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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________
FORM 10-Q
______________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021.
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-475
________________________________
A. O. Smith Corporation
(Exact name of registrant as specified in its charter)
________________________________

Delaware
(State of Incorporation)
11270 West Park Place, Milwaukee, Wisconsin
(Address of Principal Executive Office)
39-0619790
(I.R.S. Employer
Identification No.)
53224-9508
(Zip Code)
(414) 359-4000
(Registrant’s telephone number, including area code)
_________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading
Symbol
Name of Each Exchange
on Which Registered
Common Stock (par value $1.00 per share)AOSNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated Filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes No
Class A Common Stock Outstanding as of April 28, 2021 - 25,989,387 shares
Common Stock Outstanding as of April 28, 2021 - 134,466,854 shares




Index
A. O. Smith Corporation
Page
2

Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in millions, except for per share data)
(unaudited)
Three Months Ended
March 31,
20212020
Net sales$769.0 $636.9 
Cost of products sold480.4 397.4 
Gross profit288.6 239.5 
Selling, general and administrative expenses166.5 173.8 
Interest expense1.0 2.2 
Other income(5.0)(4.2)
Earnings before provision for income taxes126.1 67.7 
Provision for income taxes28.4 16.0 
Net Earnings$97.7 $51.7 
Net Earnings Per Share of Common Stock$0.60 $0.32 
Diluted Net Earnings Per Share of Common Stock$0.60 $0.32 
Dividends Per Share of Common Stock$0.26 $0.24 

A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(dollars in millions)
(unaudited)
Three Months Ended
March 31,
20212020
Net earnings$97.7 $51.7 
Other comprehensive earnings (loss)
Foreign currency translation adjustments(1.4)(18.0)
Unrealized net (losses) gains on cash flow derivative instruments, less related income tax benefit (provision) of $0.7 in 2021 and $(0.1) in 2020
(2.0)0.3 
Adjustment to pension liability, less related income tax provision of ($1.3) in 2021 and ($1.2) in 2020
3.8 3.6 
Comprehensive Earnings$98.1 $37.6 
See accompanying notes to unaudited condensed consolidated financial statements.
3

Table of Contents
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
(unaudited)
March 31,
2021
December 31,
2020
Assets
Current Assets
Cash and cash equivalents$578.5 $573.1 
Marketable securities87.0 116.5 
Receivables534.5 585.0 
Inventories312.8 300.1 
Other current assets45.4 43.3 
Total Current Assets1,558.2 1,618.0 
Property, plant and equipment1,227.1 1,222.6 
Less accumulated depreciation(688.0)(681.3)
Net property, plant and equipment539.1 541.3 
Goodwill547.3 546.8 
Other intangibles320.9 323.9 
Operating lease assets44.2 41.6 
Other assets97.1 89.1 
Total Assets$3,106.8 $3,160.7 
Liabilities
Current Liabilities
Trade payables$547.4 $595.2 
Accrued payroll and benefits55.1 74.6 
Accrued liabilities181.2 161.9 
Product warranties45.6 47.8 
Debt due within one year6.8 6.8 
Total Current Liabilities836.1 886.3 
Long-term debt99.6 106.4 
Product warranties96.0 94.5 
Long-term operating lease liabilities35.8 34.4 
Other liabilities190.3 190.8 
Total Liabilities1,257.8 1,312.4 
Stockholders’ Equity
Class A Common Stock, $5 par value: authorized 27,000,000 shares; issued, 26,119,767 and 26,168,513
130.6 130.8 
Common Stock, $1 par value: authorized 240,000,000 shares; issued 164,587,827 and 164,539,081
164.7 164.6 
Capital in excess of par value528.7 520.4 
Retained earnings2,565.1 2,509.6 
Accumulated other comprehensive loss(320.8)(321.2)
Treasury stock at cost(1,219.3)(1,155.9)
Total Stockholders’ Equity1,849.0 1,848.3 
Total Liabilities and Stockholders’ Equity$3,106.8 $3,160.7 
See accompanying notes to unaudited condensed consolidated financial statements.
4

Table of Contents
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
(unaudited)
Three Months Ended
March 31,
20212020
Operating Activities
Net earnings$97.7 $51.7 
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization19.5 20.1 
Stock based compensation expense7.4 9.0 
Net changes in operating assets and liabilities:
Current assets and liabilities(13.2)(15.1)
Noncurrent assets and liabilities(7.0)(11.6)
Cash Provided by Operating Activities104.4 54.1 
Investing Activities
Capital expenditures(17.1)(12.8)
Investments in marketable securities(24.4)(38.8)
Net proceeds from sale of marketable securities54.0 78.0 
Cash Provided by Investing Activities12.5 26.4 
Financing Activities
Long-term debt (repaid) incurred(6.8)58.5 
Common stock repurchases(67.0)(56.7)
Net proceeds (payments) from stock option activity4.5 (1.2)
Dividends paid(42.2)(39.0)
Cash Used in Financing Activities(111.5)(38.4)
Net increase in cash and cash equivalents5.4 42.1 
Cash and cash equivalents - beginning of period573.1 374.0 
Cash and Cash Equivalents - End of Period$578.5 $416.1 
See accompanying notes to unaudited condensed consolidated financial statements.
5

Table of Contents
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(dollars in millions)
(unaudited)
Three Months Ended
March 31,
20212020
Class A Common Stock
Balance at the beginning of period$130.8 $130.9 
Conversion of Class A Common Stock(0.2) 
Balance at end of period$130.6 $130.9 
Common Stock
Balance at the beginning of period$164.6 $164.5 
Conversion of Class A Common Stock0.1 $ 
Balance at end of period$164.7 $164.5 
Capital in Excess of Par Value
Balance at the beginning of period$520.4 $509.0 
Conversion of Class A Common Stock0.2  
Issuance of share units(5.3)(6.5)
Vesting of share units(1.7)(1.6)
Stock based compensation expense7.2 8.8 
Exercises of stock options2.6 (0.1)
Stock incentives5.3 6.5 
Balance at end of period$528.7 $516.1 
Retained Earnings
Balance at the beginning of period$2,509.6 $2,323.4 
Net earnings97.7 51.7 
Cash dividends on stock(42.2)(39.0)
Balance at end of period$2,565.1 $2,336.1 
Accumulated Other Comprehensive Loss (see Note 15)$(320.8)$(362.4)
Treasury Stock
Balance at the beginning of period$(1,155.9)$(1,112.7)
Exercise of stock options1.9 (1.1)
Shares repurchased(67.0)(56.7)
Vesting of share units1.7 1.6 
Balance at end of period$(1,219.3)$(1,168.9)
Total Stockholders’ Equity$1,849.0 $1,616.3 
See accompanying notes to unaudited condensed consolidated financial statements.
6

Table of Contents
A. O. SMITH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(unaudited)
1.    Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full year. It is suggested the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 12, 2021.
Recent Accounting Pronouncement
In December 2019, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 740, Income Taxes (issued under Accounting Standards Update (ASU) 2019-12, “Simplifying the Accounting for Income Taxes”). This amendment removes certain exceptions to the general principles of ASC 740 and clarifies and amends existing guidance to improve consistent application. The Company adopted the amendment on January 1, 2021, and the adoption of ASU 2019-12 did not have an impact on its consolidated balance sheets, statements of earnings or statements of cash flows.
2.    Revenue Recognition
Substantially all of the Company’s sales are from contracts with customers for the purchase of its products. Contracts and customer purchase orders are used to determine the existence of a sales contract. Shipping documents are used to verify shipment. For substantially all of its products, the Company transfers control of products to the customer at the point in time when title and risk are passed to the customer, which generally occurs upon shipment of the product. Each unit sold is considered an independent, unbundled performance obligation. The Company’s sales arrangements do not include other performance obligations that are material in the context of the contract.
The nature, timing and amount of revenue for a respective performance obligation are consistent for each customer. The Company measures the sales transaction price based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Sales and value added taxes are excluded from the measurement of transaction price. The Company’s payment terms for the majority of its customers are 30 to 90 days from shipment.
Additionally, certain customers in China pay the Company prior to the shipment of products resulting in a customer deposits liability of $77.7 million and $90.0 million at March 31, 2021 and December 31, 2020, respectively. Customer deposit liabilities are short term in nature and deposits are recognized into revenue within one year of receipt. The Company assesses the collectability of customer receivables based on the creditworthiness of a customer as determined by credit checks and analysis, as well as the customer’s payment history. In determining the allowance for doubtful accounts, the Company also considers various factors including the aging of customer accounts and historical write-offs. In addition, the Company monitors other risk factors including forward-looking information when establishing adequate allowances for doubtful accounts, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables. The Company’s allowance for doubtful accounts was $5.3 million at March 31, 2021 and $5.6 million at December 31, 2020.
Rebates and incentives are based on pricing agreements and are tied to sales volume. The amount of revenue is reduced for variable consideration related to customer rebates which are calculated using expected values and are based on program specific factors such as expected rebate percentages based on expected volumes. In situations where the customer has the right to return eligible products, the Company reduces revenue for its estimates of expected product returns, which are primarily based on an analysis of historical experience. Changes in such accruals may be required if actual sales volume differs from estimated sales volume or if future returns differ from historical experience. Shipping and handling costs billed to customers are included in net sales and the related costs are included in cost of products sold and are activities performed to fulfill the promise to transfer products.
7

Table of Contents
2.    Revenue Recognition (continued)
Disaggregation of Net Sales
The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks and water treatment products. Both segments primarily manufacture and market in their respective regions of the world.
As each segment manufactures and markets products in its respective region of the world, the Company has determined that geography is the primary factor in reporting its sales. The Company further disaggregates its North America segment sales by major product line as each of North America’s major product lines is sold through distinct distribution channels and these product lines may be impacted differently by certain economic factors. Within the Rest of World segment, particularly in China and India, the Company’s major customers purchase across the Company’s product lines, utilizing the same distribution channels regardless of product type. In addition, the impact of economic factors is unlikely to be differentiated by product line in the Rest of World segment.
The North America segment major product lines are defined as the following:
Water heaters The Company’s water heaters are open water heating systems that heat potable water. Typical applications for water heaters include residences, restaurants, hotels and motels, office buildings, laundries, car washes and small businesses. The Company sells residential and commercial water heater products and related parts through its wholesale distribution channel, which includes more than 1,200 independent wholesale plumbing distributors. The Company also sells residential water heaters and related parts through retail and maintenance, repair and operations (MRO) channels. A significant portion of the Company’s water heater sales in the North America segment is derived from the replacement of existing products.
Boilers The Company’s boilers are closed loop water heating systems used primarily for space heating or hydronic heating. The Company’s boilers are primarily used in applications in commercial settings for hospitals, schools, hotels and other large commercial buildings while residential boilers are used in homes, apartments and condominiums. The Company’s boiler distribution channel is comprised primarily of manufacturer representative firms, with the remainder of its boilers distributed through wholesale channels. The Company’s boiler sales in the North America segment are derived from a combination of replacement of existing products and new construction.
Water treatment products The Company’s water treatment products range from point-of-entry water softeners, solutions for problem well water, and whole-home water filtration products to on-the-go filtration bottles and point-of-use carbon and reverse osmosis products. Typical applications for the Company’s water treatment products include residences, restaurants, hotels and offices. The Company sells water treatment products through its retail and wholesale distribution channels, similar to water heater products and related parts. The Company’s water treatment products are also sold through independent water quality dealers as well as directly to consumers including through internet sales channels. A portion of the Company’s sales of water treatment products in the North America segment is comprised of replacement filters.
The following table disaggregates the Company’s net sales by segment. As described above, the Company’s North America segment sales are further disaggregated by major product line. In addition, the Company’s Rest of World segment sales are disaggregated by China and all other Rest of World:
(dollars in millions)Three Months Ended
March 31,
20212020
North America
Water heaters and related parts$457.7 $447.8 
Boilers and related parts46.5 41.5 
Water treatment products48.7 43.6 
Total North America552.9 532.9 
Rest of World
China$199.2 $91.0 
All other Rest of World23.1 19.2 
Total Rest of World222.3 110.2 
Inter-segment sales(6.2)(6.2)
Total Net Sales$769.0 $636.9 
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3.    Leases
The Company’s lease portfolio consists of operating leases for buildings and equipment, such as forklifts and copiers, primarily in the United States and China. The Company defines a lease as a contract that gives the Company the right to control the use of a physical asset for a stated term. The Company pays the lessor for that right, with a series of payments defined in the contract and a corresponding right of use operating lease asset and liability are recorded. The Company has elected not to record leases with an initial term of 12 months or less on its condensed consolidated balance sheet. To determine balance sheet amounts, required legal payments are discounted using the Company’s incremental borrowing rate as of the inception of the lease. The incremental borrowing rate is the rate of interest that the Company would incur if it were to borrow, on a collateralized basis, an amount equal to the value of the leased item over a similar term, in a similar economic environment. Variable lease components not based on an index or rate are excluded from the measurement of the lease asset and liability and expensed as incurred for all asset classes.
Certain leases include one or more options to renew or terminate. Renewal terms can extend the lease term from one to five years and options to terminate can be effective within one year. The exercise of lease renewal or termination is at the Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants or material subleases. Cash flows associated with leases are materially consistent with the expense recorded in the condensed consolidated statement of earnings.
Supplemental balance sheet information related to leases is as follows:
(dollars in millions)March 31,
2021
December 31, 2020
Liabilities
Short term: Accrued liabilities$12.3 $11.1 
Long term: Operating lease liabilities35.8 34.4 
Total operating lease liabilities$48.1 $45.5 
Less: Rent incentives and deferrals(3.9)(3.9)
Assets
Operating lease assets$44.2 $41.6 
Lease Term and Discount RateMarch 31, 2021
Weighted-average remaining lease term9.6 years
Weighted-average discount rate3.34%
The components of lease expense were as follows:
(dollars in millions)Three months ended
March 31,
Lease ExpenseClassification
2021(1)
2020(2)
Operating lease expenseCost of products sold$1.0 $0.7 
Selling, general and administrative expenses4.0 4.0 
(1)2021 includes short-term and variable lease expenses of $0.5 million and $0.6 million, respectively.
(2)2020 includes short-term and variable lease expenses of $0.4 million and $0.4 million, respectively.

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3.    Leases (continued)
Maturities of lease liabilities were as follows:
(dollars in millions)March 31, 2021
2021$10.3 
202211.2 
20236.7 
20245.6 
20254.0 
After 202521.3 
Total lease payments59.1 
Less: imputed interest(11.0)
Present value of operating lease liabilities$48.1 
4.    Inventories
The following table presents the components of the Company’s inventory balances:
(dollars in millions)March 31,
2021
December 31, 2020
Finished products$149.2 $143.4 
Work in process21.9 21.8 
Raw materials166.0 159.2 
Inventories, at FIFO cost337.1 324.4 
LIFO reserve(24.3)(24.3)
$312.8 $300.1 
5.    Product Warranties
The Company offers warranties on the sales of certain of its products with terms that are consistent with the market and records an accrual for the estimated future claims. The following table presents the Company’s warranty liability activity:
(dollars in millions)Three Months Ended
March 31,
20212020
Balance at January 1$142.3 $134.3 
Expense12.6 13.5 
Claims settled(13.3)(12.5)
Balance at March 31$141.6 $135.3 
6.    Long-Term Debt
The Company had a $500 million multi-year multi-currency revolving credit agreement with a group of nine banks, which would have expired on December 15, 2021. The facility had an accordion provision which allowed it to be increased up to $700 million if certain conditions (including lender approval) were satisfied. Borrowings under bank credit lines and commercial paper borrowings were supported by the $500 million revolving credit agreement. At its option, the Company either maintained cash balances or paid fees for bank credit and services. The Company did not have borrowings on this facility during the three months ended March 31, 2021.
On April 1, 2021, the Company renewed and amended the $500 million revolving credit facility with the new expiration date of March 31, 2026. The renewed and amended facility has an accordion provision which allows it to be increased up to $850 million if certain conditions (including lender approval) are satisfied.

