the Collateral.

 

Transactions
Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor’s business, or as
otherwise provided for in this Agreement, Grantor shall not sell, offer to
sell, or otherwise transfer or dispose of the Collateral. While Grantor is not
in default under this Agreement, Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who qualify as a buyer in
the ordinary course of business. A sale in the ordinary course of Grantor’s
business does not include a transfer in partial or total satisfaction of a debt
or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest,
encumbrance, or charge, other than the security interest provided for in this
Agreement, without the prior written consent of Lender. This includes security
interests even if junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition of the
Collateral (for whatever reason) shall be held in trust for Lender and shall
not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.

 

Title. Grantor represents and warrants to Lender
that Grantor holds good and marketable title to the Collateral, free and clear
of all liens and encumbrances except for the lien of this Agreement. No
financing statement covering any of the Collateral is on file in any public
office other than those which reflect the security interest created by this
Agreement or to which Lender has specifically consented. Grantor shall defend
Lender’s rights in the Collateral against the claims and demands of all other
persons.

 

Repairs and
Maintenance. Grantor
agrees to keep and maintain, and to cause others to keep and maintain, the
Collateral in good order, repair and condition at all times while this
Agreement remains in effect. Grantor further agrees to pay when due all claims
for work done on, or services
rendered or material furnished in connection with the Collateral so that no
lien or encumbrance may ever attach to or be filed against the Collateral.

 

Inspection
of Collateral. Lender
and Lender’s designated representatives and agents shall have the right at all
reasonable times to examine and inspect the Collateral wherever located.

 

Taxes,
Assessments and Liens.
Grantor will pay when due all taxes, assessments and liens upon the Collateral,
its use or operation, upon this Agreement, upon any promissory note or notes
evidencing the Indebtedness, or upon any of the other Related Documents.
Grantor may withhold any such payment or may elect to contest any lien if
Grantor is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender’s interest in the Collateral is not
jeopardized in Lender’s sole opinion. If the Collateral is subjected to a lien
which is not discharged within fifteen (15) days, Grantor shall deposit with
Lender cash, a sufficient corporate surety bond or other security satisfactory
to Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys’ fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment before
enforcement against the Collateral. Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings. Grantor
further agrees to furnish Lender with evidence that such taxes, assessments,
and governmental and other charges have been paid in full and in a timely
manner. Grantor may withhold any such payment or may elect to contest any lien
if Grantor is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender’s interest in the Collateral is not
jeopardized.

 

Compliance
with Governmental Requirements. Grantor shall comply promptly with all laws, ordinances, rules and
regulations of all governmental authorities, now or hereafter in effect,
applicable to the ownership, production, disposition, or use of the Collateral,
including all laws or regulations relating to the undue erosion of
highly-erodible land or relating to the conversion of wetlands for the
production of an agricultural product or commodity. Grantor may contest in good
faith any such law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender’s interest in the
Collateral, in Lender’s opinion, is not jeopardized.

 

Hazardous
Substances. Grantor
represents and warrants that the Collateral never has been, and never will be
so long as this Agreement remains a lien on the Collateral, used in violation
of any Environmental Laws or for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
Hazardous Substance. The representations and warranties contained herein are
based on Grantor’s due diligence in investigating the Collateral for Hazardous
Substances. Grantor hereby (1) releases and waives any future claims against Lender
for indemnity or contribution in the event Grantor becomes liable for cleanup
or other costs under any Environmental Laws, and (2) agrees to indemnify and
hold harmless Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement. This obligation to indemnify shall
survive the payment of the Indebtedness and the satisfaction of this Agreement.

 

Maintenance
of Casualty Insurance.
Grantor shall procure and maintain all risks insurance, including without
limitation fire, theft and liability coverage together with such other
insurance as Lender may require with respect to the Collateral, in form,
amounts, coverages and basis reasonably acceptable to Lender and issued by a
company or companies reasonably acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or certificates
of insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least twenty (20)
days’ prior written notice to Lender and not including any disclaimer of the
insurer’s liability for failure to give such a notice. Each insurance policy
also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor or
any other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest, Grantor will provide Lender
with such loss payable or other endorsements as Lender may require. If Grantor
at any time fails to obtain or maintain any insurance as required under this
Agreement, Lender may (but shall not be obligated to) obtain such insurance as
Lender deems appropriate, including if Lender so chooses “single interest
insurance,” which will cover only Lender’s interest in the Collateral.

