-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DGx9rLAGKP9reFlpt1fQ4KVOQaLt9nHf8EvejmIoLG0g1OF+rCo5cXcfWOjMrCvk sAHXYFFN+5rpDp3K9NfAcw== 0000893220-02-000982.txt : 20020813 0000893220-02-000982.hdr.sgml : 20020813 20020813082653 ACCESSION NUMBER: 0000893220-02-000982 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YORK INTERNATIONAL CORP /DE/ CENTRAL INDEX KEY: 0000842662 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 133473472 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10863 FILM NUMBER: 02727959 BUSINESS ADDRESS: STREET 1: 631 S RICHLAND AVE CITY: YORK STATE: PA ZIP: 17403 BUSINESS PHONE: 7177717890 MAIL ADDRESS: STREET 1: 631 SOUTH RICHLAND AVENUE CITY: YORK STATE: PA ZIP: 17403 FORMER COMPANY: FORMER CONFORMED NAME: YORK HOLDINGS CORP DATE OF NAME CHANGE: 19910930 10-Q 1 w62242e10vq.txt FORM 10-Q YORK INTERNATIONAL CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 COMMISSION FILE NUMBER 1-10863 YORK INTERNATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3473472 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 631 SOUTH RICHLAND AVENUE, YORK, PA 17403 (717) 771-7890 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at August 13, 2002 ----- ----------------------------- Common Stock, par value $.005 39,445,405 shares
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 INDEX
Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Statements of Operations - (unaudited) Three Months and Six Months Ended June 30, 2002 and 2001 3 Consolidated Condensed Balance Sheets - June 30, 2002 (unaudited) and December 31, 2001 4 Consolidated Condensed Statements of Cash Flows - (unaudited) Six Months Ended June 30, 2002 and 2001 5 Supplemental Notes to Consolidated Condensed Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings 20 Item 2. Changes in Securities 20 Item 3. Defaults Upon Senior Securities 20 Item 4. Submission of Matters to a Vote of Security Holders 20 Item 5. Other Information 21 Item 6. Exhibits and Reports on Form 8-K 21
2 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 1 FINANCIAL STATEMENTS Consolidated Condensed Statements of Operations (unaudited) (in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30, 2002 2001 2002 2001 ---------------- ---------------- ---------------- ---------------- Net sales $ 1,047,094 $ 1,077,472 $ 1,891,476 $ 2,019,577 Cost of goods sold 831,242 867,914 1,522,777 1,628,695 ---------------- ---------------- ---------------- ---------------- Gross profit 215,852 209,558 368,699 390,882 Selling, general and administrative expenses 143,236 142,339 286,668 290,603 Restructuring charges, net -- 35,224 2,730 57,175 ---------------- ---------------- ---------------- ---------------- Income from operations 72,616 31,995 79,301 43,104 Interest expense, net 12,436 18,282 25,149 38,231 Loss on divestiture -- -- 10,683 -- Equity in earnings of affiliates (2,038) (1,847) (2,608) (1,949) ---------------- ---------------- ---------------- ---------------- Income before income taxes and cumulative effect of a change in accounting principle 62,218 15,560 46,077 6,822 Provision (benefit) for income taxes 13,999 (17,256) 12,603 (17,000) ---------------- ---------------- ---------------- ---------------- Income before cumulative effect of a change in accounting principle 48,219 32,816 33,474 23,822 Cumulative effect of a change in accounting principle -- -- (179,436) -- ---------------- ---------------- ---------------- ---------------- Net income (loss) $ 48,219 $ 32,816 $ (145,962) $ 23,822 ================ ================ ================ ================ Basic earnings (loss) per share: Income before cumulative effect of a change in accounting principle $ 1.23 $ 0.85 $ 0.85 $ 0.62 Cumulative effect of a change in accounting principle -- -- (4.56) -- ---------------- ---------------- ---------------- ---------------- Net income (loss) $ 1.23 $ 0.85 $ (3.71) $ 0.62 ================ ================ ================ ================ Diluted earnings (loss) per share: Income before cumulative effect of a change in accounting principle $ 1.21 $ 0.84 $ 0.84 $ 0.61 Cumulative effect of a change in accounting principle -- -- (4.49) -- ---------------- ---------------- ---------------- ---------------- Net income (loss) $ 1.21 $ 0.84 $ (3.65) $ 0.61 ================ ================ ================ ================ Cash dividends per share $ 0.15 $ 0.15 $ 0.30 $ 0.30 ================ ================ ================ ================ Weighted average common shares and common equivalents outstanding: Basic 39,362 38,472 39,309 38,430 Diluted 39,998 39,006 39,955 38,922
See accompanying supplemental notes to consolidated condensed financial statements. 3 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (in thousands)
June 30, 2002 December 31, (unaudited) 2001 ------------------- ------------------- ASSETS Current assets: Cash and cash equivalents $ 40,804 $ 39,434 Receivables, net 691,952 613,892 Inventories Raw material 141,471 143,148 Work in process 122,455 101,575 Finished goods 235,130 270,537 ------------------- ------------------- Total inventories 499,056 515,260 Prepayments and other current assets 104,226 81,883 ------------------- ------------------- Total current assets 1,336,038 1,250,469 Deferred income taxes 42,951 56,149 Investments in affiliates 26,918 24,957 Property, plant and equipment, net 493,143 480,999 Goodwill 492,268 651,673 Intangibles, net 30,764 28,415 Deferred charges and other assets 79,299 79,847 ------------------- ------------------- Total assets $ 2,501,381 $ 2,572,509 =================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 38,337 $ 36,604 Accounts payable and accrued expenses 778,467 735,962 Income taxes 28,767 5,073 ------------------- ------------------- Total current liabilities 845,571 777,639 Long-term warranties 44,970 43,751 Long-term debt 681,515 724,378 Postretirement and postemployment benefits 208,743 208,195 Other long-term liabilities 74,430 79,112 ------------------- ------------------- Total liabilities 1,855,229 1,833,075 Stockholders' equity 646,152 739,434 ------------------- ------------------- Total liabilities and stockholders' equity $ 2,501,381 $ 2,572,509 =================== ===================
See accompanying supplemental notes to consolidated condensed financial statements. 4 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (unaudited) (in thousands)