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7.    Earnings per Share of Common Stock
The numerator for the calculation of basic and diluted earnings per share is net earnings. The following table sets forth the computation of basic and diluted weighted-average shares used in the earnings per share calculations:
Three Months Ended
March 31,
20212020
Denominator for basic earnings per share - weighted average shares161,526,733 161,871,788 
Effect of dilutive stock options and share units1,258,590 1,025,817 
Denominator for diluted earnings per share162,785,323 162,897,605 
8.    Stock Based Compensation
The Company adopted the A. O. Smith Combined Incentive Compensation Plan (the Plan) effective January 1, 2007. The Plan was most recently reapproved by stockholders on April 15, 2020. The Plan is a continuation of the A. O. Smith Combined Executive Incentive Compensation Plan which was originally approved by stockholders in 2002. The number of shares available for granting of options or share units at March 31, 2021 was 6,763,257. Upon stock option exercise or share unit vesting, shares are issued from treasury stock.
Total stock based compensation expense recognized in the three months ended March 31, 2021 and 2020 was $7.4 million and $9.0 million, respectively.
Stock Options
The stock options granted in the three months ended March 31, 2021 and 2020 have three year pro rata vesting from the date of grant. Stock options are issued at exercise prices equal to the fair value of the Company’s Common Stock on the date of grant. For active employees, all options granted in 2021 and 2020 expire ten years after the date of grant. The Company’s stock options are expensed ratably over the three year vesting period; however, included in stock option expense for the three months ended March 31, 2021 and 2020 was expense associated with the accelerated vesting of stock option awards for certain employees who either are retirement eligible or become retirement eligible during the vesting period. Stock based compensation expense attributable to stock options in the three months ended March 31, 2021 and 2020 was $3.6 million and $4.5 million, respectively.

Changes in options, all of which relate to the Company’s Common Stock, were as follows for the three months ended March 31, 2021:
Weighted-
Avg. Per
Share
Exercise
Price
Number of
Options
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
(dollars in
millions)
Outstanding at January 1, 2021$43.01 2,785,654 
Granted60.82 367,025 
Exercised35.07 (184,574)
Forfeited45.36 (4,388)
Outstanding at March 31, 202145.70 2,963,717 7 years$64.9 
Exercisable at March 31, 202143.21 1,882,018 6 years$45.9 
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8.    Stock Based Compensation (continued)
The weighted-average fair value per option at the date of grant during the three months ended March 31, 2021 and 2020 using the Black-Scholes option-pricing model was $14.01 and $8.15, respectively. Assumptions were as follows:
Three Months Ended March 31,
20212020
Expected life (years)5.85.7
Risk-free interest rate1.2 %1.6 %
Dividend yield1.6 %2.1 %
Expected volatility27.3 %23.6 %
The expected lives of options for purposes of these models are based on historical exercise behavior. The risk-free interest rates for purposes of these models are based on the U.S. Treasury yield curve in effect on the date of grant for the respective expected lives of the option. The expected dividend yields for purposes of these models are based on the dividends paid in the preceding four quarters divided by the grant date market value of the Common Stock. The expected volatility for purposes of these models are based on the historical volatility of the Common Stock.
Restricted Stock and Share Units
Participants may also be awarded shares of restricted stock or share units under the Plan. Share units vest three years after the date of grant. The Company granted 100,153 and 169,407 share units under the plan in the three months ended March 31, 2021 and 2020, respectively. The share units were valued at $6.1 million and $7.2 million at the date of issuance in 2021 and 2020, respectively, based on the price of the Company’s Common Stock at the date of grant. The share units are recognized as compensation expense ratably over the three-year vesting period; however, included in share unit expense in the three months ended March 31, 2021 and 2020 was expense associated with accelerated vesting of share unit awards for certain employees who either are retirement eligible or will become retirement eligible during the vesting period. Stock based compensation expense attributable to share units of $3.8 million and $4.5 million was recognized in the three months ended March 31, 2021 and 2020, respectively. Certain non-U.S.-based employees receive the cash value of the share price at the vesting date in lieu of shares. Unvested cash-settled awards are remeasured at each reporting period.
A summary of share unit activity under the plan is as follows for the three months ended March 31, 2021:
Number of UnitsWeighted-Average
Grant Date Value
Issued and unvested at January 1, 2021426,786 $46.99 
Granted100,153 60.82 
Vested(89,079)60.54 
Forfeited(2,915)53.22 
Issued and unvested at March 31, 2021434,945 47.34 

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9.    Pensions
The following table presents the components of the Company’s net pension income:
(dollars in millions)Three Months Ended
March 31,
20212020
Service cost$0.4 $0.4 
Interest cost3.6 5.7 
Expected return on plan assets(12.0)(13.0)
Amortization of unrecognized loss5.2 4.9 
Amortization of prior service cost(0.1)(0.1)
Defined benefit plan income$(2.9)$(2.1)
The service cost component of net periodic benefit cost is presented within cost of products sold and selling, general and administrative expenses within the condensed consolidated statements of earnings while the other components of pension income are reflected in other income. The Company was not required to and did not make a contribution to its U.S. pension plan in 2020. The Company is not required to make a contribution in 2021.
10.    Segment Results
The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks, and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The Rest of World segment also manufactures and markets in-home air purification products in China.
The following table presents the Company’s segment results:
(dollars in millions)Three Months Ended
March 31,
20212020
Net sales
North America$552.9 $532.9 
Rest of World222.3 110.2 
Inter-segment(6.2)(6.2)
$769.0 $636.9 
Segment earnings (losses)
North America$130.4 $127.1 
Rest of World11.8 (42.2)
142.2 84.9 
Corporate expense(15.1)(15.0)
Interest expense(1.0)(2.2)
Earnings before income taxes126.1 67.7 
Provision for income taxes28.4 16.0 
Net earnings$97.7 $51.7 

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11.    Fair Value Measurements
ASC 820, Fair Value Measurements, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring basis or nonrecurring basis. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on the market approach which are prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The following table presents assets (liabilities) measured at fair value on a recurring basis (dollars in millions):
Fair Value Measurement UsingMarch 31,
2021
December 31, 2020
Quoted prices in active markets for identical assets (Level 1)$87.0 $116.5 
Significant other observable inputs (Level 2)(3.0)(4.3)
Items measured at fair value were comprised of the Company’s marketable securities (Level 1) and derivative instruments (Level 2). There were no changes in the Company’s valuation techniques used to measure fair values on a recurring basis during the three months ended March 31, 2021.
12.    Derivative Instruments
The Company utilizes certain derivative instruments to enhance its ability to manage currency exposure as well as raw materials price risk. Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. The Company does not enter into contracts for speculative purposes. The contracts are executed with major financial institutions with no credit loss anticipated for failure of the counterparties to perform.
Cash Flow Hedges
With the exception of its net investment hedges, the Company designates all of its hedging instruments as cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), gains or losses on the derivative instrument are reported as a component of other comprehensive loss, net of tax, and are reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings.
Foreign Currency Forward Contracts
The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases, sales and certain intercompany transactions in the normal course of business. Principal currencies for which the Company utilizes foreign currency forward contracts include the British pound, Canadian dollar, Euro and Mexican peso.
Gains and losses on these instruments are recorded in accumulated other comprehensive loss, net of tax, until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive loss to the consolidated statement of earnings. The assessment of effectiveness for forward contracts is based on changes in the forward rates. These hedges have been determined to be effective. The majority of the amounts in accumulated other comprehensive loss for cash flow hedges are expected to be reclassified into earnings within one year.
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12.    Derivative Instruments (continued)
The following table summarizes, by currency, the contractual amounts of the Company’s foreign currency forward contracts that are designated as cash flow hedges:
(dollars in millions)March 31, 2021December 31, 2020
BuySellBuySell
British pound$— $0.7 $— $1.0 
Canadian dollar— 59.8 — 79.7 
Euro24.6 — 32.7 — 
Mexican peso18.1 — 16.5 — 
Total$42.7 $60.5 $49.2 $80.7 
Commodity Futures Contracts
In addition to entering into supply arrangements in the normal course of business, the Company also enters into futures contracts to fix the cost of certain raw material purchases, principally steel, with the objective of minimizing changes in cost due to market price fluctuations. The hedging strategy for achieving this objective is to purchase steel futures contracts on the New York Metals Exchange (NYMEX) and copper futures contracts on the open market of the London Metals Exchange (LME) or over the counter contracts based on the LME.
With NYMEX, the Company is required to make cash deposits on unrealized losses on steel derivative contracts.
Net Investment Hedges
The Company enters into certain foreign currency forward contracts to hedge the exposure to a portion of the Company’s net investments in certain non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For the derivative instruments that are designated and qualify as net investment hedges, gains and losses are reported in other comprehensive loss where they offset gains and losses recorded on the Company’s net investments in its non-U.S. subsidiaries. These hedges are determined to be effective. The Company recognized $— and $0.8 million of after-tax gains associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive income in the three months ended March 31, 2021 and 2020, respectively. The contractual amount of the Company's foreign currency forward contracts that are designated as net investment hedges is $50.0 million as of March 31, 2021.
The following tables present the impact of derivative contracts on the Company’s financial statements.
Fair value of derivatives designated as hedging instruments under ASC 815:
(dollars in millions)Balance Sheet LocationMarch 31,
2021
December 31,
2020
Foreign currency contractsOther current assets$0.7 $2.7 
Accrued liabilities(3.7)(7.0)
Total derivatives designated as hedging instruments$(3.0)$(4.3)
The effect of cash flow hedges on the condensed consolidated statement of earnings:
Three Months Ended March 31 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationshipsAmount of (loss) gain
recognized in other
comprehensive
loss on derivatives
Location of gain (loss)
reclassified from
accumulated other
comprehensive loss
into earnings
Amount of  (loss) gain
reclassified from
accumulated other
comprehensive
loss into earnings
2021202020212020
Foreign currency contracts$(2.9)$1.4 Cost of products sold$(0.3)$0.8 
Commodities contracts (0.2)Cost of products sold  
$(2.9)$1.2 $(0.3)$0.8 

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13.    Income Taxes
The Company’s effective income tax rate for the three months ended March 31, 2021 was 22.5 percent compared to 23.6 percent for the three months ended March 31, 2020. The lower effective income tax rate for the three months ended March 31, 2021 compared to the effective income tax rate for the three months ended March 31, 2020 was primarily due to a change in geographical earnings mix. The Company estimates that its annual effective income tax rate for the full year 2021 will be approximately 23 percent.
As of March 31, 2021, the Company had $9.0 million of unrecognized tax benefits of which $0.5 million would affect its effective income tax rate if recognized. The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company’s U.S. federal income tax returns for 2017-2021 are subject to audit. The Company is subject to state and local income tax audits for tax years 2002-2021. The Company is subject to non-U.S. income tax examinations for years 2015-2021.
14.    Commitments and Contingencies
The Company maintains a commercial relationship with a supply-chain service provider (the Provider) in connection with the Company’s business in China. In this capacity, the Provider offers order-entry, warehousing and logistics support. The Provider also offers asset-backed financing to certain of the Company’s distributors in China to facilitate their working capital needs. To facilitate its financing support business, the Provider has collateralized lending facilities in place with multiple Chinese banks under which the Company has agreed to repurchase inventory if both requested by the banks and certain defined conditions are met, primarily related to the aging of the distributors’ notes.
The Provider is required to indemnify the Company for any losses the Company would incur in the event of an inventory repurchase under these arrangements. Potential losses under the repurchase arrangements represent the difference between the repurchase price and net proceeds from the resale of product plus costs incurred in the process, less related distributor rebates.
Before considering any reduction of distributor rebate accruals of $4.9 million and $5.4 million as of March 31, 2021 and December 31, 2020, respectively, and from the resale of the related inventory, the gross amount the Company would be obligated to repurchase, which would be contingent on the default of all of the outstanding loans, was approximately $6.5 million as of both March 31, 2021 and December 31, 2020. The Company’s reserves for estimated losses under repurchase arrangements were immaterial as of March 31, 2021 and December 31, 2020.

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15.    Changes in Accumulated Other Comprehensive Loss by Component
Changes to accumulated other comprehensive loss by component are as follows:
(dollars in millions)Three Months Ended
March 31,
20212020
Cumulative foreign currency translation
Balance at beginning of period$(48.1)$(66.2)
Other comprehensive loss before reclassifications(1.4)(18.0)
Balance at end of period(49.5)(84.2)
Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period0.6 0.2 
Other comprehensive (loss) gain before reclassifications(2.2)0.9 
Realized losses (gains) on derivatives reclassified to cost of products sold (net of income tax (benefit) provision of $(0.1) and $0.2 in 2021 and 2020, respectively)
0.2 (0.6)
Balance at end of period(1.4)0.5 
Pension liability
Balance at beginning of period(273.7)(282.3)
Amounts reclassified from accumulated other comprehensive loss:(1)
3.8 3.6 
Balance at end of period(269.9)(278.7)
Accumulated other comprehensive loss, end of period$(320.8)$(362.4)
(1) Amortization of pension items:
Actuarial losses$5.2 
(2)
$4.9 
(2)
Prior year service cost(0.1)
(2)
(0.1)
(2)
5.1 4.8 
Income tax benefit(1.3)(1.2)
Reclassification net of income tax benefit$3.8 $3.6 
(2)These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9 - Pensions for additional details.

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Our company is comprised of two reporting segments: North America and Rest of World. Our Rest of World segment is primarily comprised of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks, and water treatment products. Both segments primarily manufacture and market in their respective region of the world.
In January 2020, an outbreak of a novel coronavirus (COVID-19) surfaced in Wuhan, China. As a result of the outbreak, the Chinese government required businesses to close and restricted certain travel within the country. In cooperation with the government authorities, our operations in China closed for approximately four weeks before resuming production before the end of the first quarter. In March 2020, COVID-19 was declared a global pandemic and we experienced impacts to our business and other markets worldwide. As a result of the COVID-19 pandemic and in support of continuing our manufacturing efforts, we have undertaken numerous and meaningful steps to protect our employees, suppliers, and customers. As we receive guidance from governmental authorities, we adjust our safety measures to meet or exceed those guidelines.
Our global supply chain management team continues to monitor and manage our ability to operate effectively despite pandemic and weather-related challenges. Ongoing communications with our suppliers to identify and mitigate potential disruptions and manage inventory levels continue. Bottlenecks in our global supply chain, largely due to the pandemic and severe weather, along with shipping delays, weather-related plant closures, absenteeism and self-quarantine related to the pandemic have further extended our water heater lead times in the first quarter of 2021.
The first quarter of 2021 was particularly challenging for our North America water heater business as severe weather disruptions at our facilities and supply chain constraints limited production. If not for the limited production, based on a surge in customer orders in the first quarter of 2021, we believe our U.S. residential water heater shipments would have increased compared to the same quarter last year.
In our North America segment, we expect industry residential water heater volumes will be down approximately two percent in 2021 compared with 2020, which is driven by our belief that customers may have added inventory in 2020 due to industry extended lead times. We believe that some de-stocking by our customers will occur as our lead times improve throughout 2021. The timing of the de-stocking is difficult to predict, as we have announced three price increases that will go into effect in the first half of 2021, which typically generate pre-buy orders in advance of the price increases. We continue to experience inflation across our supply chain, particularly steel and logistics costs. The cost of steel has increased 25 percent since late January when we announced our second water heater price which is effective April 1, 2021. Due to rapidly rising material costs and a continued need to expedite freight to overcome shipping delays, we announced our third price increase on water heaters in late March, which is effective on June 1, 2021. When fully implemented, the cumulative impact of our three announced price increases is 24 to 27 percent based on the type of water heater. We believe that commercial water heater industry volumes will further decline approximately four percent in 2021 as COVID-19 pandemic-impacted businesses continue to delay or defer new construction and discretionary replacement installations. We expect to see a low-double-digits increase in our boiler sales in 2021 compared to 2020 due to pandemic-related pent-up demand as well as our new product introductions. We expect sales of our North America water treatment products to increase by 13 to 14 percent in 2021, compared to 2020, primarily driven by consumer demand for our point of use and point of entry water treatment systems.
In our Rest of World segment, we expect China sales in 2021 to increase 18 to 20 percent in local currency compared with 2020 due to increased consumer demand. We assume China currency rates will stay at current levels and which would add approximately $50 million and $3 million to sales and earnings in 2021, respectively. In addition, we believe that our mix of products sold in China is shifting to more mid-price range products from our historical mix of higher-priced products.
Combining all of these factors, we expect our consolidated sales to increase by between 14 and 15 percent in 2021. Our guidance excludes the potential impacts from future acquisitions and assumes the conditions of our business environment and that of our suppliers and customers are similar throughout 2021 to what we have experienced in recent months and does not deteriorate as a result of further restrictions, supply chain bottlenecks or shutdowns.