 

Application
of Insurance Proceeds.
Grantor shall promptly notify Lender of any loss or damage to the Collateral.
Lender may make proof of loss if Grantor fails to do so within fifteen (15)
days of the casualty. All proceeds of any insurance on the Collateral,
including accrued proceeds thereon, shall be held by Lender as part of the
Collateral. If Lender consents to repair or replacement of the damaged or
destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay
or reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to pay all
of the Indebtedness, and shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral shall
be used to prepay the Indebtedness.

 

Insurance
Reserves. Lender may
require Grantor to maintain with Lender reserves for payment of insurance
premiums, which reserves shall be created by monthly payments from Grantor of a
sum estimated by Lender to be sufficient to produce, at least fifteen (15) days
before the premium due date, amounts at least equal to the insurance premiums
to be paid. If fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall constitute
a non-interest-bearing account which Lender may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become due. Lender does
not hold the reserve funds in trust for Grantor, and Lender is not the agent of
Grantor for payment of the insurance premiums required to be paid by Grantor.
The responsibility for the payment of premiums shall remain Grantor’s sole
responsibility.

 

Insurance
Reports. Grantor, upon
request of Lender, shall furnish to Lender reports on each existing policy of
insurance showing such Information as Lender may reasonably request including
the following: (1) the name of the insurer; (2) the risks insured; (3) the
amount of the policy; (4) the property insured; (5) the then current value on
the basis of which insurance has been obtained and the manner of determining
the value; and (6) the expiration date of the policy.  In addition, Grantor shall upon request by Lender (however not
more often than annually) have an Independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the Collateral.

 

Financing
Statements. Grantor
authorizes Lender to file a UCC-1 financing statement, or alternatively, a copy
of this Agreement to perfect Lender's security interest.  At Lender's request, Grantor additionally
agrees to sign all other documents that are necessary to perfect, protect, and
continue Lender's security interest in the Property.  Grantor will pay all filing fees, title transfer fees, and other
fees and costs involved unless prohibited by law or unless Lender is required
by law to pay such fees and costs. 
Grantor irrevocably appoints Lender to execute financing statements and
documents of title in Grantor's name and to execute all documents necessary to
transfer title if there is a default. 
Lender may file a copy of this Agreement as a financing statement.  If Grantor changes Grantor's name or
address, of the name or address of any person granting a security interest
under this Agreement changes, Grantor will promptly notify the Lender of such
change.

 

GRANTOR'S
RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. 
Until default
and except as otherwise provided below with respect to accounts, Grantor may
have possession of the tangible personal property, and beneficial use of all
the Collateral and may use it in any lawful manner not inconsistant with this
Agreementor the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest
in such Collateral.  Until otherwise
notified by Lender, Grantor may collect any of the Collateral consisting of
accounts.  At any time and even though
no Event of Default exists.  Lender may
exercise its rights to collect the accounts and to notify account debtors to make
payments directly to Lender for application to the indebtedness.  If Lender at any time has possession of any
Collateral, whether before or after an Event of Default; Lender shall be deemed
to have exercised reasonable care in the custody and preservation of the
Collateral if Lender takes such action for that purpose as Grantor shall
request or as Lender, in Lender’s sole discretion, shall deem appropriate under
the circumstances, but failure to honor any request

 

2

 

by Grantor shall not of
itself be deemed to be a failure to exercise reasonable care. Lender shall not
be required to take any steps necessary to preserve any rights in the
Collateral against prior parties, nor to protect, preserve or maintain any
security interest given to secure the Indebtedness.