Six Months Ended June 30, 2002 2001 --------------- ---------------- Cash flows from operating activities: Net (loss) income $ (145,962) $ 23,822 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Cumulative effect of a change in accounting principle 179,436 -- Depreciation and amortization of property, plant and equipment 30,217 33,313 Amortization of deferred charges, intangibles and goodwill 1,358 13,883 Provision for doubtful receivables 8,849 4,411 Effect of non-cash charges 1,631 26,690 Loss on divestiture 10,683 -- Deferred income taxes 13,233 4,047 Loss on sale of fixed assets 1,201 1,829 Other (179) 1,427 Change in assets and liabilities net of effects from acquisitions and divestitures: Receivables (92,871) (80,833) Inventories 13,855 33,715 Prepayments and other current assets (23,893) 14,711 Accounts payable and accrued expenses 49,358 (66,512) Income taxes 23,758 (4,680) Other long-term assets and liabilities 2,361 8,490 --------------- ---------------- Net cash provided by operating activities 73,035 14,313 --------------- ---------------- Cash flows from investing activities: Purchases of other companies, net of cash acquired (2,248) -- Proceeds from divestiture, net 12,071 -- Capital expenditures (35,915) (35,301) Proceeds from sale of fixed assets 4,699 450 --------------- ---------------- Net cash used by investing activities (21,393) (34,851) --------------- ---------------- Cash flows from financing activities: Net proceeds on short-term debt 1,729 68,746 Net (payments) proceeds of commercial paper borrowings (29,305) 22,841 Net payments on other long-term debt (16,732) (66,044) Common stock issued 6,163 3,875 Treasury stock purchases (30) (38) Dividends paid (11,809) (11,544) --------------- ---------------- Net cash (used) provided by financing activities (49,984) 17,836 --------------- ---------------- Effect of exchange rate changes on cash and cash equivalents (288) 123 --------------- ---------------- Net increase (decrease) in cash and cash equivalents 1,370 (2,579) Cash and cash equivalents at beginning of period 39,434 26,425 --------------- ---------------- Cash and cash equivalents at end of period $ 40,804 $ 23,846 =============== ================
See accompanying supplemental notes to consolidated condensed financial statements. 5 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Supplemental Notes To Consolidated Condensed Financial Statements (unaudited) (1) The consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. We believe that the information presented is not misleading and the disclosures are adequate. In our opinion, the accompanying consolidated condensed financial statements contain all adjustments necessary to present fairly the financial position as of June 30, 2002 and December 31, 2001, the results of operations for the three and six months ended June 30, 2002 and 2001, and cash flows for the six months ended June 30, 2002 and 2001. The results of operations for interim periods are not necessarily indicative of the results expected for the full year. Certain reclassifications have been made to the 2001 consolidated condensed financial statements to conform to the 2002 presentation. (2) The following table summarizes our indebtedness as of June 30, 2002 and December 31, 2001 (in thousands):
June 30, December 31, 2002 2001 ---------------- ---------------- Notes payable and current portion of long-term debt: Bank loans (primarily foreign currency) $ 34,692 $ 32,963 Current portion of long-term debt 3,645 3,641 ---------------- ---------------- Total $ 38,337 $ 36,604 ================ ================ Long-term debt: Commercial paper, 2.05% interest in 2002 and 2.38% interest in 2001 $ 168,397 $ 197,702 Senior notes, 6.75% interest, due March 2003 100,000 100,000 Senior notes, 6.625% interest, due August 2006 200,000 200,000 Senior notes, 6.70% interest, due June 2008 200,000 200,000 Other (primarily foreign bank loans) at an average rate of 6.57% in 2002 and 6.38% in 2001 16,763 30,317 ---------------- ---------------- Total 685,160 728,019 Less current portion (3,645) (3,641) ---------------- ---------------- Noncurrent portion $ 681,515 $ 724,378 ================ ================
As of June 30, 2002 and December 31, 2001, our borrowings consisted of senior notes, commercial paper issuances and various other bank and term loans. The commercial paper issuances and certain bank loans are expected to be reborrowed in the ordinary course of business, depending on our financing needs. As of June 30, 2002, it is expected that commercial paper will be issued to redeem the $100 million senior notes due March 2003. In May 2002, we amended our Five Year Credit Agreement and renewed our 364-Day Credit Agreement. We have available a $400 million Five Year Credit Agreement, which expires on May 29, 2006, and a $300 million 364-Day Credit Agreement, which expires on May 28, 2003 (collectively, the Agreements). As of December 31, 2001, we had available the $400 million Five Year Credit Agreement, and a $300 million 364-Day Credit Agreement, which expired on May 28, 2002. As of June 30, 2002 and December 31, 2001, no amounts were outstanding under the Agreements. 6 (continued) The $400 million Five Year Credit Agreement provides for borrowings at the London Interbank Offering Rate (LIBOR) plus 0.75% or 0.875%, and the $300 million 364-Day Credit Agreement provides for borrowings at LIBOR plus 0.775% or 0.90%, based on the amount of facility utilization. We pay annual fees of 0.125% on the $400 million facility and 0.10% on the $300 million facility. The Agreements allow for borrowings at specified bid rates. As of June 30, 2002 and December 31, 2001, the three-month LIBOR rate was 1.87% and 1.86%, respectively. The Agreements contain financial covenants requiring us to maintain certain financial ratios and standard provisions limiting leverage and liens. We were in compliance with these financial covenants as of June 30, 2002 and December 31, 2001. We have additional unused domestic bank lines that provide for total borrowings of $100 million as of June 30, 2002 and December 31, 2001. Our non-U.S. subsidiaries maintain bank credit facilities in various currencies that provided for available borrowings of $383.9 million and $386.3 million as of June 30, 2002 and December 31, 2001, respectively, of which $293.0 million and $276.1 million, respectively, were unused. See note 6 for discussion regarding revolving trade receivable purchase facility. (3) The following table summarizes our stockholders' equity as of June 30, 2002 and December 31, 2001 (in thousands, except per share data):
June 30, December 31, 2002 2001 ---------------- ---------------- Common stock $.005 par value; 200,000 shares authorized; issued 45,616 shares at June 30, 2002 and December 31, 2001 $ 228 $ 228 Additional paid-in capital 722,558 723,980 Retained earnings 291,318 449,089 Accumulated other comprehensive losses (139,221) (196,870) Treasury stock, at cost; 6,172 shares at June 30, 2002 and 6,394 shares at December 31, 2001 (228,706) (236,938) Unearned compensation (25) (55) --------- --------- Total stockholders' equity $ 646,152 $ 739,434 ========= =========
(4) Derivative Instruments and Hedging Activities We are exposed to market risk associated with changes in interest rates, foreign currency exchange rates, and certain commodity prices. To enhance our ability to manage these market risks, we enter into derivative instruments for periods consistent with the related underlying exposures. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in fair value or cash flows of the underlying exposures being hedged. We mitigate the risk that the counter-party to these derivative instruments will fail to perform by only entering into derivative instruments with major financial institutions. We do not typically hedge our market risk exposures beyond three years and do not hold or issue derivative instruments for trading purposes. Recognized gains or losses for the six months ended June 30, 2002 as a result of the discontinuance of cash flow hedges were not significant. Currency Rate Hedging We manufacture and sell our products in a number of countries throughout the world, and therefore, are exposed to movements in various currencies against the United States Dollar and against the currencies in which we manufacture. Through our currency hedging activities, we seek to minimize the risk that cash flows resulting from the sale of products, manufactured in a currency different from the currency used by the selling subsidiary, will be affected by changes in foreign currency exchange rates. Foreign currency derivative instruments (forward contracts and purchased option contracts) are matched to the underlying foreign currency exposures and are executed to minimize foreign exchange transaction costs. 