RESULTS OF OPERATIONS
FIRST THREE MONTHS OF 2021 COMPARED TO 2020
Sales in the first quarter of 2021 were $769 million, approximately 21 percent higher than sales of $637 million in the first quarter of 2020. The increase in our first quarter of 2021 sales compared to the same period last year was primarily due to a 119 percent increase in sales in China and higher sales of boilers, water heaters in Canada, and water treatment products in North
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America. Our sales in China also benefited from currency translation of approximately $14 million in the first quarter of 2021 due to the Chinese currency's appreciation against the U.S. Dollar.
First quarter gross profit margin of 37.5 percent in 2021 was slightly lower than the gross profit margin of 37.6 percent in the prior-year period.
Selling, general, and administrative (SG&A) expenses in the first quarter of 2021 were $166.5 million or $7.3 million lower than SG&A expenses of $173.8 million in the first quarter of 2020. The decrease in SG&A expenses in 2021 was primarily due to lower selling expenses and advertising costs in China, resulting from headcount reductions, store closures, cuts in advertising, and other cost-saving measures implemented during 2020.
Interest expense in the first quarter of 2021 was $1.0 million compared to $2.2 million in the first quarter of 2020. The decrease in interest expense in the first quarter of 2021 was primarily due to lower debt levels than the prior-year period.
Other income was $5.0 million in the first quarter of 2021, up from $4.2 million in the same period last year. The increase in other income was primarily due to higher currency translation gains and pension income than in the first quarter of 2020 and partially offset by lower interest income.
Our pension costs and credits are developed from actuarial valuations. The valuations reflect key assumptions regarding, among other things, discount rates, expected return on plan assets, retirement ages, and years of service. We consider current market conditions, including changes in interest rates, in making these assumptions. Our assumption for the expected rate of return on plan assets is 6.25 percent in 2021 compared to 6.75 percent in 2020. The discount rate used to determine net periodic pension costs decreased to 2.45 percent in 2021 from 3.18 percent in 2020. Pension income for the first quarter of 2021 and 2020 was $2.9 million and $2.1 million, respectively. The service cost component of our pension income is reflected in cost of products sold and SG&A expenses. All other components of our pension income are reflected in other income.
Our effective income tax rate for the first quarter of 2021 was 22.5 percent compared to 23.6 percent in the same period last year. Our effective income tax rate in the first quarter of 2021 was lower than the effective income tax rate in the first quarter of 2020 primarily due to a change in the geographic earnings mix. We estimate that our effective income tax rate for the full year 2021 will be approximately 23 percent.
North America
Sales in our North America segment were $553 million in the first quarter of 2021 or $20 million higher than sales of $533 million in the first quarter of 2020. Increased sales in the first quarter of 2021 were primarily due to higher boiler, service parts and tankless water heater sales in the U.S., improved water heater sales in Canada, a twelve percent growth in water treatment sales and inflation-related price increases on water heaters in the U.S., which were partially offset by lower U.S. residential and commercial tank-type water heater volumes.
North America segment earnings were $130.4 million in the first quarter of 2021, which was higher than segment earnings of $127.1 million in the same period of 2020. Segment margin was 23.6 percent in the first quarter of 2021 compared to 23.9 percent in the first quarter of 2020. Increased earnings from higher sales and inflation-related price increases on water heaters were partially offset by higher material and freight costs and lower water heater volumes in the U.S. We expect our full-year 2021 North America segment margin to be between 23 and 23.50 percent.
Rest of World
Sales in the Rest of World segment were $222 million in the first quarter of 2021 or $112 million higher than sales of $110 million in the first quarter of 2020. Sales in China increased $108 million, or 119 percent in U.S. dollar terms, compared to the prior-year period and benefited from currency translation of approximately $14 million in the first quarter of 2021 due to the Chinese currency's appreciation against the U.S. Dollar. Stronger consumer demand in the first quarter of 2021 in each of our major product lines in China more than doubled sales compared to the first quarter of 2020 which was impacted by pandemic-related lockdowns and weak end-market demand.
Rest of World segment earnings were $11.8 million in the first quarter of 2021 compared to $42.2 million of losses in the first quarter of 2020. Segment margin was 5.3 percent in the first quarter of 2021 compared to a negative margin of 38.3 percent in the same period last year. In China, stronger consumer demand drove higher sales volumes across our major product lines. Lower SG&A expenses, due to lower selling expenses and advertising costs in China, resulting from headcount reductions, store closures, cuts in advertising expenditures, and other cost-saving measures implemented during 2020, contributed to higher segment earnings in the first quarter of 2021 compared to the first quarter of 2020. We expect our full-year 2021 Rest of World segment margin to be between seven and eight percent.


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Outlook
We expect our consolidated sales to grow between 14 and 15 percent in 2021 on strong North America water treatment, boiler and China sales, enhanced by pricing actions, and more than offset expected weaker North America water heater volumes. Our sales growth projection includes approximately $50 million of benefit from China currency translation. We have increased the midpoint of our EPS guidance for 2021 and we believe we will achieve full-year net earnings of between $2.55 and $2.65 per share. Our 2021 guidance excludes the potential impacts from future acquisitions and assumes that the conditions of our business environment and those of our suppliers and customers are similar for the remainder of the year to what we have experienced in recent months and do not deteriorate as a result of further restrictions, supply chain bottlenecks or shutdowns.
Liquidity & Capital Resources
Working capital of $722.1 million at March 31, 2021 was $9.6 million lower than at December 31, 2020, primarily due to lower accounts receivable balances. As of March 31, 2021, approximately $540 million of our $666 million of cash, cash equivalents, and marketable securities was held by our foreign subsidiaries. We expect to repatriate approximately $160 million of cash from our foreign subsidiaries in 2021 and use the proceeds to purchase shares of our common stock.
Cash provided by operations in the first quarter of 2021 was $104.4 million compared with $54.1 million during the same period last year. Higher earnings resulted in higher cash flow from operations in the first quarter of 2021. For the full year 2021, we expect cash provided by operating activities will be between $475 and $500 million, lower than 2020 cash provided by operating activities of $562 million primarily due to higher investments in working capital partially offset by higher earnings compared to the prior year.
Capital expenditures totaled $17.1 million in the first quarter of 2021, compared with $12.8 million in the year ago period. We project 2021 capital expenditures will be between $85 and $90 million and full year depreciation and amortization expense will be approximately $80 million.
We had a $500 million multi-currency credit facility with a group of nine banks, which would have expired in December 2021. The facility had an accordion provision, which allowed us to increase it up to $700 million if certain conditions (including lender approval) were satisfied. Borrowing rates under the facility were determined by our leverage ratio. The facility required us to maintain two financial covenants, a leverage ratio test and an interest coverage test, and we were in compliance with the covenants as of March 31, 2021. We did not have borrowings on this facility during the quarter ended March 31, 2021. On April 1, 2021, we renewed and amended our $500 million revolving credit facility with the new expiration date of March 31, 2026. The renewed and amended facility has an accordion provision which allows it to be increased up to $850 million if certain conditions (including lender approval) are satisfied.
The facility backs up commercial paper and credit line borrowings. At March 31, 2021, we had available borrowing capacity of $500 million under this facility. We believe the combination of available borrowing capacity and operating cash flows will provide sufficient funds to finance our existing operations for the foreseeable future.
Our total debt decreased $6.8 million from $113.2 million at December 31, 2020 to $106.4 million at March 31, 2020. Our leverage, as measured by the ratio of total debt to total capitalization, calculated excluding operating lease liabilities, was 5.4 percent at March 31, 2021, compared with 5.8 percent at December 31, 2020.
Our pension plan continues to meet all funding requirements under ERISA regulations. We are not required to make a contribution and we do not plan to make any voluntary contributions to the plan in 2021.
In the first quarter of 2021, our Board of Directors approved adding 7,000,000 shares of common stock to our existing discretionary share repurchase authority. Under our share repurchase program, we may purchase our common stock through a combination of a Rule 10b5-1 automatic trading plan and discretionary purchases in accordance with applicable securities laws. The stock repurchase authorization remains effective until terminated by our Board of Directors, which may occur at any time, subject to the parameters of any Rule 10b5-1 automatic trading plan that we may then have in effect. During the first quarter of 2021, we repurchased 1,075,200 shares of our stock at a total cost of $67.0 million. At March 31, 2021, we had 7,538,624 million shares remaining on the share repurchase authority. Depending on factors such as stock price, working capital requirements and alternative investment opportunities, we expect to spend approximately $400 million on stock repurchases in 2021 through a combination of our Rule 10b5-1 automatic trading plan and opportunistic repurchase in the open market.
On April 12, 2021, our Board of Directors declared a regular quarterly cash dividend of $0.26 per share on our Common Stock and Class A common stock. The dividend is payable on May 17, 2021, to shareholders of record on April 30, 2021.

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Non-GAAP Financial Information
We provide a non-GAAP measure, adjusted earnings per share (EPS) that excludes severance and restructuring expenses in 2020. We believe that this measure of adjusted EPS provides useful information to investors about our performance and allows management and our investors to better compare our performance period over period.
A. O. SMITH CORPORATION
2021 EPS Guidance and 2020 Adjusted EPS
(unaudited)
The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP):
2021 Guidance2020
Diluted EPS (GAAP)$2.55-2.65$2.12 
Severance and restructuring expenses per diluted share, net of tax— 0.04 
Adjusted EPS$2.55-2.65$2.16 
Critical Accounting Policies
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the U.S., which requires the use of estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The critical accounting policies that we believe could have the most significant effect on our reported results or require complex judgment by management are contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2020. We believe that at March 31, 2021, there has been no material change to this information.
Recent Accounting Pronouncement
Refer to Recent Accounting Pronouncement in Note 1 – Basis of Presentation in the notes to our condensed consolidated financial statements included in Part 1 Financial Information.
Forward Looking Statements
This filing contains statements that the Company believes are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “continue,” “guidance” or words of similar meaning. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this filing. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: negative impacts to the Company’s businesses, including demand for its products, particularly commercial products, operations and workforce dislocation and disruption, supply chain disruption and liquidity as a result of the severity and duration of the COVID-19 pandemic; lengthening or deepening of weather-related supply chain bottlenecks; an uneven recovery of the Chinese economy or decline in the growth rate of consumer spending or housing sales in China; negative impact to the Company’s businesses from international tariffs, trade disputes and geopolitical differences; potential weakening in the high-efficiency boiler segment in the U.S.; significant volatility in material availability and prices; inability of the Company to implement or maintain pricing actions; a failure to recover or further weakening in U.S. residential or commercial construction or instability in the Company’s replacement markets; foreign currency fluctuations; the Company’s inability to successfully integrate or achieve its strategic objectives resulting from acquisitions; competitive pressures on the Company’s businesses; the impact of potential information technology or data security breaches; changes in government regulations or regulatory requirements; and adverse developments in general economic, political and business conditions in key regions of the world. Forward-looking statements included in this filing are made only as of the date of this filing, and the Company is under no obligation to update these statements to reflect subsequent events or circumstances. All subsequent written and oral forward-looking statements attributed to the Company, or persons acting on its behalf, are qualified entirely by these cautionary statements.
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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As is more fully described in our Annual Report on Form 10-K for the year ended December 31, 2020, we are exposed to various types of market risks, including currency and certain commodity risks. Our quantitative and qualitative disclosures about market risk have not materially changed since that report was filed. We monitor our currency and commodity risks on a continuous basis and generally enter into forward and futures contracts to minimize these exposures. The majority of the contracts are for periods of less than one year. Our Company does not engage in speculation in our derivative strategies. It is important to note that gains and losses from our forward and futures contract activities are offset by changes in the underlying costs of the transactions being hedged.
ITEM 4 - CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon this evaluation of these disclosure controls and procedures, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of March 31, 2021 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There have been no material changes in the legal and environmental matters discussed in Part 1, Item 3 and Note 15 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In the first quarter of 2021, our Board of Directors approved adding 7,000,000 shares of common stock to the existing discretionary share repurchase authority. Under the share repurchase program, the Common Stock may be purchased through a combination of Rule 10b5-1 automatic trading plan and discretionary purchases in accordance with applicable securities laws. The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, as well as working capital requirements, general business conditions and other factors, including alternative investment opportunities. The stock repurchase authorization remains effective until terminated by our Board of Directors which may occur at any time, subject to the parameters of any Rule 10b5-1 automatic trading plan that we may then have in effect. In the first quarter of 2021, we repurchased 1,075,200 shares at an average price of $62.35 per share and at a total cost of $67.0 million. As of March 31, 2021, there were 7,538,624 shares remaining on the existing repurchase authorization.
ISSUER PURCHASES OF EQUITY SECURITIES
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that may yet be Purchased Under the Plans or Programs
January 1 - January 31, 2021— $— — 8,613,824 
February 1 - February 28, 2021473,000 59.59 473,000 8,140,824 
March 1 - March 31, 2021602,200 64.53 602,200 7,538,624 
ITEM 6 - EXHIBITS
Refer to the Exhibit Index on page 23 of this report.
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INDEX TO EXHIBITS
Exhibit
Number
Description
10.1
31.1
31.2
32.1
32.2
101The following materials from A. O. Smith Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 are filed herewith, formatted in XBRL (Extensive Business Reporting Language): (i) the Condensed Consolidated Statement of Earnings for the three months ended March 31, 2021 and 2020, (ii) the Condensed Consolidated Statement of Comprehensive Earnings for the three months ended March 31, 2021 and 2020, (iii) the Condensed Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020 (iv) the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2021 and 2020 (v) the Condensed Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (vi) the Notes to Condensed Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has authorized this report to be signed on its behalf by the undersigned.
A. O. SMITH CORPORATION
April 30, 2021/s/ Helen E. Gurholt
Helen E. Gurholt
Vice President and Controller
/s/ Charles T. Lauber
Charles T. Lauber
Executive Vice President and Chief Financial Officer
24
aos-20210331xex101
Exhibit 10.1 US-DOCS\121756134.5 EXECUTION COPY AMENDMENT NO. 2 dated as of April 1, 2021 to CREDIT AGREEMENT Dated as of December 12, 2012 THIS AMENDMENT NO. 2 (“Amendment”) is made as of April 1, 2021 (the “Effective Date”) by and among A.O. Smith Corporation (the “Company”), the Subsidiaries thereof identified on the signature pages hereto (together with the Company, the “Borrowers”), the lenders listed on the signature pages hereof (the “Lenders”) and U.S. Bank National Association (“U.S. Bank”), as administrative agent (the “Administrative Agent”), under that certain Amended and Restated Credit Agreement dated as of December 12, 2012 by and among the Borrowers, the Lenders and the Administrative Agent (as amended, supplemented or otherwise modified from time to time prior to the Effective Date, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers have requested that the Lenders and the Administrative Agent agree to make certain modifications to the Credit Agreement; and WHEREAS, the Borrowers, the Lenders and the Administrative Agent have so agreed on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Administrative Agent hereby agree as follows. 1. Amendments to the Credit Agreement. Effective as of the Effective Date, but subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: (a) The Credit Agreement is hereby amended in its entirety to read as set forth in Annex A hereto. (b) The Exhibits to the Credit Agreement are hereby amended in their entirety to read as set forth in the corresponding Exhibits attached hereto as part of Annex A. (c) The Schedules to the Credit Agreement are hereby amended in their entirety to read as set forth in the corresponding Schedules attached hereto as Annex A.


 
2 2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the following conditions precedent: (a) the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Lenders, and the Administrative Agent; (b) the Administrative Agent shall have received the documents identified in the list of closing documents attached hereto as Annex B; (c) (i) The Administrative Agent shall have received, at least five (5) days prior to the Effective Date, all documentation and other information regarding the Borrowers requested by a Lender or the Administrative Agent that is required by applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act, to the extent requested in writing of the Company at least ten (10) days prior to the Effective Date and (ii) to the extent any Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, at least five (5) days prior to the Effective Date, any Lender that has requested, in a written notice to the Company at least ten (10) days prior to the Effective Date, a Beneficial Ownership Certification in relation to such Borrower shall have received such Beneficial Ownership Certification (provided that, upon the execution and delivery by such Lender of its signature page to this Amendment, the condition set forth in this clause (c) shall be deemed to be satisfied); and (d) the Administrative Agent shall have received all fees and amounts due and payable on or prior to the Effective Date, including, to the extent invoiced no less than one (1) Business Day prior to the Effective Date, reimbursement or payment of all reasonable out-of- pocket expenses required to be reimbursed or paid by the Borrowers. 3. Representations and Warranties of each Borrower. Each Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of such Borrower and are enforceable against such Borrower in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability. (b) As of the date hereof and after giving effect to the terms of this Amendment, (i) no Event of Default or Unmatured Event of Default exists and (ii) the representations and warranties of such Borrower set forth in Section 5 the Credit Agreement, as amended hereby, are true and correct in all material respects (except to the extent any such representation and warranty itself is qualified by “materiality”, “Material Adverse Effect” or similar qualifier, in which case, it is true and correct in all respects), except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date. 4. Reference to and Effect on the Credit Agreement.