 

LENDER’S
EXPENDITURES. If any action or proceeding is commenced
that would materially affect Lender’s interest in the Collateral or if Grantor
fails to comply with any provision of this Agreement or any Related Documents,
including but not limited to Grantor’s failure to discharge or pay when due any
amounts Grantor is required to discharge or pay under this Agreement or any
Related Documents, Lender on Grantor’s behalf may (but shall not be obligated
to) take any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a
part of the Indebtedness and, at Lender’s option, will (A) be payable on
demand; (B) be added to the balance of the Note and be apportioned among and be
payable with any installment payments to become due during either (1) the term
of any applicable insurance policy; or (2) the remaining term of the Note; or (C)
be treated as a balloon payment which will be due and payable at the Note’s
maturity. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

 

DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:

 

Payment
Default. Grantor fails
to make any payment when due under the Indebtedness. 

 

Other Defaults. Grantor fails to comply with or to perform
any other term, obligation, covenant or condition contained in this Agreement
or in any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Grantor.

 

False
Statements. Any warranty,
representation or statement made or furnished to Lender by Grantor or on
Grantor’s behalf under this Agreement or the Related Documents is false or
misleading in any material respect, either now or at the time made or furnished
or becomes false or misleading at any time thereafter.

 

Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien) at
any time and for any reason.

 

Insolvency. The dissolution or termination of Grantor’s
existence as a going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Grantor.

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any collateral securing the Indebtedness. This includes a garnishment of any of
Grantor’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

 

Events
Affecting Guarantor.
Any of the preceding events occurs with respect to guarantor, endorser, surety,
or accommodation party of any of the Indebtedness or guarantor, endorser,
surety, or accommodation party dies or becomes incompetent or revokes or
disputes the validity of, or liability under, any Guaranty of the Indebtedness.

 

Adverse Change. A material adverse change occurs in Grantor’s
financial condition, or Lender believes the prospect of payment or performance
of the Indebtedness is impaired.

 

Insecurity. Lender in good faith believes itself
insecure.

 

RIGHTS AND
REMEDIES ON DEFAULT.
If an Event of Default occurs under this Agreement, at any time thereafter,
Lender shall have all the rights of a secured party under the Ohio Uniform
Commercial Code. In addition and without limitation, Lender may exercise any
one or more of the following rights and remedies:

 

Accelerate
Indebtedness. Lender
may declare the entire Indebtedness, including any prepayment penalty which
Grantor would be required to pay, immediately due and payable, without notice
of any kind to Grantor.

 

Assemble
Collateral. Lender may
require Grantor to deliver to Lender all or any portion of the Collateral and
any and all certificates of title and other documents relating to the
Collateral. Lender may require Grantor to assemble the Collateral and make it
available to Lender at a place to be designated by Lender. Lender also shall
have full power to enter upon the property of Grantor to take possession of and
remove the Collateral. If the Collateral contains other goods not covered by
this Agreement at the time of repossession, Grantor agrees Lender may take such
other goods, provided that Lender makes reasonable efforts to return them to
Grantor after repossession.

 

Sell the
Collateral. Lender
shall have full power to sell, lease, transfer, or otherwise deal with the
Collateral or proceeds thereof in Lender’s own name or that of Grantor. Lender
may sell the Collateral at public auction or private sale. Unless the
Collateral threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Lender will give Grantor, and other persons as
required by law, reasonable notice of the time and place of any public sale, or
the time after which any private sale or any other disposition of the Collateral
is to be made. However, no notice need be provided to any person who, after
Event of Default occurs, enters into and authenticates an agreement waiving
that person’s right to notification of sale. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days before the
time of the sale or disposition. All expenses relating to the disposition of
the Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part of
the indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.

 

Appoint
Receiver. Lender shall
have the right to have a receiver appointed to take possession of all or any
part of the Collateral, with the power to protect and preserve the Collateral,
to operate the Collateral preceding foreclosure or sale, and to collect the
Rents from the Collateral and apply the proceeds, over and above the cost of
the receivership, against the Indebtedness. The receiver may serve without bond
if permitted by law. Lender’s right to the appointment of a receiver shall
exist whether or not the apparent value of the Collateral exceeds the
Indebtedness by a substantial amount. Employment by Lender shall not disqualify
a person from serving as a receiver.