7 (continued) As of June 30, 2002, we forecasted that $1.2 million of net losses in accumulated other comprehensive losses will be reclassified into earnings within the next twelve months. Commodity Price Hedging We purchase raw material commodities and are at risk for fluctuations in the market price of those commodities. In connection with the purchase of major commodities, principally copper for manufacturing requirements, we enter into commodity forward contracts to effectively fix our cost of the commodity. These contracts require each settlement between our counterparty and us to coincide with cash market purchases of the actual commodity. As of June 30, 2002, we forecasted that $0.7 million of net losses in accumulated other comprehensive losses will be reclassified into earnings within the next twelve months. Interest Rate Hedging We manage our interest rate risk by entering into both fixed and variable rate debt at the lowest possible costs. In addition, we enter into interest rate swap contracts in order to achieve a cost effective mix of fixed and variable rate indebtedness. As of June 30, 2002, we had interest rate swap contracts to pay variable interest, based on the six-month LIBOR rate, and received a fixed rate of interest of 6.625% on a notional amount of $100 million. As of June 30, 2002, the fair value of these swap contracts was an unrealized gain of $5.3 million. We have designated our outstanding interest rate swap contracts as fair value hedges of an underlying fixed rate debt obligation. The fair value of these contracts is recorded in other long-term assets or liabilities with a corresponding increase or decrease in the fixed rate debt obligation. The change in fair values of both the fair value hedge instruments and the underlying debt obligations are recorded as equal and offsetting unrealized gains and losses in the interest expense component of the consolidated condensed statements of operations. All existing fair value hedges are 100% effective under Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." As a result, there is no impact on current earnings resulting from hedge ineffectiveness. (5) Comprehensive income (loss) is determined as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30, 2002 2001 2002 2001 ------------- ------------ ------------- ------------- Net income (loss) $ 48,219 $ 32,816 $ (145,962) $ 23,822 Other comprehensive income (loss): Foreign currency translation adjustment 43,196 (20,700) 51,159 (51,706) Cash flow hedges: Transition adjustment, net of tax -- -- -- (976) Reclassification adjustment, net of tax 2,181 667 3,413 1,219 Net derivative (losses) gains, net of tax (635) (2,153) 3,077 (4,928) ------------- ------------ ------------- ------------- Comprehensive income (loss) $ 92,961 $ 10,630 $ (88,313) $ (32,569) ============= ============ ============= =============
(6) Pursuant to the terms of a revolving facility which expires in December 2004, we sell our trade receivables to a wholly-owned, consolidated subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis, up to a $175.0 million undivided ownership interest in the purchased trade receivables to bank conduits. We continue to service the receivables. No servicing asset or liability has been recognized as our cost to service the receivables approximates the servicing income. In accordance with the facility, YRFLLC has sold $175.0 million of an undivided interest in trade receivables as of June 30, 2002 and December 31, 2001. The proceeds from the sale were reflected as a 8 (continued) reduction of receivables in the accompanying consolidated condensed balance sheets as of June 30, 2002 and December 31, 2001. The discount rate on the trade receivables sold was 1.82% and 2.00% as of June 30, 2002 and December 31, 2001, respectively. (7) Effective January 1, 2002 we adopted SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, we no longer amortize goodwill, but instead we test reporting unit goodwill for impairment at least annually. Commencing in the fourth quarter of 2002, we will perform an annual goodwill impairment test for each of our reporting units. The Engineered Systems Group, York Refrigeration Group, Unitary Products Group and Bristol Compressors segments were identified as our reporting units, as defined under the standard. We will identify potential goodwill impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the amount of goodwill impairment loss, if any, must be measured. We measure the amount of goodwill impairment loss by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of goodwill, an impairment loss will be recognized as an operating expense. Upon adoption of SFAS No. 142, we were required to perform a transitional goodwill impairment test. We completed the transitional goodwill impairment test during the second quarter of 2002. We tested our reporting units by comparing carrying value to fair value as of January 1, 2002. We determined fair value using a discounted cash flow and market-multiple approach. The transitional impairment analysis indicated an impairment existed in our York Refrigeration Group reporting unit. No indication of impairment existed in our other reporting units. The historic and projected financial performance of the York Refrigeration Group, which includes the entities acquired in the Sabroe acquisition, were insufficient to support the related goodwill. We employed a third-party appraisal firm to determine the fair value of the York Refrigeration Group reporting unit as well as York Refrigeration Group's property, plant and equipment and intangibles. As a result, we recognized a non-cash transitional goodwill impairment charge of $179 million in our York Refrigeration Group reporting unit. As required by SFAS No. 142, the transitional goodwill impairment charge was recorded as a cumulative effect of a change in accounting principle in the accompanying consolidated condensed statement of operations as of January 1, 2002. The changes in the carrying amount of goodwill for the six months ended June 30, 2002 by segment, are as follows (in thousands):
Net Transitional Foreign Balance as of Goodwill Impairment Currency Balance as of Dec. 31, 2001 Acquired Adjustment Fluctuation June 30, 2002 ----------------- ------------- ----------------- -------------- ----------------- Engineered Systems Group $ 83,872 $ 801 $ -- $ 560 $ 85,233 York Refrigeration Group 371,048 704 (179,436) 17,966 210,282 Unitary Products Group 140,440 -- -- -- 140,440 Bristol Compressors 56,313 -- -- -- 56,313 --------------- ----------- -------------- ------------ --------------- $ 651,673 $ 1,505 $ (179,436) $ 18,526 $ 492,268 =============== =========== ============== ============ ===============
9 (continued) The following table presents net income and basic and diluted earnings per share excluding goodwill amortization for the periods indicated (in thousands, except per share data):