 
3 (a) Upon the effectiveness of this Amendment, on and after the date hereof, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Credit Agreement, as amended hereby. (b) Except as specifically amended above or otherwise expressly provided in this Amendment, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. (d) This Amendment shall be a Loan Document. 5. Costs and Expenses. The Company (and, to the extent any of the following relate directly to the Canadian Borrower or the Dutch Borrower, the Canadian Borrower and/or the Dutch Borrower, as applicable) shall pay promptly after demand accompanied by invoices in reasonable detail all reasonable out-of-pocket costs and expenses of the Administrative Agent (including Attorney Costs of one primary external counsel, one Dutch counsel and one Canadian counsel representing all of the Joint Lead Arrangers and the Administrative Agent) incurred in connection with the preparation, execution and delivery of this Amendment. 6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF ILLINOIS; PROVIDED THAT THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. The provisions of Sections 11.15(b) and Section 11.16 of the Credit Agreement are hereby incorporated by reference as though fully set forth herein. 7. Execution. This Amendment may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of which taken together shall be deemed to constitute but one and the same instrument. Delivery of a counterpart hereof, or a signature page hereto, by facsimile or electronic transmission shall be effective as delivery of a manually-signed counterpart hereof. 8. Headings. The captions and headings of this Amendment are for convenience of reference only and shall not affect the interpretation of this Amendment. [Signature Pages Follow]


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. A.O. SMITH CORPORATION By: /s/ Charles T. Lauber Name: Charles T. Lauber Title: Executive Vice President and Chief Financial Officer A.O. SMITH ENTERPRISES LTD. By: /s/ Patricia K. Ackerman Name: Patricia K. Ackerman Title: Assistant Treasurer A.O. SMITH INTERNATIONAL HOLDINGS B.V. By: /s/ Charles T. Lauber Name: Charles T. Lauber Title: Authorized Signatory


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent and as a Lender By: /s/ Terrence Ward Name: Terrence Ward Title: Senior Vice President


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender By: /s/ Jeanne Zeske Name: Jeanne Zeske Title: SVP – Relationship Manager


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement BANK OF AMERICA, N.A., as a Lender By: /s/ Brian Lukehart Name: Brian Lukehart Title: Managing Director


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement BMO HARRIS BANK N.A., as a Lender By: /s/ Brendan Moran Name: Brendan Moran Title: Senior Vice President


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement BANK OF CHINA, CHICAGO BRANCH, as a Lender By: /s/ Kai Wu Name: Kai Wu Title: SVP & Deputy Branch Manager


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement COMERICA BANK, as a Lender By: /s/ John Lascody Name: John Lascody Title: Vice President


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement STANDARD CHARTERED BANK, as a Lender By: /s/ James Beck Name: James Beck Title: Director


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement TRUIST BANK, as a Lender By: /s/ Troy R. Weaver Name: Troy R. Weaver Title: Senior Vice President


 
Signature Page to Amendment No. 2 to A.O. Smith Credit Agreement JPMORGAN CHASE BANK, N.A., as a Lender By: /s/ Peter S. Predun Name: Peter S. Predun Title: Executive Director JPMORGAN CHASE BANK, N.A., TORONTO BRANCH By: /s/ Peter S. Predun Name: Peter S. Predun Title: Executive Director


 
Annex A Credit Agreement, Exhibits to Credit Agreement, and Schedules to Credit Agreement, as amended pursuant to Amendment No. 2 Attached


 
Deal CUSIP: 00185GAH4 Facility CUSIP: 00185GAJ0 US-DOCS\121474105.7 AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 12, 2012 and as amended as of December 15, 2016 and as amended as of April 1, 2021 among A.O. SMITH CORPORATION, A.O. SMITH ENTERPRISES LTD., A.O. SMITH INTERNATIONAL HOLDINGS B.V., THE LENDERS PARTY HERETO and U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent, Swing Line Lender and L/C Issuer __________________ WELLS FARGO BANK, NATIONAL ASSOCIATION, BANK OF AMERICA, N.A. and BMO HARRIS BANK N.A., as Co-Syndication Agents __________________ BANK OF CHINA, CHICAGO BRANCH, as Documentation Agent __________________ U.S. BANK NATIONAL ASSOCIATION, WELLS FARGO SECURITIES, LLC, BofA SECURITIES, INC. and BMO HARRIS BANK N.A., as Joint Lead Arrangers and Joint Bookrunners


 
TABLE OF CONTENTS Page -i- Section 1 DEFINITIONS ........................................................................................................ 1 1.1 Certain Defined Terms .............................................................................................1 1.2 Other Interpretive Provisions .................................................................................38 1.3 Accounting Principles ............................................................................................39 1.4 Amendment and Restatement ................................................................................40 1.5 Divisions ................................................................................................................41 1.6 LIBOR Notification ...............................................................................................41 1.7 Certain Calculations ...............................................................................................41 Section 2 THE CREDITS ..................................................................................................... 41 2.1 Amounts and Terms of Commitments ...................................................................41 2.2 Loan Accounts .......................................................................................................42 2.3 Procedure for U.S. Borrowings and Dutch Borrowings ........................................42 2.4 Conversion and Continuation Elections for U.S. Borrowings and Dutch Borrowings .............................................................................................................43 2.5 Procedure for Canadian Borrowings ......................................................................45 2.6 Continuation Election for Canadian Borrowings ...................................................45 2.7 Letters of Credit .....................................................................................................47 2.8 Swing Line Loans ..................................................................................................57 2.9 Termination or Reduction of the Commitments ....................................................58 2.10 Optional Prepayments ............................................................................................58 2.11 Mandatory Prepayments ........................................................................................60 2.12 Repayment .............................................................................................................60 2.13 Interest....................................................................................................................60 2.14 Fees ........................................................................................................................63 2.15 Computation of Fees and Interest ..........................................................................63 2.16 Payments by the Borrowers ...................................................................................63 2.17 Payments by the Lenders .......................................................................................65 2.18 Sharing of Payments, Etc .......................................................................................66 2.19 Pro Rata Treatment ................................................................................................66 2.20 Limitations on Interest Periods ..............................................................................67 2.21 Optional Increase in Commitments .......................................................................67 2.22 Optional Increases in Canadian or Dutch Sublimit; Termination of Canadian or Dutch Sublimit..................................................................................70 2.23 Defaulting Lenders. ................................................................................................70 Section 3 TAXES, YIELD PROTECTION AND ILLEGALITY ........................................ 73 3.1 Taxes ......................................................................................................................73 3.2 Illegality .................................................................................................................77 3.3 Increased Costs and Reduction of Return ..............................................................78 3.4 Funding Losses ......................................................................................................80 3.5 Availability of Types of Borrowings; Adequacy of Interest Rates ........................80


 
TABLE OF CONTENTS (continued) Page -ii- 3.6 Certificates of Lenders ...........................................................................................84 3.7 Substitution of Lenders ..........................................................................................85 3.8 Survival ..................................................................................................................86 Section 4 CONDITIONS PRECEDENT .............................................................................. 86 4.1 Conditions of Initial Credit Extension ...................................................................86 4.2 Conditions to All Loans .........................................................................................87 Section 5 REPRESENTATIONS AND WARRANTIES ..................................................... 88 5.1 Corporate Existence and Power .............................................................................88 5.2 Authorization; No Contravention ..........................................................................88 5.3 Authorization .........................................................................................................89 5.4 Binding Effect ........................................................................................................89 5.5 Litigation ................................................................................................................89 5.6 No Default ..............................................................................................................89 5.7 ERISA Compliance; Canadian Pension Plans .......................................................89 5.8 Use of Proceeds; Margin Regulations....................................................................91 5.9 Title to Properties ...................................................................................................91 5.10 Taxes ......................................................................................................................91 5.11 Financial Condition ................................................................................................91 5.12 Environmental Matters...........................................................................................92 5.13 Regulated Entities ..................................................................................................92 5.14 Subsidiaries ............................................................................................................92 5.15 Insurance ................................................................................................................92 5.16 Anti-Corruption Laws and Sanctions.....................................................................92 5.17 Full Disclosure .......................................................................................................93 5.18 Affected Financial Institutions ...............................................................................94 5.19 Tax Residency ........................................................................................................94 5.20 Fiscal Unity for Dutch Tax Purposes .....................................................................94 Section 6 AFFIRMATIVE COVENANTS .......................................................................... 94 6.1 Financial Statements ..............................................................................................94 6.2 Certificates; Other Information ..............................................................................95 6.3 Notices ...................................................................................................................96 6.4 Preservation of Corporate Existence, Etc ..............................................................97 6.5 Insurance ................................................................................................................98 6.6 Compliance With Laws ..........................................................................................98 6.7 Compliance With ERISA; Canadian Pension Plans ..............................................98 6.8 Inspection of Property and Books and Records .....................................................99 6.9 Payment of Taxes ...................................................................................................99 6.10 Use of Proceeds ......................................................................................................99 6.11 Business Activities ...............................................................................................100


 
TABLE OF CONTENTS (continued) Page -iii- 6.12 Tax Residency ......................................................................................................100 6.13 Fiscal Unity for Dutch Tax Purposes ...................................................................100 6.14 Most Favored Lender Status ................................................................................100 Section 7 NEGATIVE COVENANTS ............................................................................... 100 7.1 Limitation on Liens ..............................................................................................101 7.2 Consolidations and Mergers ................................................................................103 7.3 Sales of Assets .....................................................................................................103 7.4 Hedging Obligations ............................................................................................104 7.5 [Reserved] ............................................................................................................104 7.6 Use of Proceeds ....................................................................................................104 7.7 ERISA ..................................................................................................................105 7.8 Maximum Leverage Ratio ...................................................................................105 7.9 Minimum Interest Coverage ................................................................................105 7.10 Limitation on Material Subsidiary Debt ..............................................................105 Section 8 EVENTS OF DEFAULT .................................................................................... 105 8.1 Event of Default ...................................................................................................105 8.2 Remedies Upon Event of Default ........................................................................108 8.3 Application of Funds............................................................................................109 8.4 Rights Not Exclusive ...........................................................................................109 Section 9 THE ADMINISTRATIVE AGENT ................................................................... 109 9.1 Appointment and Authorization ..........................................................................109 9.2 Rights as a Lender ................................................................................................110 9.3 Exculpatory Provisions ........................................................................................110 9.4 Reliance by Administrative Agent .......................................................................111 9.5 Delegation of Duties ............................................................................................112 9.6 Resignation of Administrative Agent ..................................................................112 9.7 Non-Reliance on Agents and Other Lenders .......................................................113 9.8 No Other Duties ...................................................................................................113 9.9 Administrative Agent May File Proofs of Claim .................................................113 9.10 Certain ERISA Matters ........................................................................................114 Section 10 GUARANTY BY THE COMPANY .................................................................. 115 10.1 Guaranty ...............................................................................................................115 10.2 Guaranty Unconditional .......................................................................................115 10.3 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances ......................................................................................................116 10.4 Waiver by the Company ......................................................................................116 10.5 Subrogation ..........................................................................................................116


 
TABLE OF CONTENTS (continued) Page -iv- 10.6 Stay of Acceleration .............................................................................................117 Section 11 MISCELLANEOUS ........................................................................................... 117 11.1 Amendments and Waivers ...................................................................................117 11.2 Notices .................................................................................................................120 11.3 No Waiver; Cumulative Remedies ......................................................................122 11.4 Costs and Expenses ..............................................................................................122 11.5 Indemnification ....................................................................................................122 11.6 Payments Set Aside..............................................................................................124 11.7 USA PATRIOT Act and Beneficial Ownership Notice ......................................124 11.8 Successors and Assigns ........................................................................................125 11.9 Confidentiality .....................................................................................................130 11.10 Set-off ..................................................................................................................131 11.11 Notification of Addresses, Lending Offices, Etc .................................................132 11.12 Counterparts .........................................................................................................132 11.13 Severability ..........................................................................................................132 11.14 No Third Parties Benefited ..................................................................................132 11.15 Governing Law and Jurisdiction ..........................................................................132 11.16 Jury Trial ..............................................................................................................133 11.17 Judgment Currency ..............................................................................................133 11.18 Entire Agreement .................................................................................................133 11.19 Electronic Execution of Assignments ..................................................................134 11.20 Electronic Records ...............................................................................................134 11.21 Acknowledgement and Consent to Bail-In of Affected Financial Institutions............................................................................................................134 11.22 Acknowledgement Regarding Any Supported QFCs ..........................................135 11.23 Several Obligations ..............................................................................................136 11.24 Headings ..............................................................................................................136 11.25 No Advisory or Fiduciary Responsibility ............................................................136 SCHEDULES Schedule 1.1 Pricing Schedule Schedule 2.1 Commitments and Pro Rata Shares Schedule 5.5 Litigation Schedule 5.7 ERISA Schedule 5.12 Environmental Matters Schedule 5.14 Subsidiaries Schedule 7.1 Existing Liens Schedule 11.2 Addresses for Notices EXHIBITS


 
TABLE OF CONTENTS (continued) Page -v- Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C [Reserved] Exhibit D Form of Legal Opinion of Counsel to the Company Exhibit E Form of Legal Opinion of Counsel to the Canadian Borrower Exhibit F Form of Legal Opinion of Counsel to the Dutch Borrower Exhibit G Form of Assignment and Assumption Exhibit H Form of Promissory Note Exhibit I Form of Compliance Certificate Exhibit J-1 Form of Increasing Lender Supplement Exhibit J-2 Form of Augmenting Lender Supplement Exhibits K-1-4 Forms of U.S. Tax Compliance Certificate


 
AMENDED AND RESTATED CREDIT AGREEMENT This AMENDED AND RESTATED CREDIT AGREEMENT entered into as of December 12, 2012, as amended as of December 15, 2016, and as amended as of April 1, 2021, is among A.O. SMITH CORPORATION, a Delaware corporation (the “Company”), A.O. SMITH ENTERPRISES LTD., an Ontario corporation (the “Canadian Borrower”), A.O. SMITH INTERNATIONAL HOLDINGS B.V., a besloten vennootschap met beperkte aansprakelijkheid incorporated under the laws of the Netherlands (the “Dutch Borrower”), the several financial institutions from time to time party to this Agreement (collectively the “Lenders”; individually each a “Lender”), U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined below), WELLS FARGO BANK, NATIONAL ASSOCIATION, BANK OF AMERICA, N.A., and BMO HARRIS BANK N.A., as Co-Syndication Agents, BANK OF CHINA, CHICAGO BRANCH, as Documentation Agent and U.S. BANK NATIONAL ASSOCIATION, WELLS FARGO SECURITIES, LLC, BofA SECURITIES, INC. and BMO HARRIS BANK N.A., as Joint Lead Arrangers and Joint Bookrunners. WHEREAS, the Company, the Canadian Borrower, the Dutch Borrower, Wells Fargo Bank, National Association, as the Administrative Agent and the L/C Issuer, and certain of the Lenders previously entered into that certain Credit Agreement, dated as of November 12, 2010 (as it existed immediately prior to the Restatement Signing Date (as defined below), the “Existing Credit Agreement”); WHEREAS, the Company has requested (i) an extension of the Termination Date (as defined below), (ii) adjustments to the Applicable Margins (as defined below) and (iii) the other amendments set forth herein; and WHEREAS, as a result of such request, the parties wish to amend and restate the Existing Credit Agreement in its entirety by entering into this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties amend and restate the Existing Credit Agreement in its entirety as follows: SECTION 1 DEFINITIONS 1.1 Certain Defined Terms. The following terms have the following meanings: Acquisition means, with respect to any Person, the purchase or other acquisition by such Person, by any means whatsoever (including by merger, amalgamation or consolidation (where the Company or any of its Subsidiaries is ultimately the surviving or continuing entity), devise, bequest, gift, through a dividend or otherwise), of (a) stock of, or other equity securities of, any other Person if, immediately thereafter, such other Person would be a Subsidiary of such Person, (b) any business, going concern or division or segment of any other Person, or (c) the property of any other Person other than in the ordinary course of business, provided, however, that no acquisition of substantially all of the assets of such other Person shall be deemed to be in the ordinary course of business. “Acquired” shall have a correlative meaning. Notwithstanding the


 
2 foregoing, “Acquisition” shall not include any transaction or series of related transactions solely among the Company and/or one or more of its Subsidiaries. Acquisition Indebtedness means any Debt of the Company or any of its Subsidiaries that has been issued for the purpose of financing, in whole or in part, a Material Acquisition and any related transactions or series of related transactions (including for the purpose of refinancing or replacing all or a portion of any pre-existing Debt of the Company, any of its Subsidiaries or the person(s) or assets to be acquired); provided that (a) the release of the proceeds thereof to the Company and its Subsidiaries is contingent upon the consummation of such Material Acquisition and, pending such release, such proceeds are held in escrow (and, if the definitive agreement (or, in the case of a tender offer or similar transaction, the definitive offer document) for such acquisition is terminated prior to the consummation of such Material Acquisition or if such Material Acquisition is otherwise not consummated by the date specified in the definitive documentation relating to such Debt, such proceeds shall be promptly applied to satisfy and discharge all obligations of the Company and its Subsidiaries in respect of such Debt) or (b) such Debt contains a “special mandatory redemption” provision (or other similar provision) or otherwise permits or requires such Debt to be redeemed or prepaid if such Material Acquisition is not consummated by the date specified in the definitive documentation relating to such Debt (and if the definitive agreement (or, in the case of a tender offer or similar transaction, the definitive offer document) for such Material Acquisition is terminated in accordance with its terms prior to the consummation of such Material Acquisition or such Material Acquisition is otherwise not consummated by the date specified in the definitive documentation relating to such Debt, such Debt is so redeemed or prepaid within 90 days of such termination or such specified date, as the case may be). Acquisition-Related Incremental Term Loans means any Incremental Term Loans incurred for the purpose of financing a Limited Conditionality Acquisition. Additional Covenant shall mean each of the following provisions of each Senior Note Purchase Agreement as in effect on the Second Amendment Effective Date: (a) Section 6A(1) (Minimum Interest Coverage) (including, without limitation, any ratios set forth therein); (b) Section 6A(2) (Funded Debt to Consolidated Total Capitalization) (including, without limitation, any ratios set forth therein); (c) the definition of each defined term applicable to the calculation of the ratios contemplated by either of the foregoing provisions; and (d) the definition of “Material Subsidiary”. Adjusted Covenant Period has the meaning assigned to such term in Section 7.8. Administrative Agent means U.S. Bank (including its branches and affiliates) in its capacity as administrative agent for the Lenders hereunder, and any successor thereto in such capacity arising under Section 9.6. Administrative Agent’s Office means the address for payments to the Administrative Agent set forth on Schedule 11.2 or such other address as the Administrative Agent may from time to time specify.