 

Collect
Revenues, Apply Accounts. Lender, either itself or through a receiver, may collect the payments,
rents, income, and revenues from the Collateral. Lender may at any time in
Lender’s discretion transfer any Collateral into Lender’s own name or that of
Lender’s nominee and receive the payments, rents, income, and revenues
therefrom and hold the same as security for the Indebtedness or apply it to
payment of the Indebtedness in such order of preference as Lender may
determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise, adjust,
sue for, foreclose, or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For these purposes,
Lender may, on behalf of and in the name of Grantor, receive, open and dispose
of mail addressed to Grantor; change any address to which mail and payments are
to be sent; and endorse notes, checks, drafts, money orders, documents of
title, instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.

 

Obtain
Deficiency. If Lender
chooses to sell any or all of the Collateral, Lender may obtain a judgment
against Grantor for any deficiency remaining on the indebtedness due to Lender
after application of all amounts received from the exercise of the rights
provided in the Agreement. Grantor shall be liable for a deficiency even if the
transaction described in this subsections is a sale of accounts or chattel
paper.

 

Other Rights
and Remedies. Lender
shall have all the rights and remedies of a secured creditor udner the
provisions of the Uniform Commercial Code, as may be amended from time to time.
In addition, Lender shall have and may exercise any or all other rights and
remedies it may have available at law, in equity, or otherwise.

 

Election of
Remedies. Except as
may be prohibited by applicable law, all of Lender's rights and remedies,
whether evidenced by this Agreement, the Related Documents, or by any other
writing, shall be cumulative and may be excercised singularly or concurrently.
Election by Lender to pursue any remedy shall exclude pursuit of any other
remedy, and an election to make expenditures or take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to perform,
shall not affect Lender's right to declare a default and exercise its remedies.

 

MISCELLANEOUS
PROVISIONS. The following miscellaneous provisions are
a part of this Agreement;

 

Amendments. This
agreement, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this
Agreement. No alteration of or amendment to this Agreement shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.

3

 

 

Attorneys’
Fees; Expenses.
Grantor agrees to pay upon demand all of Lender’s costs and expenses, including
Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Grantor shall pay the costs and expenses of
such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal
expenses whether or not there is a lawsuit, including attorneys’ fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Grantor also shall pay all court costs and such additional
fees as may be directed by the court.

 

Caption
Headings. Caption
headings in this Agreement are for convenience purposes only and are not to be
used to interpret or define the provisions of this Agreement.

 

Governing
Law. This Agreement will be governed by, construed and enforced in accordance
with federal law and the laws of the State of Ohio. This Agreement has been
accepted by Lender in the State of Ohio.

 

No Waiver by
Lender. Lender shall
not be deemed to have waived any rights under this Agreement unless such waiver
is given in writing and signed by Lender. No delay or omission on the
part of Lender in exercising any right shall operate as a waiver of such right
or any other right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender’s right otherwise to demand
strict compliance with that provision or any other provision of this Agreement.
No prior waiver by Lender, nor any course of dealing between Lender and
Grantor, shall constitute a waiver of any of Lender’s rights or of any of
Grantor’s obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.

 

Notices. Any notice required to be given under this
Agreement shall be given in writing, and shall be effective when actually
delivered, when actually received by telefacsimile (unless otherwise required
by law), when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near the
beginning of this Agreement. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party’s address. For notice
purposes, Grantor agrees to keep Lender informed at all times of Grantor’s
current address. Unless otherwise provided or required by law, if there is more
than one Grantor, any notice given by Lender to any Grantor is deemed to be
notice given to all Grantors.

 

Power of
Attorney. Grantor
hereby appoints Lender as Grantor’s irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect, amend, or to continue
the security interest granted in this Agreement or to demand termination of
filings of other secured parties. Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or other reproduction
of any financing statement or of this Agreement for use as a financing
statement. Grantor will reimburse Lender for all expenses for the perfection
and the continuation of the perfection of Lender’s security interest in the
Collateral.

 

Severability. If a court of competent jurisdiction finds
any provision of this Agreement to be illegal, invalid, or unenforceable as to
any circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it shall
be considered deleted from this Agreement. Unless otherwise required by law,
the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or
enforceability of any other provision of this Agreement.