Three Months Six Months Ended Ended June 30, 2001 June 30, 2001 ----------------- ----------------- Reported net income $ 32,816 $ 23,822 Add back: goodwill amortization 5,986 12,328 ----------------- ----------------- Adjusted net income $ 38,802 $ 36,150 ================= ================= Basic earnings per share: Reported net income $ 0.85 $ 0.62 Add back: goodwill amortization 0.16 0.32 ----------------- ----------------- Adjusted net income $ 1.01 $ 0.94 ================= ================= Diluted earnings per share: Reported net income $ 0.84 $ 0.61 Add back: goodwill amortization 0.15 0.32 ----------------- ----------------- Adjusted net income $ 0.99 $ 0.93 ================= =================
The following table presents net income and basic and diluted earnings per share excluding goodwill amortization for the twelve months ended December 31, 2001, 2000 and 1999 (in thousands, except per share data):
Twelve Months Ended December 31, 2001 2000 1999 ------------------ ----------------- ----------------- Reported net income $ 45,989 $ 106,607 $ 75,882 Add back: goodwill amortization 24,447 25,634 20,330 ------------------ ----------------- ----------------- Adjusted net income $ 70,436 $ 132,241 $ 96,212 ================== ================= ================= Basic earnings per share: Reported net income $ 1.19 $ 2.80 $ 1.91 Add back: goodwill amortization 0.63 0.67 0.52 ------------------ ----------------- ----------------- Adjusted net income $ 1.82 $ 3.47 $ 2.43 ================== ================= ================= Diluted earnings per share: Reported net income $ 1.17 $ 2.78 $ 1.91 Add back: goodwill amortization 0.63 0.67 0.51 ------------------ ----------------- ----------------- Adjusted net income $ 1.80 $ 3.45 $ 2.42 ================== ================= =================
(8) The following table summarizes the major intangible asset classes subject to amortization included in the accompanying consolidated condensed balance sheets as of June 30, 2002 and December 31, 2001 (in thousands): 10 (continued)
Gross Carrying Accumulated Net Carrying June 30, 2002 Amount Amortization Amount - ------------- ------------- ------------- ----------------- Trade names and trademarks $ 33,593 $ 3,574 $ 30,019 Other 1,425 680 745 ------------- ------------- ----------------- $ 35,018 $ 4,254 $ 30,764 ============= ============= ================= December 31, 2001 Trade names and trademarks $ 30,439 $ 2,734 $ 27,705 Other 1,237 527 710 ------------- ------------- ----------------- $ 31,676 $ 3,261 $ 28,415 ============= ============= =================
Amortization expense for trade names and trademarks and other intangible assets for the three and six months ended June 30, 2002 was $0.3 million and $0.6 million, respectively. For the three and six months ended June 30, 2001, amortization expense for trade names and trademarks and other intangible assets was $0.3 million and $0.6 million, respectively. The following table estimates the amount of amortization expense for trade names and trademarks and other intangible assets for the remainder of 2002 and each of the fiscal years indicated (in thousands): 2002 (July 1 - December 31) $ 626 2003 1,252 2004 1,252 2005 1,252 2006 1,252 Thereafter 25,130
(9) Net income (loss) as set forth in the consolidated condensed statements of operations is used in the computation of basic and diluted earnings (loss) per share information. Reconciliations of shares used in the computations of earnings (loss) per share are as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30, 2002 2001 2002 2001 ------------- -------------- -------------- ------------- Weighted average common shares outstanding used in the computation of basic earnings (loss) per share 39,362 38,472 39,309 38,430 Effect of dilutive securities: Non-vested restricted shares 2 3 2 3 Stock options 634 531 644 489 ------------ -------------- -------------- ------------- Weighted average common shares and equivalents used in the computation of diluted earnings (loss) per share 39,998 39,006 39,955 38,922 ============= ============== ============== ============= Stock options not included in the earnings (loss) per share computation as their effect would have been anti-dilutive 1,968 3,436 1,930 3,436 ============= ============== ============== =============
(10) In 2002, we reorganized certain portions of our operating segments. Prior year amounts were reclassified to conform to the current presentation. Also in 2002, we allocated certain goodwill, which was previously reflected as a non-allocated asset, to our operating segments in accordance with SFAS No. 142. Prior year total assets were reclassified to conform to the current presentation. The table below represents our operating results by segment (in thousands): 11 (continued)
Three Months Ended June 30, Six Months Ended June 30, 2002 2001 2002 2001 --------------- ----------------- ----------------- ---------------- Net sales: Engineered Systems Group $ 489,346 $ 516,468 $ 877,998 $ 958,290 York Refrigeration Group 231,252 233,783 420,381 446,028 Unitary Products Group 217,809 227,508 378,994 401,451 Bristol Compressors 163,698 162,773 319,654 330,823 Eliminations(1) (55,011) (63,060) (105,551) (117,015) --------------- ----------------- ----------------- ---------------- 1,047,094 1,077,472 1,891,476 2,019,577 =============== ================= ================= ================ (1)Eliminations include the following intersegment sales: Engineered Systems Group 3,758 7,262 5,899 15,824 York Refrigeration Group 7,828 4,938 14,913 10,371 Unitary Products Group 10,487 16,572 24,547 29,075 Bristol Compressors 32,938 34,288 60,192 61,745 --------------- ----------------- ----------------- ---------------- Eliminations 55,011 63,060 105,551 117,015 =============== ================= ================= ================ Income from operations: Engineered Systems Group 35,219 44,026 39,086 62,021 York Refrigeration Group 17,967 18,205 26,662 28,442 Unitary Products Group 18,282 24,770 15,842 37,522 Bristol Compressors 12,788 17,303 29,123 34,066 General corporate expenses, eliminations, and other non-allocated items (11,640) (14,264) (20,936) (30,420) Charges and operating expenses -- (58,045) (10,476) (88,527) --------------- ----------------- ----------------- ---------------- 72,616 31,995 79,301 43,104 =============== ================= ================= ================ Equity in earnings of affiliates: Engineered Systems Group (720) (1,090) (854) (1,114) York Refrigeration Group (349) (103) (761) (259) Bristol Compressors (969) (654) (993) (576) --------------- ----------------- ----------------- ---------------- (2,038) (1,847) (2,608) (1,949) =============== ================= ================= ================ Earnings before interest and taxes: Engineered Systems Group 35,939 45,116 39,940 63,135 York Refrigeration Group 18,316 18,308 27,423 28,701 Unitary Products Group 18,282 24,770 15,842 37,522 Bristol Compressors 13,757 17,957 30,116 34,642 General corporate expenses, eliminations, and other non-allocated items (11,640) (14,264) (20,936) (30,420) Charges and operating expenses -- (58,045) (10,476) (88,527) Loss on divestiture -- -- (10,683) -- --------------- ----------------- ----------------- ---------------- 74,654 33,842 71,226 45,053 Interest expense, net 12,436 18,282 25,149 38,231 --------------- ----------------- ----------------- ---------------- Income before income taxes and cumulative effect of a change in accounting principle 62,218 15,560 46,077 6,822 Provision (benefit) for income taxes 13,999 (17,256) 12,603 (17,000) --------------- ----------------- ----------------- ---------------- Income before cumulative effect of a change in accounting principle $ 48,219 $ 32,816 $ 33,474 $ 23,822 =============== ================= ================= ================