 
3 Administrative Questionnaire means an Administrative Questionnaire in a form supplied by the Administrative Agent. Affected Financial Institution means (a) any EEA Financial Institution or (b) any UK Financial Institution. Affected Lender has the meaning assigned to such term in Section 3.7. Affiliate means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities or membership interests, by contract, or otherwise. Agent-Related Persons means the Administrative Agent, any successor to the Administrative Agent in such capacity, the Affiliates of the Administrative Agent, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. Aggregate Commitment means the aggregate amount of the Commitments, as such amount may be adjusted in accordance with the terms of this Agreement (including Sections 2.9 and 2.21). As of the Second Amendment Effective Date, the Aggregate Commitment is U.S.$500,000,000. Agreed Currencies means (i) U.S. Dollars, (ii) Euro and (iii) Canadian Dollars. Agreement means this Credit Agreement. Anti-Corruption Laws means all laws, rules, and regulations of any jurisdiction applicable to the Company or its Subsidiaries from time to time concerning or relating to bribery or corruption. Applicable Margin means the applicable percentage set forth in Schedule 1.1 opposite the Leverage Ratio as of the end of the immediately preceding fiscal quarter or fiscal year. Adjustments, if any, to the Applicable Margin shall be effective from and after the date that is five Business Days after the date on which the related Compliance Certificate for such fiscal quarter or fiscal year, as applicable, is scheduled to be delivered. For the avoidance of doubt, the Applicable Margin as in effect under this Agreement immediately prior to the Second Amendment Effective Date shall be applicable to all interest accruing prior to the Second Amendment Effective Date. Approved Fund means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. Assignment and Assumption means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by


 
4 Section 11.8), and accepted by the Administrative Agent, in substantially the form of Exhibit G or any other form approved by the Administrative Agent. Attorney Costs means and includes all reasonable attorneys’ fees and charges. Augmenting Lender has the meaning set forth in Section 2.21. Available Aggregate Commitment means, at any time, the Aggregate Commitment then in effect minus the Total Outstandings at such time. Available Tenor means, as of any date of determination and with respect to the then- current Benchmark, as applicable, any tenor for such Benchmark or payment period for interest calculated with reference to such Benchmark, as applicable, that is or may be used for determining the length of an Interest Period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to clause (v) of Section 3.5(b). Bail-In Action means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution. Bail-In Legislation means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings). Bank of America Fee Letter means that certain Fee Letter, dated March 11, 2021, by and among Bank of America, N.A., BofA Securities, Inc. and the Borrowers. Bankruptcy Plan means any plan of reorganization or plan of liquidation pursuant to any Debtor Relief Laws. Base Rate means, for any day, a rate per annum equal to the highest of (a) 0.0%, (b) the Federal Funds Rate in effect on such day plus 0.50%, (c) the Prime Rate in effect on such day and (d) the Eurocurrency Rate for a one-month Interest Period in effect on such day (or if such day is not a Business Day, the immediately preceding Business Day) for Dollars plus 1.00%; provided that the Eurocurrency Rate for such day shall be based on the rate reported by the applicable financial information service at approximately 11:00 a.m. London time on such day. Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Rate, or the Eurocurrency Rate shall be effective from the effective date of such change. If the Base Rate is being used when Eurocurrency Borrowings are unavailable pursuant to Section 3.5, then the Base Rate shall be the highest of clauses (a), (b) and (c) above, without reference to clause (d) above.


 
5 Base Rate Borrowing means a Borrowing of Base Rate Loans. Base Rate Loan means a U.S. Loan, a Dutch Loan denominated in U.S. Dollars, a Canadian Loan denominated in U.S. Dollars or a Swing Line Loan that bears interest based on the Base Rate. Benchmark means, initially, the Relevant Rate; provided that if a Benchmark Transition Event, a Term SOFR Transition Event, or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred with respect to the Relevant Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has become effective pursuant to Section 3.5(b). Benchmark Replacement means, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date; provided that, in the case of any Loan denominated in a Foreign Currency, “Benchmark Replacement” shall mean the alternative set forth in (3)(i) below: (1) the sum of: (a) Term SOFR and (b) the related Benchmark Replacement Adjustment; (2) the sum of: (a) Daily Simple SOFR and (b) the related Benchmark Replacement Adjustment; (3) (i) in the case of any Available Tenor other than in relation to a Swing Line Loan bearing interest at the Daily Eurodollar Rate, the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Company as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (I) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (II) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for syndicated credit facilities denominated in the applicable Agreed Currency at such time and (b) the related Benchmark Replacement Adjustment and (ii) in the case of any Available Tenor in relation to a Swing Line Loan bearing interest at the Daily Eurodollar Rate, a rate mutually agreed upon between the Company and the Swing Line Lender (it being understood and agreed that if such a rate is not mutually agreed upon between the Company and the Swing Line Lender in respect of such Available Tenor in relation to a Swing Line Loan bearing interest at the Daily Eurodollar Rate, such Swing Line Loan shall bear interest at the Alternate Base Rate plus the Applicable Margin); provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a screen or other information service commonly used in the banking industry for such purpose that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion and consistent with such selection generally under other substantially similar credit facilities for which it acts as the administrative agent; provided further that, solely with respect to a Loan denominated in U.S. Dollars, notwithstanding anything to the contrary in this Agreement or in any other


 
6 Loan Document, upon the occurrence of a Term SOFR Transition Event, and the delivery of a Term SOFR Notice, on the applicable Benchmark Replacement Date the “Benchmark Replacement” shall revert to and shall be deemed to be the sum of (a) Term SOFR and (b) the related Benchmark Replacement Adjustment, as set forth in clause (1) of this definition (subject to the first proviso above). If the Benchmark Replacement as determined pursuant to clause (1), (2) or (3) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents. Benchmark Replacement Adjustment means, with respect to any replacement of the then- current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement: (1) for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the first alternative set forth in the order below that can be determined reasonably and in good faith by the Administrative Agent: (a) the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that has been selected or recommended by the Relevant Governmental Body for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for the applicable Corresponding Tenor; (b) the spread adjustment (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that would apply to the fallback rate for a derivative transaction referencing the ISDA Definitions to be effective upon an index cessation event with respect to such Benchmark for the applicable Corresponding Tenor; and (2) for purposes of clause (3)(i) of the definition of “Benchmark Replacement,” the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Company for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for syndicated credit facilities denominated in the applicable Agreed Currency at such time; provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other information service commonly used in the banking industry for such purpose that publishes such Benchmark Replacement Adjustment from time to time as selected by the Administrative Agent in its reasonable discretion and consistent with such selection


 
7 generally under other substantially similar credit facilities for which it acts as the administrative agent. Benchmark Replacement Conforming Changes means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Borrowing,” the definition of “Eurocurrency Borrowing,” the definition of “CDOR Borrowing,” the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent reasonably and in good faith decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent in good faith decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines in good faith that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents). Benchmark Replacement Date means, with respect to any Benchmark, the earliest to occur of the following events with respect to such then-current Benchmark: (1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); (2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein; (3) in the case of a Term SOFR Transition Event, the date that is 30 days after the date a Term SOFR Notice is provided to the Lenders and the Company so long as the Administrative Agent has not received, by such time, written notice of objection to such Term SOFR Notice from the Company; or (4) in the case of an Early Opt-in Election, the sixth Business Day after the date notice of such Early Opt-in Election is provided to the Lenders (and the Company), so long as the Administrative Agent has not received, by 4:00 p.m. (Milwaukee time) on the fifth Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders. For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the


 
8 Reference Time for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof). Benchmark Transition Event means, with respect to any Benchmark, the occurrence of one or more of the following events with respect to such then-current Benchmark: (1) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely as of a specific date, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); (2) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the FRB, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely as of a specific date, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or (3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are no longer representative. For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof). Benchmark Unavailability Period means, with respect to any Benchmark, the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at such time, no Benchmark Replacement has replaced such then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.5(b) and (y) ending at the time that a Benchmark Replacement has replaced such then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.5(b).


 
9 Beneficial Ownership Certification means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation. Beneficial Ownership Regulation means 31 C.F.R. § 1010.230. Benefit Plan means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan.” BHC Act Affiliate of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. § 1841(k)) of such party. BMO Fee Letter means that certain Fee Letter, dated March 11, 2021, by and among BMO Harris Bank N.A. and the Borrowers. Borrower means each of the Company, the Canadian Borrower and the Dutch Borrower. Borrowing means (x) a borrowing hereunder consisting of Loans made to the same Borrower on the same day by the Lenders under Section 2.1 and (a) in the case of U.S. Loans, Dutch Loans or Canadian Loans, of the same Type, and (b) in the case of Eurocurrency Loans, having the same Interest Period or (y) a borrowing of a Swing Line Loan pursuant to Section 2.8, as the context may require. Borrowing Date means any date on which a Borrowing occurs under Section 2.3, 2.5 or 2.8. Business Day means any day other than a Saturday, Sunday or other day on which commercial banks in New York City, New York or Milwaukee, Wisconsin are authorized or required by law to close and (a) if the applicable Business Day relates to a Eurocurrency Loan, means such a day on which dealings are carried on in the London interbank eurocurrency market; and (b) in the case of payments and disbursements in Canadian Dollars, means such a day on which banks generally are open for commercial banking business in Toronto, Ontario, and commercial banks in London generally are open for commercial banking business in London. Canadian Borrower has the meaning assigned to such term in the preamble to this Agreement. Canadian Borrowing means a Borrowing of Canadian Loans. Canadian Cost of Funds Rate means, for any day, the rate of interest per annum as reasonably determined by the Administrative Agent at which overnight or weekend deposits in Canadian Dollars (or if the applicable amount due remains unpaid for more than three (3) Business Days, then for such other reasonable period of time as the Administrative Agent may reasonably elect) for delivery in immediately available and freely transferable funds would be offered by the Administrative Agent to major banks in the interbank market upon request of


 
10 such major banks for Canadian Dollars as determined above and in an amount comparable to the unpaid principal amount of the related Credit Extension, plus any taxes, levies, imposts, duties, deductions, charges or withholdings imposed upon, or charged to, the Administrative Agent by any relevant correspondent bank in respect of such amount in Canadian Dollars. Canadian Dollar Outstandings means, for any Lender, the aggregate principal amount of such Lender’s outstanding Canadian Loans denominated in Canadian Dollars. Canadian Dollars and C$ each mean lawful money of Canada. Canadian Loan means a loan to the Canadian Borrower denominated in Canadian Dollars or U.S. Dollars. Canadian Pension Plan means a “registered pension plan” as such term is defined in the ITA (that is not subject to ERISA), which the Canadian Borrower or any other Canadian Subsidiary of the Company establishes, sponsors, maintains or administers or into which the Canadian Borrower or any other Canadian Subsidiary of the Company makes or is obligated to make contributions at any time. Canadian Sublimit means an amount equal to U.S.$150,000,000, as such amount may be adjusted from time to time pursuant to Section 2.22. The Canadian Sublimit is part of, and not in addition to, the Aggregate Commitment. Capital Adequacy Regulation means (i) the risk-based capital guidelines in effect in the United States on the Second Amendment Effective Date, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States, including transition rules, and, in each case, any amendments to such regulations. Capital Lease means, at any time, subject to Section 1.3(c), a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. Capitalized Lease Obligations means, with respect to any Person, all outstanding obligations of such Person in respect of Capital Leases, taken at the capitalized amount thereof accounted for as indebtedness in accordance with GAAP. Cash Collateralize means to pledge and deposit with or deliver to the Administrative Agent, for its own benefit and for the benefit of the L/C Issuer and the Lenders, as collateral subject to a first priority, perfected security interest securing the Obligations, cash or deposit account balances, or, if the Administrative Agent and the L/C Issuer shall agree in their reasonable discretion, a standby letter of credit from a financial institution satisfactory to the Administrative Agent, in each case, in an amount equal to the then Effective Amount of all L/C Obligations or the obligations of a Deteriorating Lender under a Letter of Credit, as applicable, pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such term shall have a corresponding meaning. Cash Collateral in the form of cash or deposit account balances shall be maintained in interest-bearing blocked deposit accounts at U.S. Bank.


 
11 CDOR Borrowing means a Borrowing of Canadian Loans that are CDOR Rate Loans. CDOR Rate means, with respect to the relevant Interest Period, the greater of (a) zero percent (0.0%) and (b) the per annum rate equal to the arithmetic average of the annual yield rates applicable to Canadian Dollar bankers’ acceptances for such Interest Period (or if such Interest Period is not equal to a number of months, for a term equivalent to the number of months closest to such Interest Period) on the “CDOR Page” (or any display substituted therefor) of Reuters Monitor Money Rates Services (or, if such source is unavailable, such other page or commercially available source displaying Canadian interbank bid rates for Canadian dollar bankers’ acceptances as may be designated by the Administrative Agent from time to time in a manner consistent with its selection of such a replacement source generally under credit agreements for which it acts as administrative agent) at or about 10:00 a.m. (Milwaukee time) two (2) Business Days prior to the commencement of such Interest Period; provided, that if such Canadian Dollar CDOR rate is unavailable at any time pursuant to the foregoing methodology, the Administrative Agent may select, using its reasonable judgment in a manner consistent with its selection of such a replacement source generally under credit agreements for which it acts as administrative agent, an alternative published interest rate to determine such rate. CDOR Rate Loan means a Canadian Loan denominated in Canadian Dollars and bearing interest at a rate determined by reference to the CDOR Rate. Change of Control means any of the following events: (a) any Person or group (within the meaning of Rule 13d-5 of the SEC under the Exchange Act as in effect on the Second Amendment Effective Date, but excluding (i) any employee benefit plan of such Person or its Subsidiaries, and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan, and (ii) any Permitted Holders) shall become the Beneficial Owner (as defined in Rule 13d-3 of the SEC under the Exchange Act as in effect on the Second Amendment Effective Date) of 30% or more (by number of votes) of the Voting Stock; (b) a majority of the members of the Board of Directors of the Company shall cease to be Continuing Members (other than as a result of the death or disability of a Continuing Member so long as there has not been an opportunity to replace such Continuing Member); (c) at any time prior to termination of the Canadian Sublimit, the Company shall fail to beneficially own, directly or indirectly, all of the outstanding equity interests in the Canadian Borrower; or (d) at any time prior to termination of the Dutch Sublimit, the Company shall fail to beneficially own, directly or indirectly, all of the outstanding equity interests in the Dutch Borrower. Change of Law means the occurrence after the Second Amendment Effective Date (or, in the case of any Lender that becomes a Lender after the Second Amendment Effective Date, the occurrence after the date such Lender becomes a Lender) of any of the following: the adoption of any Law, any change in any Law or the application or requirements thereof (whether such change occurs in accordance with the terms of such Law as enacted, as a result of amendment or