 

Successors
and Assigns. Subject
to any limitations stated in this Agreement on transfer of Grantor’s interest,
this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the
Collateral becomes vested in a person other than Grantor, Lender, without
notice to Grantor, may deal with Grantor’s successors with reference to this
Agreement and the Indebtedness by way of forbearance or extension without
releasing Grantor from the obligations of this Agreement or liability under the
Indebtedness.

 

Survival of
Representations and Warranties. All representations, warranties, and agreements made by Grantor in this
Agreement shall survive the execution and delivery of this Agreement, shall be
continuing in nature, and shall remain in full force and effect until such time
as Grantor’s Indebtedness shall be paid in full.

 

Time is of
the Essence. Time is
of the essence in the performance of this Agreement.

 

DEFINITIONS. The following capitalized words and terms
shall have the following meanings when used in this Agreement. Unless
specifically stated to the contrary, all references to dollar amounts shall
mean amounts in lawful money of the United States of America. Words and terms
used in the singular shall include the plural, and the plural shall include the
singular, as the context may require. Words and terms not otherwise defined in
this Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code:

 

Account. The word “Account” means a trade account,
account receivable, other receivable, or other right to payment for goods sold
or services rendered owing to Grantor (or to a third party grantor acceptable
to Lender).

 

Agreement. The word “Agreement” means this Commercial
Security Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules attached
to this Commercial Security Agreement from time to time.

 

Borrower. The word “Borrower” means Quality Products,
Inc. and includes all co-signers and co-makers signing the Note.

 

Collateral. The word “Collateral” means all of Grantor’s
right, title and interest in and to all the Collateral as described in the
Collateral Description section of this Agreement.

 

Default. The word “Default” means the Default set
forth in this Agreement in the section titled “Default”.

 

Environmental
Laws. The words
“Environmental Laws” mean any and all state, federal and local statutes,
regulations and ordinances relating to the protection of human health or the
environment, including without limitation the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or
federal laws, rules, or regulations adopted pursuant thereto.

 

Event of
Default. The words
“Event of Default” mean any of the events of default set forth in this
Agreement in the default section of this Agreement.

 

Grantor. The word “Grantor” means Quality Products,
Inc..

 

Guaranty. The word “Guaranty” means the guaranty from
guarantor, endorser, surety, or accommodation party to Lender, including
without limitation a guaranty of all or part of the Note.

 

Hazardous
Substances. The words
“Hazardous Substances” mean materials that, because of their quantity,
concentration or physical, chemical or infectious characteristics, may cause or
pose a present or potential hazard to human health or the environment when
improperly used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled. The words “Hazardous Substances” are used in
their very broadest sense and include without limitation any and all hazardous
or toxic substances, materials or waste as defined by or listed under the
Environmental Laws. The term "Hazardous Substances" also includes,
without limitation, petroleum and petroleum by-products or any fraction thereof
and asbestos.

 

Indebtedness. The word "Indebtedness" means the
indebtedness evidenced by the Note or Related Documents, including all
principal and interest together with all other indebtedness and costs and
expenses for which Grantor is responsible under this Agreement or under any of
the Related Documents. Speficially, without limitation, Indebtedness includes
all amounts that may be indirectly secured by the Cross-Collaterization
provision of this Agreement.

 

Lender. The word "Lender" means THE
HUNTINGTON NATIONAL BANK, its successors and assigns.

 

Note. The word "Note" means the Note
executed by Quality Products, Inc. in the principal amount of $1,300,000.00
dated March 18, 2004, together with renewals of, extensions of, modifications
of, refinancings of, consolidations of, and substitutions for the note or
credit agreement.

 

Property. The word "Property" means all of
Grantor's right, title and interest in and to all the property as described in
the "Collateral Description" section of this agreement.

 

Related
Documents. The words
"Related Documents" mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, security deeds, collateral mortgages, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the indebtedness.

 

GRANTOR
HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 18, 2004.

4

 

	
  GRANTOR:

  
	
   

  
	
   

  
	
  QUALITY
  PRODUCTS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Richard A. Drexler, Chief Executive Officer of

  Quality Products, Inc.

  	
   

  

 

5

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