12 (continued)
June 30, 2002 Dec. 31, 2001 ------------------ ----------------- Total assets: Engineered Systems Group $ 1,025,076 $ 1,049,536 York Refrigeration Group 792,670 917,541 Unitary Products Group 484,981 447,359 Bristol Compressors 316,600 270,943 Eliminations and other non-allocated assets (117,946) (112,870) ------------------ ----------------- $ 2,501,381 $ 2,572,509 ================== =================
(11) In October 2000, we announced the initiation of a cost reduction process, which included plant closures and divestitures, product line and facility rationalizations, selling, general and administrative expense reductions and other one-time costs. In the second quarter of 2001, we expanded the scope of the cost reduction process to include additional plant closings and staff reductions. In the six months ended June 30, 2002, the six months ended June 30, 2001, and the three months ended June 30, 2001, we recorded restructuring charges of $2.8 million, $67.5 million and $42.6 million, respectively, including $0.1 million, $10.3 million, and $7.4 million, respectively, charged to cost of goods sold, relating to the cost reduction process. We incurred no similar charges in the three months ended June 30, 2002. The charges included write-downs for the impairment of fixed assets and other assets relating to facilities to be closed or divested and other impaired assets. These actions included the plant closure of the Unitary Products Group factory in Elyria, Ohio, the Engineered Systems Group Airside factory in Portland, Oregon, the York Refrigeration Group facility in San Antonio, Texas, the Bristol Compressor plant in Sparta, North Carolina and factories in Asquith, Australia; Montevideo, Uruguay; and Barlassina, Italy. Severance and other accruals included planned reductions in workforce throughout the company. Of the approximately 2,350 salary and wage employee reductions planned, approximately 200 remained at June 30, 2002. Detail of the activity in the six months ended June 30, 2002 is as follows:
Additional Non-cash Accrual Accrual Write-downs Established Utilized Reduction in Six in Six in Six in Six Remaining Months Months Months Months Remaining Accruals at Ended Ended Ended Ended Accruals at Dec. 31 June 30, June 30, June 30, June 30, June 30, (in thousands) 2001 2002 2002 2002 2002 2002 ------------ ------------ ------------ ------------ ------------ ------------ Fixed asset write-downs $ -- $ 1,500 $ -- $ -- $ -- $ -- Inventory write-downs -- 44 -- -- -- -- Other asset write-downs -- 87 -- -- -- -- Severance 10,728 -- 994 7,618 464 3,640 Contractual obligations 3,011 -- 5 737 6 2,273 Other 2,580 -- 658 985 -- 2,253 ------------ ------------ ------------ ------------ ------------ ------------ $ 16,319 $ 1,631 $ 1,657 $ 9,340 $ 470 $ 8,166 ============ ============ ============ ============ ============ ============
(12) In January 2002, we sold our Engineered Systems Group air conditioning operations in Australia for $12.1 million. The sale resulted in a loss of $10.7 million. 13 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table sets forth net sales and earnings before interest and taxes (EBIT) by segment (in thousands:)
Three Months Ended June 30, Six Months Ended June 30, 2002 2001 2002 2001 --------------- ---------------- ---------------- ---------------- Net sales: Engineered Systems Group $ 489,346 $ 516,468 $ 877,998 $ 958,290 York Refrigeration Group 231,252 233,783 420,381 446,028 Unitary Products Group 217,809 227,508 378,994 401,451 Bristol Compressors 163,698 162,773 319,654 330,823 Eliminations (55,011) (63,060) (105,551) (117,015) --------------- ---------------- ---------------- ---------------- Net sales $ 1,047,094 $ 1,077,472 $ 1,891,476 $ 2,019,577 =============== ================ ================ ================ EBIT: Engineered Systems Group $ 35,939 $ 45,116 $ 39,940 $ 63,135 York Refrigeration Group 18,316 18,308 27,423 28,701 Unitary Products Group 18,282 24,770 15,842 37,522 Bristol Compressors 13,757 17,957 30,116 34,642 General corporate expenses, eliminations, and other non-allocated items (11,640) (14,264) (20,936) (30,420) Charges and operating expenses -- (58,045) (10,476) (88,527) Loss on divestiture -- -- (10,683) -- --------------- ---------------- ---------------- ---------------- EBIT $ 74,654 $ 33,842 $ 71,226 $ 45,053 =============== ================ ================ ================
Consolidated Operations Net sales for the three months ended June 30, 2002 decreased 2.8% to $1,047.1 million from $1,077.5 million for the same period in 2001. Net sales for the six months ended June 30, 2002 decreased 6.3% to $1,891.5 million as compared to $2,019.6 million for the six months ended June 30, 2001. Reduced shipments of chillers and lower sales of unitary light commercial products were partially offset by service growth. (See further discussion below under Segment Analysis.). For the three months ended June 30, 2002, net sales in the United States decreased 2.7% to $525.6 million and international net sales decreased 2.9% to $521.5 million. Order backlog as of June 30, 2002 was $971.5 million compared to $1,052.7 million as of June 30, 2001 and $852.0 million as of December 31, 2001. Gross profit increased 3.0% to $215.9 million (20.6% of net sales) in the three months ended June 30, 2002 as compared to $209.6 million (19.4% of net sales) in the same period of 2001. During the six months ended June 30, 2002, gross profit decreased 5.7% to $368.7 million (19.5% of net sales) from $390.9 million (19.4% of net sales) for the six months ended June 30, 2001. Included in cost of goods sold for the six months ended June 30, 2002, the six months ended June 30, 2001, and the three months ended June 30, 2001, were $0.1 million, $10.3 million, and $7.4 million, respectively, of restructuring charges, $6.8 million, $13.5 million, and $9.6 million, respectively, of one-time costs related to cost reduction actions, and $0.8 million, $7.6 million, and $5.9 million, respectively, related to a discontinued product line. We incurred no similar charges in the three months ended June 30, 2002. 