 
12 otherwise), any change in the interpretation or administration of any Law by any Governmental Authority, or compliance by any Lender with any request or directive (whether or not having the force of law) of any Governmental Authority, provided that (a) notwithstanding anything herein to the contrary but subject to clause (b) below, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, regulations, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change of Law”, regardless of the date enacted, adopted or issued, and (b) notwithstanding anything herein to the contrary, “Change of Law” shall exclude any change of the type described above that is merely proposed and not binding. Code means the U.S. Internal Revenue Code of 1986. Commitment means, as to each Lender, its obligation to (a) make Loans to the Borrowers pursuant to Section 2.1, (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. Company has the meaning assigned to such term in the Preamble. Competitor means any competitor of the Company or any of its Subsidiaries that is in one or more of the same or similar lines of business as the Company or any of its Subsidiaries. Compliance Certificate means a certificate substantially in the form of Exhibit I. Connection Income Taxes means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes. Consolidated EBITDA means, for any period, for the Company and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for federal, state, local and foreign income taxes (including franchise taxes based upon income) payable by the Company and its Subsidiaries for such period, (iii) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (iv) other non-cash charges, losses and expenses and other non-cash items, (v) the amount of fees, costs and expenses incurred in connection with any acquisition, any disposition, any investment, any incurrence, issuance, repayment, amendment or modification of Debt (including make-whole amounts, prepayment premiums and similar amounts) or any issuance, redemption or other retirement of equity interests during such period, (vi) the amount of (1) any restructuring, impairment and/or settlement charges and expenses, (2) any casualty or condemnation event, (3) any pension buyout and any related losses,


 
13 charges, costs and expenses and (4) any losses, charges and expenses in respect of discontinued operations, in each case incurred during such period, (vii) the amount of any other non-recurring and/or unusual costs, expenses, losses, charges or similar items incurred during such period, up to an aggregate amount per four consecutive fiscal quarters equal to the greater of (A) U.S.$50,000,000 and (B) an amount equal to 10% of Consolidated EBITDA for such period (as calculated without giving effect to this clause (vii)), and (viii) with respect to each Acquisition, demonstrable cost savings and cost synergies (in each case, net of continued associated expenses) that, as of the date of calculation with respect to such period, are anticipated by the Company in good faith to be realized within 18 months following such Acquisition, net of the amount of any such cost savings and cost synergies otherwise included, or added back, pursuant to this definition, provided that (A) the amount added back under this clause (viii) with respect to any period may not exceed 10% of Consolidated EBITDA for such period (as calculated without giving effect to this clause (viii)), (B) such cost savings and cost synergies have been reasonably detailed by the Company in the applicable Compliance Certificate furnished by the Company pursuant to Section 6.2(a), and (C) if any cost savings or cost synergies included in any pro forma calculations based on the anticipation that such cost synergies or cost savings will be achieved within such 18-month period shall at any time cease to be reasonably anticipated by the Company to be so achieved, then on and after such time pro forma calculations required to be made hereunder shall not reflect such cost synergies or cost savings and minus (b) any cash payments made during such period in respect of the item described in clause (iv) above subsequent to the fiscal quarter in which the relevant non-cash charge, loss or expense or other non-cash item, as applicable, was incurred; provided, however, that pro forma credit shall be given for the Consolidated EBITDA of any Person (or identifiable business units or divisions) acquired during the applicable period as if owned on the first day of the applicable period; Persons (or identifiable business units or divisions) sold, transferred or otherwise disposed of during any period will be treated as if not owned during the entire applicable period. Consolidated Interest Charges means, for any period, the sum of (a) all interest expense of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and (b) to the extent not included in clause (a), the consolidated yield or discount accrued during such period on all Securitization Obligations. Consolidated Interest Coverage Ratio means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of the four prior fiscal quarters ending on such date to (b) Consolidated Interest Charges for such period, to the extent paid in cash and after giving effect to net receipts under interest rate hedging arrangements; provided, however that the Consolidated Interest Charges attributable to Persons (or identifiable business units or divisions) sold, transferred or otherwise disposed of during such period shall be excluded, and the Consolidated Interest Charges attributable to Persons (or identifiable business units or divisions) acquired during such period shall be included as if owned on the first day of such period. Consolidated Net Income means, for any period, for the Company and its Subsidiaries on a consolidated basis, the net income of the Company and its Subsidiaries (excluding gains and losses that, in each case, are unusual in nature and infrequently occurring under GAAP) for that period.


 
14 Consolidated Net Worth means the Company’s consolidated stockholders’ equity, including noncontrolling interests, but excluding (i) any accumulated other comprehensive income or loss and (ii) the non-cash effects of Accounting Standards Codification Topic 715, Compensation—Retirement Benefits (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect), arising from the termination of any pension plan or change in pension accounting method. Continuing Member means a member of the Board of Directors of the Company who (a) was a member of the Company’s Board of Directors on the Second Amendment Effective Date and has been such continuously thereafter, (b) became a member of such Board of Directors after the Second Amendment Effective Date and whose election or nomination for election was approved by a vote of the majority of the members of the Company’s Board of Directors who were then Continuing Members or by a nominating or similar committee of the Board of Directors by a vote of the majority of the members of such committee who were then Continuing Members, or (c) became a member of such Board of Directors after the Second Amendment Effective Date and whose election or nomination for election was approved by Permitted Holders. Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. Corresponding Tenor with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor. Conversion/Continuation Date means any date on which, under Section 2.4 or Section 2.6, a Borrower (a) converts Loans of one Type to the other Type or (b) continues as Eurocurrency Loans or CDOR Rate Loans, but with a new Interest Period, Eurocurrency Loans or CDOR Rate Loans having an Interest Period expiring on such date. Covered Entity means any of the following: (a) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (b) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (c) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). Covered Party has the meaning set forth in Section 11.22. Credit Extension means each of the following: (a) the making of any Loan and (b) an L/C Credit Extension.


 
15 CRR means regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012. Daily Eurodollar Loan means a Swing Line Loan that bears interest at the Daily Eurodollar Rate. Daily Eurodollar Rate means, with respect to a Swing Line Loan, the greater of (a) zero percent (0.0%) and (b) the applicable interest settlement rate for deposits in U.S. Dollars administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for one month appearing on the applicable Reuters screen (or on any successor or substitute page) as of 11:00 a.m. (London time) on a Business Day; provided that if the applicable Reuters screen (or any successor or substitute page) is not available at such time for any reason, the applicable Daily Eurodollar Rate for one month shall instead be the applicable interest settlement rate for deposits in U.S. Dollars administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for one month as reported by any other generally recognized financial information service reasonably selected by the Administrative Agent (in a manner consistent with its selection of such a replacement source generally under credit agreements for which it acts as administrative agent) as of 11:00 a.m. (London time) on a Business Day. For purposes of determining any interest rate hereunder or under any other Loan Document which is based on the Daily Eurodollar Rate, such interest rate shall change as and when the Daily Eurodollar Rate changes. Daily Simple SOFR means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Administrative Agent in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided, that if the Administrative Agent in good faith decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another comparable convention in its reasonable good faith discretion. Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money and all mandatory purchase, redemption or other retirement obligations of such Person in respect of its mandatorily redeemable preferred stock; (b) all obligations issued, undertaken or assumed by such Person as the deferred purchase price of property or services (other than (i) trade and similar accounts payable and accrued expenses, in each case arising in the ordinary course of business and, in the case of accounts payable, on ordinary terms, (ii) accrued pension cost, employee compensation and benefits and postretirement health care obligations arising in the ordinary course of business, and (iii) obligations in respect of customer advances); (c) all non-contingent reimbursement or payment obligations of such Person with respect to letters of credit, other than trade letters of credit; (d) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments; (e) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement (other than an operating lease), or incurred as financing, in either case with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (f) all Capitalized Lease Obligations of such Person; (g) all indebtedness of the types referred to in clauses (a) through (f)


 
16 above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt, provided that the amount of any such Debt shall be deemed to be the lesser of the face principal amount thereof and the fair market value of the property subject to such Lien; (h) all net Hedging Obligations of such Person; and (i) all Guaranty Obligations of such Person in respect of indebtedness or obligations of others of the type referred to in clauses (a) through (f) above; provided, however, that Debt shall not include (i) indebtedness owing to the Company by any Subsidiary of the Company or indebtedness owing to any Subsidiary of the Company by the Company or any other Subsidiary of the Company; (ii) performance bonds or performance guaranties (or bank guaranties or letters of credit in lieu thereof); (iii) earnouts and holdbacks in connection with acquisitions that are contingent on the performance of the business (but excluding, for the avoidance of doubt, any indebtedness described in clause (e) above); (iv) legally defeased, discharged and/or redeemed Debt; provided that funds in an amount equal to all such Debt (including interest and any other amounts required to be paid to the holders thereof in order to give effect to such defeasance, discharge and/or redemption) have been irrevocably deposited with a trustee or other comparable escrow agent for the benefit of the relevant holders of such Debt) and (v) interest, fees, make-whole amounts, premium, charges or expenses, if any, relating to the principal amount of Debt. The amount of Debt of the Company and its Subsidiaries shall be calculated without duplication of Guaranty Obligations of the Company or any of its Subsidiaries in respect thereof. Debtor Relief Laws means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, arrangement, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally including, without limitation, the Dutch Bankruptcy Code (Faillissementswet). Default Rate means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to the rate otherwise applicable to such Obligations plus 2% per annum; and (b) when used with respect to Letter of Credit Fees, a rate equal to the Letter of Credit Fee Rate plus 2% per annum, in all cases to the fullest extent permitted by applicable Law. Default Right has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. § 252.81, 47.2 or 382.1, as applicable. Defaulting Lender means any Lender that (a) has failed to fund any portion of the Loans or participations in L/C Obligations or Swing Line Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless such amount is the subject of a good faith dispute (specifically identified), (c) has notified the Borrower, the Administrative Agent or any other Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply or has failed to comply with its funding obligations under this


 
17 Agreement or under other agreements in which it commits or is obligated to extend credit, (d) has failed, within three Business Days after request by the Administrative Agent or the Company, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations to fund prospective Loans and participations in L/C Obligations or Swing Line Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (d) upon the Administrative Agent’s or the Company’s receipt of such certification in form and substance satisfactory to it, (e) has become or is insolvent or has become the subject of a bankruptcy or insolvency proceeding, or had had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or (f) has become the subject of a Bail-In Action. Departing Lender means each lender under the Existing Credit Agreement that executes and delivers to the Administrative Agent a Departing Lender Signature Page. Departing Lender Signature Page means each signature page to this Agreement on which it is indicated that the Departing Lender executing the same shall cease to be a party to the Existing Credit Agreement on the Restatement Signing Date. Deteriorating Lender means (a) any Lender that is a Defaulting Lender or (b) any Lender as to which (i) the L/C Issuer has a good faith belief that such Lender has defaulted in fulfilling its obligations under other syndicated credit facilities other than as a result of a bona fide dispute or (ii) an entity that controls such Lender becomes subject to (a) a receivership, bankruptcy or other similar proceeding or (b) a Bail-In Action. For the purpose of this definition, “control” of any Lender shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. Disposition has the meaning assigned to such term in Section 7.3. Disqualified Institution means, on any date, (a) any Person designated by the Company as a “Disqualified Institution” by written notice delivered to the Administrative Agent on or prior to the Second Amendment Effective Date and (b) any other Person that is a Competitor of the Company or any of its Subsidiaries, which Person has been designated by the Company as a “Disqualified Institution” by written notice to the Administrative Agent and the Lenders (including by posting such notice to the Lenders by electronic communication in accordance with Section 11.2(b)) not less than five (5) Business Days prior to such date; provided that (i) “Disqualified Institutions” shall exclude any Person that the Company has designated as no longer being a “Disqualified Institution” by written notice delivered to the Administrative Agent from time to time, and (ii) no supplement delivered pursuant to clause (b) above shall apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in any Loan (but solely with respect to such Loan) in accordance with this Agreement. Disregarded Entity means an entity that, pursuant to Treas. Reg. § 301.7701-2(c)(2), is disregarded for U.S. federal income tax purposes as an entity separate from its owner.


 
18 Dollar Equivalent means, at any time, (a) as to any amount denominated in U.S. Dollars, the amount thereof at such time, and (b) as to any amount denominated in Canadian Dollars or Euros, as applicable, the equivalent amount in U.S. Dollars as determined by the Administrative Agent at such time on the basis of the Spot Rate for the purchase of U.S. Dollars with Canadian Dollars or Euros, as applicable. Domestic Subsidiary means any Subsidiary other than a Foreign Subsidiary. DQ List has the meaning assigned to such term in Section 11.8(l). Dutch Borrower has the meaning assigned to such term in the preamble to this Agreement. Dutch Borrowing means a Borrowing of Dutch Loans. Dutch Loan means a Loan to the Dutch Borrower denominated in U.S. Dollars or Euros. Dutch Sublimit means an amount equal to U.S.$150,000,000, as such amount may be adjusted from time to time pursuant to Section 2.22. The Dutch Sublimit is part of, and not in addition to, the Aggregate Commitment. E-SIGN means the Federal Electronic Signatures in Global and National Commerce Act, as amended from time to time, and any successor statute, and any regulations promulgated thereunder from time to time. Early Opt-in Election means: (a) in the case of Loans denominated in U.S. Dollars, the occurrence of: (1) a notification by the Administrative Agent to each of the other parties hereto that at least five currently outstanding U.S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as the then-current benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and (2) the joint election by the Administrative Agent and the Company to trigger a fallback from the Eurocurrency Rate and the provision by the Administrative Agent of written notice of such election to the Lenders; and (b) in the case of Loans denominated in any Foreign Currency, the occurrence of: (1) (i) a determination by the Administrative Agent or (ii) a notification by the Required Lenders to the Administrative Agent (with a copy to the Company) that the Required Lenders have determined that syndicated credit facilities denominated in the applicable Foreign Currency being executed at such


 
19 time, or that include language similar to that contained in Section 3.5 are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the Relevant Rate, and (2) (i) the joint election by the Administrative Agent and the Company or (ii) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Administrative Agent of written notice of such election to the Company and the Lenders or by the Required Lenders of written notice of such election to the Administrative Agent and the Company. ECSA means the Electronic Commerce Security Act as in effect in the State of Illinois, as amended from time to time, and any successor statute, and any regulations promulgated thereunder from time to time. EEA Financial Institution means (a) any credit institution or investment firm established in any EEA Member Country that is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country that is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country that is a subsidiary of an institution described in clause (a) or (b) of this definition and is subject to consolidated supervision with its parent. EEA Member Country means any of the member states of the European Union, Iceland, Liechtenstein, and Norway. EEA Resolution Authority means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution. Effective Amount means, with respect to any outstanding L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any issuance or amendment of a Letter of Credit occurring on such date, any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursement of outstanding unpaid drawings under any Letter of Credit or any reduction in the maximum amount available for drawing under any Letter of Credit taking effect on such date. Effective Date means November 12, 2010, to the extent used in any Loan Documents. Eligible Assignee means a Person that is (a) a Lender, an Affiliate of a Lender, an Approved Fund, or any other Person (other than a natural person or holding company, investment vehicle or trust for, or owned and operated for the benefit of, a natural Person) approved by (i) the Administrative Agent, the L/C Issuer and the Swing Line Lender and (ii) unless an Event of Default has occurred and is continuing, the Company (such approval not to be unreasonably withheld or delayed, provided that the Company shall be deemed to have consented to such Person unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof), and (b) (i) a commercial bank, savings and loan association or savings bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least


 
20 U.S.$500,000,000, (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “OECD”), or a political subdivision of any such country, and having a combined capital and surplus of at least U.S.$500,000,000; provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD, (iii) a finance company, insurance company or other financial institution that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of U.S.$500,000,000, or (iv) a Person that is primarily engaged in the business of commercial lending and that is (x) a Subsidiary of a Lender, (y) a Subsidiary of a Person of which a Lender is a Subsidiary, or (z) a Person of which a Lender is a Subsidiary; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include (1) the Company or any of the Company’s Affiliates or Subsidiaries or (2) any Defaulting Lender. For the avoidance of doubt, any Disqualified Institution shall be subject to the provisions of Section 11.8 relating to Disqualified Institutions. Environmental Claims means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. Environmental Laws means all federal (United States of America and Canada), state, provincial, district, local, municipal and foreign laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental and land use matters. ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended. ERISA Affiliate means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a substantial cessation of operations which is treated as such a withdrawal; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to terminate a Pension Plan that has any Unfunded Pension Liability, the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA, the receipt by the Company or any ERISA Affiliate of notice of termination of a Multiemployer Plan under Section 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate or appoint a trustee to administer a Pension Plan or, to the knowledge of the Company or any ERISA Affiliate, a Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or, to the knowledge of the Company or any ERISA Affiliate, any Multiemployer Plan; or (f) the