14 (continued) Excluding the charges discussed above, gross profit decreased 7.1% to $215.9 million (20.6% of net sales) in the three months ended June 30, 2002 from $232.4 million (21.6% of net sales) in the same period of 2001. For the six months ended June 30, 2002, gross profit, excluding the charges discussed above, decreased 10.8% to $376.4 million (19.9% of net sales) from $422.2 million (20.9% of net sales) for the six months ended June 30, 2001. The decreases were primarily due to reduced volume, the impact of competitive margin pressures, manufacturing inefficiencies, changes in product mix, and increased investments relating to our service activities. Selling, general and administrative (SG&A) expense increased 0.6% to $143.2 million (13.7% of net sales) in the three months ended June 30, 2002 from $142.3 million (13.2% of net sales) in the three months ended June 30, 2001. Increases resulting from higher medical and information technology costs and the effect of strengthening European currencies were partially offset by staff reductions and other cost reduction efforts and the elimination of goodwill amortization in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." For the six months ended June 30, 2002, SG&A expense decreased 1.4% to $286.7 million (15.2% of net sales) from $290.6 million (14.4% of net sales) for the same period of 2001. In addition to the items which affected second quarter expense, SG&A expense for the six months increased as a percent of sales due to a first quarter write-off of a $5.9 million receivable related to a Unitary Products Group distributor that became insolvent. In October 2000, we announced the initiation of a cost reduction process, which included plant closures and divestitures, product line and facility rationalizations, SG&A expense reductions and other one-time costs. In the second quarter of 2001, we expanded the scope of the cost reduction process to include additional plant closings and staff reductions. In the six months ended June 30, 2002, the six months ended June 30, 2001, and the three months ended June 30, 2001, we recorded charges to operations of $9.6 million, $81.0 million, and $52.2 million, respectively, related to these cost reduction actions, including the $6.9 million, $23.8 million, and $17.0 million, respectively, charged to cost of goods sold as discussed above. We incurred no similar charges in the three months ended June 30, 2002. The charges in the six months ended June 30, 2002, the six months ended June 30, 2001, and the three months ended June 30, 2001 included $1.6 million, $26.7 million, and $20.3 million, respectively, in write-downs of various assets and $1.2 million, $40.8 million, and $22.3 million, respectively, in accruals for severance and other costs. As of June 30, 2002, the closing of one facility was still in process. We do not anticipate significant additional costs to be incurred during the remainder of 2002 relating to the announced actions. Equity in earnings of affiliates was $2.0 million during the three months ended June 30, 2002 as compared to $1.8 million during the three months ended June 30, 2001. For the six months ended June 30, 2002, equity in earnings of affiliates was $2.6 million as compared to $1.9 million for the same period of 2001. The increase was primarily the result of improved performance of Scroll Technologies and our joint venture in Korea. In January 2002, we sold our Engineered Systems Group air conditioning operations in Australia for $12.1 million. The sale resulted in a loss of $10.7 million. During the three months ended June 30, 2002, earnings before interest and taxes (EBIT) increased 120.6% to $74.7 million (7.1% of net sales) from $33.8 million (3.1% of net sales) during the three months ended June 30, 2001. During the six months ended June 30, 2002, EBIT increased 58.1% to $71.2 million (3.8% of net sales) from $45.1 million (2.2% of net sales) during the same period of 2001. Excluding the charges discussed above, EBIT decreased 18.8% to $74.7 million (7.1% of net sales) in the three months ended June 30, 2002 compared to $91.9 million (8.5% of net sales) in the same period of 2001. EBIT, excluding the charges discussed above and the loss on divestiture, decreased 30.8% to $92.4 million (4.9% of net sales) in the six months ended June 30, 2002 as compared to $133.6 million (6.6% of net sales) in the same period of 2001. (See further discussion below under Segment Analysis.) Net interest expense in the three months ended June 30, 2002 was $12.4 million compared to $18.3 million in the same period of 2001. Net interest expense in the six months ended June 30, 2002 was $25.1 million compared to $38.2 million in the six months ended June 30, 2001. The decrease resulted from lower average debt levels and lower interest rates. The income tax provision of $14.0 million for the three months ended June 30, 2002 and $12.6 million for the six months ended June 30, 2002 relates to both U.S. and non-U.S. operations. The tax rate for ongoing operations was 22.5% for the first six months of 2002 compared to 30.0% for the first six months of 2001. The tax rate improvement for ongoing operations was the result of effective tax planning strategies, tax holidays and the impact of the adoption of SFAS No. 142. 15 (continued) Upon adoption of SFAS No. 142 we were required to perform a transitional goodwill impairment test. The transitional goodwill impairment test was completed during the second quarter of 2002. As a result, we recognized a non-cash transitional goodwill impairment charge of $179 million in our York Refrigeration Group reporting unit. The historic and projected financial performance of the York Refrigeration Group, which includes the entities acquired in the Sabroe acquisition, were insufficient to support the related goodwill. As required, the transitional goodwill impairment charge was recorded as a cumulative effect of a change in accounting principle as of January 1, 2002. Net income, as a result of the above factors, was $48.2 million during the three months ended June 30, 2002 as compared to $32.8 million during the three months ended June 30, 2001. For the six months ended June 30, 2002, net income, excluding the cumulative effect of a change in accounting principle, was $33.5 million compared to $23.8 million for the same period of 2001. Segment Analysis The discussion below of each segment's EBIT relates to ongoing operations and excludes the charges and loss on divestiture discussed above. Engineered Systems Group (ESG) ESG net sales for the three months ended June 30, 2002 decreased 5.3% to $489.3 million from $516.5 million for the same period in 2001. Net sales for the six months ended June 30, 2002 decreased 8.4% to $878.0 million as compared to $958.3 million for the same period in 2001. Strength in global service businesses was more than offset by a decline in chiller shipments, particularly in North America and Europe. EBIT for the three months ended June 30, 2002 decreased 20.3% to $35.9 million (7.3% of net sales) from $45.1 million (8.7% of net sales) for the same period in 2001. For the six months ended June 30, 2002, EBIT decreased 36.7% to $39.9 million (4.5% of net sales) as compared to $63.1 million (6.6% of net sales) for the same period in 2001. The decline resulted from lower volumes and the related absorption effects of fixed costs, pricing pressure, higher medical costs, and continued investment in service infrastructure. York Refrigeration Group (YRG) YRG net sales for the three months ended June 30, 2002 decreased 1.1% to $231.3 million from $233.8 million for the same period in 2001. Reduced shipments for petrochemical and cruise ship applications were offset by positive foreign currency effects. Net sales for the six months ended June 30, 2002 decreased 5.8% to $420.4 million as compared to $446.0 million for the same period in 2001. In addition to the items which affected second quarter revenue, net sales for the six months were decreased by soft first quarter European equipment orders and contracting. EBIT for the three months ended June 30, 2002 remained flat at $18.3 million (7.9% of net sales) as compared to $18.3 million (7.8% of net sales) for the same period in 2001. Improved gross margin as a result of aftermarket growth and better contracting performance was offset by higher production costs and higher medical costs in the U.S. For the six months ended June 30, 2002, EBIT decreased 4.5% to $27.4 million (6.5% of net sales) as compared to $28.7 million (6.4% of net sales) for the same period in 2001. The decrease was due to lower volume and pricing pressures in certain markets. Unitary Products Group (UPG) UPG net sales for the three months ended June 30, 2002 decreased 4.3% to $217.8 million from $227.5 million for the same period in 2001. Net sales for the six months ended June 30, 2002 decreased 5.6% to $379.0 million as compared to $401.5 million for the same period in 2001. The decreases resulted from declines in the North American commercial and manufactured housing markets and reduced export volume. EBIT for the three months ended June 30, 2002 decreased 26.2% to $18.3 million (8.4% of net sales) from $24.8 million (10.9% of net sales) for the same period in 2001. For the six months ended June 30, 2002, EBIT decreased 57.8% to $15.8 million (4.2% of net sales) as compared to $37.5 million (9.3% of net sales) for the same period in 2001. In addition to the impact of lower sales volume, EBIT decreased due to an unfavorable product mix, manufacturing inefficiencies and the first quarter write-off of a $5.9 million receivable related to a distributor that 16 (continued) became insolvent during March 2002. The unfavorable product mix resulted from a shift to lower margin products as light commercial products declined more than residential. While beneficial in the long-term, the UPG residential factory consolidation was more costly and slower than originally anticipated. Although plant efficiency levels and shipping improved steadily, UPG experienced manufacturing inefficiencies and higher logistics and warehousing costs at the Wichita facility during the first half of 2002. Bristol Compressors Bristol Compressors net sales for the three months ended June 30, 2002 increased 0.6% to $163.7 million from $162.8 million for the same period in 2001. Net sales for the six months ended June 30, 2002 decreased 3.4% to $319.7 million as compared to $330.8 million for the same period in 2001. Bristol experienced decreases in international shipments and increased sales to North American unitary manufacturers. EBIT for the three months ended June 30, 2002 decreased 23.4% to $13.8 million (8.4% of net sales) from $18.0 million (11.0% of net sales) for the same period in 2001. For the six months ended June 30, 2002, EBIT decreased 13.1% to $30.1 million (9.4% of net sales) as compared to $34.6 million (10.5% of net sales) for the same period in 2001. Although Bristol benefited from improved product designs with lower costs, margins were down due to continued decreases in larger applications and pricing pressure in the market place. Bristol is experiencing a negative impact of order mix as high-margin large compressors used in light commercial applications are down significantly, while the volume of smaller units has grown. Liquidity and Capital Resources Working capital requirements are generally met through a combination of internally generated funds, bank lines of credit, commercial paper borrowings, financing of trade receivables and credit terms from suppliers which approximate receivable terms to our customers. Additional sources of working capital include customer deposits and progress payments. Working capital increased $17.6 million to $490.5 million as of June 30, 2002 as compared to $472.8 million as of December 31, 2001. The increase resulted from higher receivables levels due to normal seasonal trends and increases in prepayments and other current assets, partially offset by increases in accounts payable and accrued expenses and income taxes. The current ratio was 1.58 as of June 30, 2002 as compared to 1.61 as of December 31, 2001. Capital expenditures were $35.9 million for the six months ended June 30, 2002 as compared to $35.3 million for the six months ended June 30, 2001. Capital expenditures currently anticipated for expanded capacity, cost reductions and the introduction of new products during 2002 are expected to be in excess of depreciation and amortization. These expenditures will be funded from a combination of operating cash flows, availability under credit agreements and commercial paper borrowings. Cash dividends of $0.15 per share were paid on common stock in the three months ended June 30, 2002 and in the three months ended March 31, 2002. The declaration and payment of future dividends will be at the sole discretion of the Board of Directors and will depend upon such factors as our profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by the Board of Directors. Total indebtedness was $719.9 million as of June 30, 2002, primarily consisting of $500.0 million of senior notes and $168.4 million of commercial paper. On June 1, 1998, we issued $200 million of 6.70% fixed rate senior notes having a maturity of ten years from the date of issue. On August 6, 2001, we issued $200 million of 6.625% fixed rate senior notes due August 2006. The remaining $100 million ten-year senior notes bear interest at a 6.75% fixed rate and are due March 2003. As of June 30, 2002, it is expected that commercial paper will be issued to redeem the $100 million senior notes due March 2003. Commercial paper borrowings are expected to be reborrowed in the ordinary course of business. The interest rate on the commercial paper was 2.05% as of June 30, 2002. As of June 30, 2002, we had available a $400 million Five Year Credit Agreement, which expires on May 29, 2006, and a $300 million 364-Day Credit Agreement, which expires on May 28, 2003 (collectively, the Agreements). As of June 30, 2002, no amounts were outstanding under the Agreements. 17 (continued) The $400 million Five Year Credit Agreement provides for borrowings at the London Interbank Offering Rate (LIBOR) plus 0.75% or 0.875%, and the $300 million 364-Day Credit Agreement provides for borrowings at LIBOR plus 0.775% or 0.90%, based on the amount of facility utilization. We pay annual fees of 0.125% on the $400 million facility and 0.10% on the $300 million facility. The Agreements allow for borrowings at specified bid rates. As of June 30, 2002, the three-month LIBOR rate was 1.87%. The Agreements contain financial covenants requiring us to maintain certain financial ratios and standard provisions limiting leverage and liens. We were in compliance with these financial covenants as of June 30, 2002. We have additional unused domestic bank lines that provide for total borrowings of $100 million as of June 30, 2002 and December 31, 2001. Our non-U.S. subsidiaries maintain bank credit facilities in various currencies that provided for available borrowings of $383.9 million and $386.3 million as of June 30, 2002 and December 31, 2001, respectively, of which $293.0 million and $276.1 million, respectively, were unused. Pursuant to the terms of a revolving facility, we sell our trade receivables to a wholly-owned, consolidated subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis up to a $175.0 million undivided ownership interest in the purchased trade receivables to bank conduits. We continue to service the receivables. No servicing asset or liability has been recognized as our cost to service the receivables approximates the servicing income. In accordance with the facility, YRFLLC has sold $175.0 million of an undivided interest in trade receivables as of June 30, 2002 and December 31, 2001. The proceeds from the sale were reflected as a reduction of receivables in