 
21 imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate. EU means the European Union. EU Bail-In Legislation Schedule means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time. Euro or EUR means the single currency of the participating member states of the EU. Euro Outstandings means, for any Lender at any time, the aggregate principal amount of such Lender’s outstanding Dutch Loans denominated in Euros. Eurocurrency Borrowing means a Borrowing of Eurocurrency Loans. Eurocurrency Loan means a U.S. Loan, a Dutch Loan or a Canadian Loan denominated in U.S. Dollars that bears interest by reference to the Eurocurrency Rate (other than a Base Rate Loan for which interest is determined by reference to the Eurocurrency Rate). Eurocurrency Rate means, for the relevant Interest Period, the greater of (a) zero percent (0.0%) and (b) the applicable interest settlement rate for deposits in U.S. Dollars or Euros, as applicable, administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) appearing on the applicable Reuters screen (or on any successor or substitute page) as of 11:00 a.m. (London time) on the Quotation Date for such Interest Period, and having a maturity equal to such Interest Period, provided that, if the applicable Reuters screen (or any successor or substitute page) is not available at such time for any reason, the applicable Eurocurrency Rate for the relevant Interest Period shall instead be the applicable interest settlement rate for deposits in U.S. Dollars or Euros, as applicable, administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) as reported by any other generally recognized financial information service reasonably selected by the Administrative Agent (in a manner consistent with its selection of such a replacement source generally under credit agreements for which it acts as administrative agent) as of 11:00 a.m. (London time) on the Quotation Date for such Interest Period, and having a maturity equal to such Interest Period. Event of Default has the meaning assigned to such term in Section 8.1. Exchange Act means the Securities Exchange Act of 1934. Excluded Taxes means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender with respect to a Loan or Commitment extended to a U.S. Borrower, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment


 
22 pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Company under Section 3.7) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 3.1, amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.1(g) and (d) any U.S. federal withholding Taxes imposed under FATCA. Existing Credit Agreement has the meaning assigned to such term in the recitals to this Agreement. Existing Loan shall mean each “Loan” under and as defined in the Existing Credit Agreement outstanding immediately prior to the Restatement Signing Date. FATCA means Sections 1471 through 1474 of the Code, as of the Second Amendment Effective Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities entered into in connection with the implementation of the foregoing. Federal Funds Rate means, for any day, the greater of (a) zero percent (0.0%) and (b) the rate per annum calculated by the Federal Reserve Bank of New York based on such day’s federal funds transactions by depository institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 9:00 a.m. (Milwaukee time) on such day on such transactions received by the Administrative Agent from three (3) federal funds brokers of recognized standing selected by the Administrative Agent in its reasonable discretion. First Amendment Effective Date means December 15, 2016. First Rate has the meaning assigned to such term in Section 2.13(j). Floor means 0%. Foreign Currencies means (i) Euro and (ii) Canadian Dollars. Foreign Currency Equivalent means, at any time, with respect to any Foreign Currency, as to any amount denominated in U.S. Dollars, the equivalent amount in such Foreign Currency as determined by the Administrative Agent at such time on the basis of the Spot Rate for the purchase of such Foreign Currency with U.S. Dollars. Foreign Lender means (a) if the applicable Borrower is a U.S. Person, (i) a Lender that is neither a Disregarded Entity nor a U.S. Person, and (ii) a Lender that is a Disregarded Entity and that is treated for U.S. federal income tax purposes as having as its sole owner a Person that is


 
23 not a U.S. Person, and (b) if the applicable Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the applicable Borrower is resident for tax purposes. Foreign Subsidiary means any Subsidiary that (i) is organized under the laws of a jurisdiction other than the United States or a State thereof and (ii) does substantially all of its business outside of the United States. FRB means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. Fronting Exposure means, at any time there is a Defaulting Lender, (a) with respect to the L/C Issuer, such Defaulting Lender’s Total Pro Rata Share of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Total Pro Rata Share of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof. Fund means any Person (other than a natural person or holding company, investment vehicle or trust for, or owned and operated for the benefit of, a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. Funded Debt means, at any time, the sum (determined on a consolidated basis and without duplication) of the principal amount of (i) all Debt of the Company and its Subsidiaries of the types described in clauses (a), (b), (d), (e), (f) and (g) of the definition of Debt, (ii) all non- contingent reimbursement obligations of the Company and its Subsidiaries with respect to letters of credit (other than trade letters of credit) issued for the account of the Company or any Subsidiary to support, and all Guaranty Obligations of the Company and its Subsidiaries in respect of, Funded Debt of any Person other than the Company or a Subsidiary and (iii) to the extent not included in clause (i) above, all Securitization Obligations of the Company and its Subsidiaries. Funded Net Debt means, at any time, Funded Debt of the Company and its Subsidiaries, minus (x) 100% of domestic cash and cash equivalents and (y) 100% of foreign cash and cash equivalents that, in the case of this clause (y), are unrestricted, unencumbered (other than by any Liens contemplated by clause (i) below) and freely transferable to the United States (it being understood and agreed that the transfer of cash and cash equivalents being subject to (i) any procedures or limitations which are solely within the control of the Company or the applicable Subsidiary, (ii) any approval, filing, consent or the like of any third party or Governmental Authority (A) that is merely of a routine or administrative nature, (B) that is routinely and ordinarily provided or accepted by such third party or Governmental Authority in the ordinary course and (C) the most recent of which, at the time of determination, has not been denied or rejected by such third party or Governmental Authority and/or (iii) the imposition of any nominal governmental stamp, documentary or similar nominal tax, charge or similar levy, in each case,


 
24 shall not cause such cash and cash equivalents not to be “unrestricted, unencumbered and freely transferable” within the meaning of the foregoing), in each case, to the extent that such cash and cash equivalents (i) are not subject to any Lien in favor of any creditor (other than any Lien of the type contemplated by Section 7.1(b) or Section 7.1(h)) and (ii) exceed, in the aggregate after giving effect to clause (i), U.S.$25,000,000. GAAP means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. Governmental Authority means any applicable nation or government, any state, provincial or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory, taxing or administrative functions of or pertaining to government, in each case having or purporting to have jurisdiction in the relevant circumstances (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting generally applicable financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing). Guaranty means that certain Guaranty, dated as of November 12, 2010 (as amended, supplemented and otherwise modified from time to time) by and among the “Guarantors” party thereto and Wells Fargo Bank, National Association, as administrative agent. For the avoidance of doubt, the Guaranty is not in effect as of the Second Amendment Effective Date. Guaranty Obligation means, as to any Person (without duplication), any direct or indirect liability of such Person, with or without recourse, with respect to any Debt, lease, letter of credit or other obligation (the “primary obligations”) of another Person (the “primary obligor”), including any obligation of such Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof. The amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof and, in the case of a Guaranty Obligation of the type described in clause (iii) above, shall be net of the value of the property, securities or services purchased, in each case, as determined by the guarantor in good faith; provided that if any Guaranty Obligation (a) is limited to an amount less than the obligations guaranteed or supported, the amount of the such Guaranty Obligation shall


 
25 be equal to the lesser of the amount determined pursuant to the initial clause of this sentence and the amount to which such Guaranty Obligation is so limited; or (b) is limited to recourse against a particular asset or assets of such Person, the amount of such Guaranty Obligation shall be equal to the lesser of the amount determined pursuant to the initial clause of this sentence and the fair market value of such asset or assets at the date for determination of the amount of such Guaranty Obligation. Hedging Obligations means, with respect to any Person, all liabilities of such Person under interest rate, currency and commodity swap agreements, cap agreements and collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates, currency exchange rates or commodity prices. Increasing Lender has the meaning set forth in Section 2.21. Incremental Term Loan has the meaning set forth in Section 2.21. Incremental Term Loan Amendment has the meaning set forth in Section 2.21. Indemnified Liabilities has the meaning assigned to such term in Section 11.5. Indemnified Person has the meaning assigned to such term in Section 11.5. Indemnified Taxes means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Borrower under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes. Independent Auditor has the meaning assigned to such term in subsection 6.1(a). Insolvency Proceeding means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, arrangement (including the arrangement provisions of corporate statutes), dissolution, winding-up or relief of debtors or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, undertaken under federal (United States of America or Canada), state, provincial or foreign law, including the U.S. Bankruptcy Code and the Dutch Bankruptcy Code (Faillissementswet). Interest Payment Date means, as to any Base Rate Loan, the last Business Day of each calendar quarter, and as to any Eurocurrency Loan or CDOR Rate Loan, the last day of each Interest Period applicable to such Loan, provided that if any Interest Period for a Eurocurrency Loan or CDOR Rate Loan exceeds three months, each three month anniversary of the beginning of such Interest Period shall also be an Interest Payment Date. Interest Period means, as to any Eurocurrency Loan or CDOR Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which such Loan is converted into or continued as a Eurocurrency Loan or continued as a CDOR Rate Loan, as applicable, and ending on the date one week (with respect to Eurocurrency Loans


 
26 only) or one, three or six months thereafter (or such other period as may be approved by all Lenders) as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation, as the case may be; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period (other than an Interest Period with a duration of less than one month) that commences on the last Business Day of a calendar month or that begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period shall extend beyond the Termination Date. IRS means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. ISDA Definitions means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto. ISP means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance). Issuer Documents means with respect to any Letter of Credit, the Letter Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Company (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of Credit. ITA means the Income Tax Act (Canada). Joint Lead Arrangers means, collectively, U.S. Bank National Association, Wells Fargo Securities, LLC, BofA Securities, Inc., and BMO Harris Bank N.A. Laws means, collectively, all international, foreign, federal (United States of America, Canada and the Netherlands), state, provincial and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.


 
27 L/C Advance means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Total Pro Rata Share. L/C Application means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer, with such modifications as the Company and the L/C Issuer may reasonably approve. L/C Borrowing means an extension of credit resulting from a drawing under any Letter of Credit that has not been reimbursed on the date required pursuant to Section 2.7.3(a) or refinanced as a Borrowing of U.S. Loans. L/C Credit Extension means, with respect to any Letter of Credit, the issuance thereof, the extension of the expiry date thereof or the increase of the amount thereof. L/C Issuer means U.S. Bank in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder. L/C Obligations means, as at any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn. Lender has the meaning specified in the preamble hereto and includes each Lender designated as a Lender on its signature page hereto, each Person that becomes a Lender pursuant to Section 2.21 and the permitted successors and assigns of any of the foregoing, and, as the context requires, includes the L/C Issuer and the Swing Line Lender. Lending Office means, as to any Lender, the office(s), branch, Affiliate or Subsidiary of such Lender specified as its “Lending Office” or “Domestic Lending Office” or “Eurocurrency Lending Office”, as the case may be, in its Administrative Questionnaire, or such other office(s), branch, Affiliate or Subsidiary as such Lender may from time to time notify the Company and the Administrative Agent. Letter of Credit means any standby letter of credit issued hereunder. Letter of Credit Expiration Date means the day that is seven days prior to the Termination Date then in effect (or, if such day is not a Business Day, the next preceding Business Day). Letter of Credit Fee has the meaning specified in subsection 2.7.9. Letter of Credit Fee Rate means, at any time, the Applicable Margin for Eurocurrency Loans. Letter of Credit Sublimit means an amount equal to U.S.$25,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitment.


 
28 Leverage Ratio means, as of the end of any fiscal quarter or fiscal year, the ratio of (a) Funded Net Debt to (b) the sum of Funded Net Debt plus Consolidated Net Worth. LIBOR means the London interbank offered rate. Lien means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment for security, charge or deposit arrangement intended for security purposes, encumbrance, lien (statutory or other) or other similar arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement), the interest of a lessor under a capital lease, or any financing lease having substantially the same economic effect as any of the foregoing, but not including the interest of a lessor under an operating lease. Limited Conditionality Acquisition means an acquisition for which the Company has determined, in good faith, that limited conditionality is reasonably necessary. Limited Conditionality Acquisition Agreement means the definitive acquisition documentation in respect of a Limited Conditionality Acquisition. Loan means an extension of credit by a Lender to a Borrower under Section 2 in the form of a U.S. Loan, Dutch Loan, Canadian Loan or Swing Line Loan. Loan Documents means this Agreement, each Note, each Issuer Document, the Bank of America Fee Letter, the Wells Fargo Fee Letter, the U.S. Bank Fee Letter and the BMO Fee Letter. Margin Stock means “margin stock” as such term is defined in Regulation T, U or X of the FRB. Material Acquisition means an Acquisition with respect to which the aggregate consideration paid or to be paid (including liabilities to be assumed as part of the purchase consideration) is equal to or greater than U.S.$250,000,000. Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the operations, business, financial condition, assets or liabilities of the Company and its Subsidiaries taken as a whole, excluding changes and effects in connection with specific events (and not general economic or industry conditions) applicable to the Company and/or its Subsidiaries as disclosed in any Annual Report on Form 10-K, Quarterly Report on Form 10-Q or Current Report on Form 8-K filed with or furnished to the SEC, in each case prior to the Second Amendment Effective Date; or (b) a material impairment of the ability of a Borrower to perform its obligations hereunder. Material Financial Obligations means Debt (other than (i) Hedging Obligations and (ii) Debt, in each case, of the Company to any Material Subsidiary or of any Material Subsidiary to the Company or any other Material Subsidiary) or Guaranty Obligations of the Company or any Material Subsidiary (other than Guaranty Obligations of the Company with respect to the obligations of any Material Subsidiary or of any Material Subsidiary with respect to the obligations of the Company or any other Material Subsidiary) in an aggregate principal amount


 
29 (including undrawn committed or available amounts), or Hedging Obligations (based upon the applicable termination value) or Securitization Obligations of the Company or any Material Subsidiary in an aggregate amount, equal to U.S.$30,000,000 or more. Material Subsidiary means, at any time, (i) while the Canadian Sublimit is in effect or any Loan is outstanding to the Canadian Borrower, the Canadian Borrower, (ii) while the Dutch Sublimit is in effect or any Loan is outstanding to the Dutch Borrower, the Dutch Borrower and (iii) any other Subsidiary of the Company (other than any bankruptcy-remote special purpose financing entity) that has a Threshold Percentage (as defined below) or more of the Company’s consolidated total assets (after elimination of intercompany assets) at such time or the Company’s consolidated revenues (after the elimination of intercompany revenues) at such time. For purposes of the foregoing, “Threshold Percentage” means 10%; provided that the Company may at any time permanently reduce the Threshold Percentage by written notice to the Administrative Agent setting forth the new Threshold Percentage. Maximum Rate has the meaning assigned to such term in Section 2.13(h). Minimum Collateral Amount means, with respect to a Defaulting Lender, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to 103% of the Fronting Exposure of the L/C Issuer with respect to such Defaulting Lender for all Letters of Credit issued and outstanding at such time and (b) otherwise, an amount determined by the Administrative Agent and the L/C Issuer in their sole discretion. Multiemployer Plan means a “multiemployer plan”, within the meaning of Section 4001(a)(3) of ERISA, with respect to which the Company or any ERISA Affiliate may have any liability. Non-Consenting Lender has the meaning assigned to such term in Section 11.1. Non-Defaulting Lender means, at any time, each Lender that is not a Defaulting Lender at such time. Non-Public Lender means: (i) until the publication of an interpretation of “public” as referred to in the CRR by the relevant competent authority/ies: an entity which (x) assumes existing rights and/or obligations vis-à-vis a Dutch Borrower organized under the laws of the Netherlands, the value of which is at least EUR100,000 (or its equivalent in another currency), (y) provides repayable funds for an initial amount of at least EUR100,000 (or its equivalent in another currency) or (z) otherwise qualifies as not being part of the ‘public’; and (ii) as soon as the interpretation of the term “public” as referred to in the CRR has been published by the relevant authority/ies: an entity which is not considered to be part of the ‘public’ on the basis of such interpretation. Note means a promissory note executed by a Borrower in favor of a Lender pursuant to subsection 2.2(b), in substantially the form of Exhibit H. Notice of Borrowing means a notice in substantially the form of Exhibit A. Notice of Conversion/Continuation means a notice in substantially the form of Exhibit B.


 
30 Obligations means, with respect to a Borrower, all advances, debts, liabilities, obligations, covenants and duties arising under this Agreement or any other Loan Document owing by such Borrower to any Lender, the Administrative Agent or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, or now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. OFAC means the Office of Foreign Assets Control of the U.S. Department of Treasury. Organization Documents means (i) for any corporation, the certificate of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, any unanimous shareholders’ agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation, (ii) for any partnership or joint venture, the partnership or joint venture agreement and any other organizational document of such entity, (iii) for any limited liability company, the certificate or articles of organization, the operating agreement and any other organizational document of such limited liability company, (iv) for any trust, the declaration of trust, the trust agreement and any other organizational document of such trust and (v) for any other entity, the document or agreement pursuant to which such entity was formed and any other organizational document of such entity. Other Connection Taxes means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document). Other Taxes means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are (a) Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.7) and/or (b) Excluded Taxes. Participant has the meaning assigned to such term in subsection 11.8(d). Participant Register has the meaning assigned to such term in subsection 11.8(d). Patriot Act has the meaning assigned to such term in Section 11.7. PBGC means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA.


 
31 Pension Plan means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA with respect to which the Company or any ERISA Affiliate may have any liability but not including any Multiemployer Plan. Permitted Holders means lineal descendants (by blood or adoption) of L. R. Smith, the respective current or former spouses of such descendants, trusts (including voting trusts) primarily for the benefit of any one or more of the foregoing (whether or not also for the benefit of other persons) or controlled by any one or more of the foregoing, trustees of such trusts in their capacities as such trustees, custodians for any such descendants or any corporation, limited liability company or other entity controlled by (within the meaning of Rule 12b-2 of the SEC under the Exchange Act as in effect on the date hereof) any one or more of the foregoing. Without limitation, a trust will be deemed controlled by one or more of the foregoing so long as trustees who are not one or more of the foregoing cannot take action without the assent of a trustee or trustees who are one or more of the foregoing. Person means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. Plan means an employee benefit plan (as defined in Section 3(3) of ERISA) with respect to which the Company may have any liability. Platform has the meaning assigned to such term in Section 11.2(b). Prime Rate means a rate per annum equal to the prime rate of interest announced from time to time by U.S. Bank or its parent (which is not necessarily the lowest rate charged to any customer); each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. PTE means a prohibited transaction class exemption issued by the U.S. Department of Labor, as amended from time to time. QFC has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. § 5390(c)(8)(D). QFC Credit Support has the meaning set forth in Section 11.22. Quotation Date means, in relation to any Interest Period for which an interest rate is to be determined, (a) if the related Loan is denominated in U.S. Dollars, two (2) Business Days before the first day of that period and (b) if the related Loan is denominated in Euro, two (2) TARGET Days and two (2) London Business Days (to the extent the two are not the same) before the first day of such period. Recipient means (a) the Administrative Agent, (b) any Lender, (c) the Swing Line Lender or (d) the L/C Issuer, as applicable. Reference Time with respect to any setting of the then-current Benchmark means (1) if such Benchmark is the Eurocurrency Rate, 11:00 a.m. (London time) on the day that is two


 
32 London banking days preceding the date of such setting, and (2) if such Benchmark is not the Eurocurrency Rate, the time determined by the Administrative Agent in its reasonable good faith discretion. Related Parties means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, members, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates. Relevant Governmental Body means (i) with respect to a Benchmark Replacement in respect of Loans denominated in U.S. Dollars, the FRB or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the FRB or the Federal Reserve Bank of New York, or any successor thereto and (ii) with respect to a Benchmark Replacement in respect of Loans denominated in any Foreign Currency, (a) the central bank for the currency in which such Benchmark Replacement is denominated or any central bank or other supervisor which is responsible for supervising either (1) such Benchmark Replacement or (2) the administrator of such Benchmark Replacement or (b) any working group or committee officially endorsed or convened by (1) the central bank for the currency in which such Benchmark Replacement is denominated, (2) any central bank or other supervisor that is responsible for supervising either (A) such Benchmark Replacement or (B) the administrator of such Benchmark Replacement, (3) a group of those central banks or other supervisors or (4) the Financial Stability Board or any part thereof. Relevant Rate means (i) with respect to any Eurocurrency Borrowing, the Eurocurrency Rate, (ii) with respect to any CDOR Borrowing, the CDOR Rate, or (iii) with respect to any Daily Eurodollar Loan, the Daily Eurodollar Rate, as applicable. Replacement Lender has the meaning assigned to such term in Section 3.7. Reportable Event means any of the events set forth in Section 4043 of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. Required Lenders means, as of any date of determination, Lenders that have Total Pro Rata Shares aggregating more than 50%; provided that the Total Pro Rata Share of any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders; provided, further that, the amount of any participation in any Swing Line Loan and Unreimbursed Amounts that such Defaulting Lender has failed to fund that have not been reallocated to and funded by another Lender shall be deemed to be held by the Lender that is the Swing Line Lender or L/C Issuer, as the case may be, in making such determination. Requirement of Law means, as to any Person, any law (statutory or common and including, without limitation, the Dutch Works Council Act (Wet op de Ondernemingsraden)), treaty, rule or regulation or determination of an arbitrator (under binding arbitration) or of a Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. Removal Effective Date has the meaning assigned to such term in Section 9.6(b).


 
33 Resignation Effective Date has the meaning assigned to such term in Section 9.6(a). Resolution Authority means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority. Responsible Officer means (i) the chief executive officer, the president, the chief financial officer, the secretary, any assistant secretary, the treasurer or any assistant treasurer of the Company, or any other officer of the Company having substantially the same authority and responsibility and (ii) with respect to the Dutch Borrower, any director of the Dutch Borrower authorized to represent the Dutch Borrower or any other Person with express irrevocable authority to act on behalf of the Dutch Borrower designated as such by the board of directors of the Dutch Borrower. Restatement Effective Date means December 12, 2012. Restatement Signing Date means December 12, 2012. Reuters means Thomson Reuters Corp., Refinitiv or any successor thereto. Sanctioned Country means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (as of the Second Amendment Effective Date, Crimea, Cuba, Iran, North Korea and Syria). Sanctioned Person means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, Department of Foreign Affairs and International Trade Canada, the Department of Public Safety Canada, the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom, or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country in violation of Sanctions or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b). Sanctions means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, (b) the Canadian Government, including those administered by the Department of Foreign Affairs and International Trade Canada or the Department of Public Safety Canada or (c) the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom, or other relevant sanctions authority. SEC means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. Second Amendment Effective Date means April 1, 2021. Securitization Obligations means, with respect to any Securitization Transaction, the aggregate investment or claim held at any time by all non-Affiliate purchasers, assignees or transferees of (or of interests in) or holders of obligations that are supported or secured by


 
34 accounts receivable, lease receivables and other rights to payment in connection with such Securitization Transaction, but excluding any equity investment or subordinated debt held by the Company or any Subsidiary. Securitization Transaction means any sale, assignment or other transfer by the Company or any Subsidiary of accounts receivable, lease receivables or other payment obligations owing to the Company or such Subsidiary or any interest in any of the foregoing, together in each case with any collections and other proceeds thereof, any collection or deposit accounts related thereto, and any collateral, guaranties or other property or claims in favor of the Company or such Subsidiary supporting or securing payment by the obligor thereon of, or otherwise related to, any such receivables or other payment obligations. Senior Note Purchase Agreement means (a) that certain Second Amended and Restated Master Senior Note and Private Shelf Agreement dated as of December 20, 2013, among the Company and the note purchasers party thereto, and (b) that certain Second Amended and Restated Master Note and Medium Term Note Agreement dated as of March 6, 2014, among the Company and the note purchasers party thereto, in each case, as amended, amended and restated, supplemented and/or modified from time to time in accordance with the terms thereof. Senior Note Purchase Documents means the Senior Note Purchase Agreement and all agreements and documents executed in connection therewith at any time and as amended or modified from time to time. SOFR means, with respect to any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR Administrator’s Website at approximately 7:00 a.m. (Milwaukee time), or in the case of an update to such rate by the SOFR Administrator, at approximately 1:30 p.m. (Milwaukee time) on the immediately succeeding Business Day. SOFR Administrator means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate). SOFR Administrator’s Website means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time. SPC has the meaning set forth in Section 11.8. Specified Quarter means a fiscal quarter of the Company during which a Material Acquisition has been consummated. Spot Rate means, on any date, the rate at which Canadian Dollars or Euros may be exchanged into U.S. Dollars, or U.S. Dollars may be exchanged into Canadian Dollars or Euros, as applicable, at the time of determination on such day on the Reuters WRLD Page for such currency. In the event that such rate does not appear on any Reuters WRLD Page, the Spot Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Company, or, in the absence of such an agreement, such Spot Rate shall instead be the arithmetic average of the spot rates of


 
35 exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about such time as the Administrative Agent shall elect in its reasonable discretion after determining that such rates shall be the basis for determining the Spot Rate, on such date for the purchase of U.S. Dollars for delivery two (2) Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be presumed correct absent demonstrable error. Subsidiary of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by such Person, or one or more of the Subsidiaries of such Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a “Subsidiary” refer to a Subsidiary of the Company. Supported QFC has the meaning set forth in Section 11.22. Swing Line Borrowing Notice has the meaning set forth in Section 2.8. Swing Line Lender means U.S. Bank or such other Lender which may succeed to its rights and obligations as Swing Line Lender pursuant to the terms of this Agreement. Swing Line Loan means an extension of credit by the Swing Line Lender to the Company under Section 2.8. Swing Line Sublimit means the maximum principal amount of Swing Line Loans the Swing Line Lender may have outstanding to the Company at any one time, which, as of the Second Amendment Effective Date, is U.S.$50,000,000. The Swing Line Sublimit is part of, and not in addition to, the Aggregate Commitment. TARGET means Trans-European Automated Real-time Gross Settlement Express Transfer payment system. TARGET Day means any day on which TARGET is open for settlement of payments in Euro. Taxes means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. Term SOFR means, for the applicable Corresponding Tenor as of the applicable Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body. Term SOFR Notice means a notification by the Administrative Agent to the Lenders and the Company of the occurrence of a Term SOFR Transition Event.


 
36 Term SOFR Transition Event means the determination by the Administrative Agent at any time, in its sole good faith discretion, that (a) Term SOFR has been recommended for use by the Relevant Governmental Body, (b) the administration of Term SOFR is administratively feasible for the Administrative Agent in accordance with the convention for this rate selected or recommended by the Relevant Governmental Body for determining “Term SOFR” for syndicated business loans, and (c) a Benchmark Transition Event or an Early Opt-in Election, as applicable, has previously occurred resulting in a Benchmark Replacement in accordance with Section 3.5(b) that is not Term SOFR. Termination Date means the earlier to occur of (a) April 1, 2026; provided, however, if such date is not a Business Day, the Termination Date under this clause (a) shall be the next preceding Business Day, or (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. Total Canadian Dollar Outstandings means the combined Canadian Dollar Outstandings of all Lenders. Total Euro Outstandings means the combined Euro Outstandings of all Lenders. Total Outstandings means the sum of the Dollar Equivalent of the Total Canadian Dollar Outstandings plus the Total U.S. Dollar Outstandings plus the Dollar Equivalent of the Total Euro Outstandings. Total Pro Rata Share means, for any Lender at any time, the proportion (expressed as a decimal, rounded to the ninth decimal place) that (a) such Lender’s Commitment constitutes of (b) the Aggregate Commitment, subject to adjustment as provided in Section 2.23 (or, after the Commitments have terminated, that (i) the sum of the U.S. Dollar Outstandings, Euro Outstandings and the Canadian Dollar Outstandings of such Lender constitute of the Total Outstandings). The initial Total Pro Rata Share of each Lender is set forth opposite the name of such Lender on Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable. Total U.S. Dollar Outstandings means the sum of the aggregate principal amount of all outstanding U.S. Loans, Dutch Loans denominated in U.S. Dollars and Canadian Loans denominated in U.S. Dollars plus the Effective Amount of all L/C Obligations plus the aggregate principal amount of all outstanding Swing Line Loans. Type means, (i) the characterization of a U.S. Loan, a Dutch Loan or a Canadian Loan denominated in U.S. Dollars as a Base Rate Loan or a Eurocurrency Loan, or (ii) the characterization of a Canadian Loan denominated in Canadian Dollars as a CDOR Rate Loan, as applicable. UK Financial Institution means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.


 
37 UK Resolution Authority means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution. Unadjusted Benchmark Replacement means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment. Unfunded Pension Liability means, with respect to any Plan, the amount of unfunded benefit liabilities of such Plan within the meaning of Section 4001(a)(18) of ERISA. United States and U.S. each means the United States of America. Unmatured Event of Default means any event or circumstance which, with the giving of notice, the lapse of time or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. Unreimbursed Amount has the meaning specified in subsection 2.7.3(a). Unused Commitment Fee Rate means, at any time, the applicable percentage set forth in Schedule 1.1 opposite the Leverage Ratio as of the end of the immediately preceding fiscal quarter or fiscal year, as adjusted on the date that is five Business Days after the date on which the Compliance Certificate relating to such fiscal quarter or fiscal year, as applicable, is scheduled to be delivered. U.S. Bank means U.S. Bank National Association, a national banking association. U.S. Bank Fee Letter means that certain Fee Letter, dated March 11, 2021, by and among U.S. Bank and the Borrowers. U.S. Borrower means any Borrower that is a U.S. Person. U.S. Borrowing means a Borrowing of U.S. Loans. U.S. Dollar Outstandings means, for any Lender at any time, the aggregate principal amount of such Lender’s outstanding U.S. Loans, Dutch Loans denominated in U.S. Dollars and Canadian Loans denominated in U.S. Dollars plus (without duplication) the participation of such Lender in (or in the case of the L/C Issuer, the unparticipated portion of) the Effective Amount of all L/C Obligations and Swing Line Loans. U.S. Dollars and U.S.$ each mean lawful money of the United States. U.S. Lender means a Lender that is not a Foreign Lender. U.S. Loan means a Loan to the Company denominated in U.S. Dollars. U.S. Person means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code. U.S. Special Resolution Regimes has the meaning set forth in Section 11.22.


 
38 U.S. Tax Compliance Certificate has the meaning specified in Section 3.1(g). Voting Stock means (a) at any time that the Class A Common Stock of the Company is entitled to elect a majority of the members of the Board of Directors of the Company, such Class A Common Stock; and (b) at any other time, all outstanding securities of all classes of the Company ordinarily (and apart from rights accruing under special circumstances) having the right to elect a majority of the directors of the Company. Wells Fargo Fee Letter means that certain Fee Letter, dated March 11, 2021, by and among Wells Fargo Bank, National Association, Wells Fargo Securities, LLC and the Borrowers. Wholly-Owned Subsidiary means any Subsidiary in which (other than directors’ qualifying shares required by Law) 100% of the capital stock of each class or other equity interests is owned, beneficially and of record, by the Company, or by one or more other Wholly- Owned Subsidiaries, or a combination of the foregoing. Withholding Agent means any Borrower and the Administrative Agent. Write-Down and Conversion Powers means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write- down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers. 1.2 Other Interpretive Provisions. (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) The term “including” is not limiting and means “including without limitation.” (d) The terms “shall” and “will” have the same meaning as the term “must.”. (e) Unless the context otherwise clearly requires, “or” has the inclusive meaning represented by the phrase “and/or.”


 
39 (f) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.” (g) Unless otherwise expressly provided herein or in any other Loan Document, (i) references herein or in any other Loan Document to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement or any other Loan Document, (ii) references herein or in any other Loan Document to any statute or regulation are to be construed as including all statutory and regulatory provisions or rules consolidating, amending, replacing, supplementing, interpreting or implementing such statute or regulation and (iii) references to any Person herein or in any other Loan Document shall be construed to include such Person’s successors and assigns (subject to any limitations on assignment set forth herein or in any other Loan Document). (h) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (i) This Agreement may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. (j) This Agreement is the result of negotiations among and has been reviewed by counsel to the Administrative Agent, the Borrowers and the Lenders, and is the product of all parties. Accordingly, this Agreement shall not be construed against the Lenders or the Administrative Agent merely because of the Administrative Agent’s or the Lenders’ involvement in its preparation. 1.3 Accounting Principles. (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP. If any financial statements prepared by or on behalf of the Company apply accounting principles other than GAAP (including as a result of any event described in subsection 1.3(b)), the Compliance Certificate accompanying such financial statements shall include information in reasonable detail reconciling such financial statements to GAAP to the extent relevant to the calculations set forth in such Compliance Certificate. (b) If at any time any change in GAAP or in the application thereof would affect the computation of any financial ratio or requirement set forth herein and the Company or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change (subject to the approval of the Required Lenders); provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP without giving effect to such change.


 
40 (c) Notwithstanding anything to the contrary herein, (i) all financial covenants contained herein shall be calculated, and compliance with all other covenants contained herein (excluding, for the avoidance of doubt, any covenant requiring the delivery of financial statements) shall be determined, (x) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of the Company or any Subsidiary at “fair value”, as defined therein and (y) without giving effect to any treatment of Debt in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Debt in a reduced or bifurcated manner as described therein, and such Debt shall at all times be valued at the full stated principal amount thereof and (ii) the determination of whether a lease constitutes a capital lease or an operating lease, and whether obligations arising under a lease are required to be capitalized on the balance sheet of the lessee thereunder and/or recognized as interest expense in the lessee’s financial statements (in each case, other than for purposes of the preparation or delivery of financial statements), shall be determined under GAAP as in effect on the Restatement Signing Date, notwithstanding any modification or interpretative change thereto that may occur thereafter (it being understood and agreed, for the avoidance of doubt, financial statements delivered pursuant to Sections 6.1(a) and 6.1(b) shall