the accompanying consolidated condensed balance sheets as of June 30, 2002 and December 31, 2001. The discount rate on the trade receivables sold was 1.82% and 2.00% as of June 30, 2002 and December 31, 2001, respectively. We believe that we will be able to satisfy our principal and interest payment obligations and our working capital and capital expenditure requirements from operating cash flows together with the availability under the Agreements. The Agreements and commercial paper borrowings support seasonal working capital needs and are available for general corporate purposes. Our ability to finance operations in the commercial paper market is dependent upon maintaining satisfactory credit ratings. If our credit ratings would be lowered by the rating agencies, we have the ability to borrow under the Agreements as long as we continue to meet the financial covenants or until expiration of the Agreements. The primary financial covenants are the earnings before interest, taxes and depreciation and amortization (EBITDA) interest coverage and the debt to capital ratio, as defined under the Agreements. As of June 30, 2002, our EBITDA interest coverage was 4.9, exceeding the minimum requirement of 3.5. As of June 30, 2002, our debt to capital ratio was 49%, below the maximum allowed of 57%. In the event we repurchased over 20% of our shares in a twelve month period and our credit ratings were lowered by one full ratings letter, our senior notes due in 2003 could be accelerated for payout. Because our obligations under the Agreements and revolving trade receivables purchase facility bear interest at floating rates, our interest costs are sensitive to changes in prevailing interest rates. In the ordinary course of business, we enter into various types of transactions that involve contracts and financial instruments. We enter into these financial instruments to manage financial market risk, including foreign exchange, commodity price and interest rate risk. Outlook During the second half of 2002, we expect continued service and parts revenue growth, reduced costs and improved plant efficiencies as a result of our cost reduction efforts, and lower interest and tax expenses than in the second half of 2001. In addition, we may experience favorable effects in the second half as a result of strengthening European currencies. 18 (continued) However, we expect these improvements to be partially offset by the impact of market conditions and certain cost increases. We expect the negative economic impact in the commercial air conditioning market to continue during the second half of 2002. These conditions are evidenced by lower backlogs at both ESG and YRG at June 30, 2002 versus June 30, 2001. We anticipate that these market conditions will continue to negatively impact the volume and pricing of commercial equipment sales. We also expect higher costs in the second half of the year due to steel price increases and higher legal costs. Forward-Looking Information - Risk Factors To the extent we have made "forward-looking statements," certain risk factors could cause actual results to differ materially from those anticipated in such forward-looking statements including, but not limited to competition, government regulation, environmental considerations and the successful implementation of our cost reduction actions. Unseasonably cool weather in various parts of the world could adversely affect our UPG and ESG air conditioning businesses and, similarly, the Bristol compressor business. Bristol is also dependent on the successful development and introduction of new products. The ESG air conditioning business could also be affected by a slowdown in the large chiller market and by the acceptance of new product introductions. YRG could be adversely affected by a decline in the value of European currencies. Both YRG and ESG could be negatively impacted by reductions in commercial construction. In addition, our overall performance could be affected by declining worldwide economic conditions or slowdowns resulting from world events. 19 PART II - OTHER INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Item 1 Legal Proceedings On November 7, 2001, a case captioned American Standard, Inc. and American Standard International Inc. v. York International Corporation and York International, S.A. de C.V. was filed in the Federal District for the Western District of Wisconsin. American Standard, a competitor of ours, alleges that two component parts of three models of chillers manufactured by us infringe two patents held by American Standard. American Standard has recently alleged that its damages are in the amount of either $88.7 million or $65 million, depending on the method of calculation. We believe that we do not infringe the American Standard patents and that the patents may be invalid, and we are vigorously defending the action. We were granted summary judgment with respect to certain claims of one of the patents. Even if we were found to infringe the patents, we believe any award of damages would not approach the alleged amounts and would not significantly affect our financial position. However, any award could be material to the period it is recorded. We have also been named among numerous other defendants in 307 asbestos-related lawsuits in various jurisdictions. These primarily relate to the former use by our Engineered Systems and York Refrigeration Groups of gaskets made of an asbestos-containing material. We have been dismissed from eleven of these cases and de minimis settlements have occurred in eight others. Some insurance coverage and/or indemnities from parties from whom we purchased businesses are available. We do not believe that this litigation is likely to have a significant effect on our financial position. Item 2 Changes in Securities Not Applicable Item 3 Defaults Upon Senior Securities Not Applicable Item 4 Submission of Matters to a Vote of Security Holders (a) The Registrant's annual meeting of Stockholders was held on May 25, 2002 (b) Proxies were solicited for the meeting. All nominees for Director were elected and item (c) 2, 3 and 4 (see below) were approved. (c) The following votes were cast at the Annual Meeting for the matters indicated below:
1. Election of Directors Votes For Votes Withheld ------------------------- --------- -------------- Gerald C. McDonough 34,068,785 1,147,239 Michael R. Young 34,254,073 961,951 W. Michael Clevy 34,262,075 953,949 Malcolm W. Gambill 34,253,897 962,127 J. Roderick Heller, III 34,261,695 954,329 Robert F. B. Logan 33,861,551 1,354,473 Donald M. Roberts 33,862,706 1,353,318 James A. Urry 33,859,062 1,356,962 Paul J. Powers 34,261,871 954,153
20 (continued) 2. Proposal to approve the 2002 Votes For Votes Against Abstentions Omnibus Stock Plan 25,534,027 5,687,722 46,092 3. Proposal to approve the 2002 Votes For Votes Against Abstentions Incentive Compensation Plan 29,736,913 1,493,127 37,802 4. The appointment of KPMG LLP Votes For Votes Against Abstentions as independent auditors 33,702,789 1,497,708 20,528
Item 5 Other Information Not Applicable Item 6 Exhibits and Reports on Form 8-K (a) Exhibit 4.1 - 364-DAY CREDIT AGREEMENT, dated as of May 29, 2002, among YORK INTERNATIONAL CORPORATION, as borrower, the initial lenders named therein, as initial lenders, CITIBANK, N.A., as administrative agent for the lenders, JPMORGAN CHASE BANK, as syndication agent, BANK OF TOKYO-MITSUBISHI TRUST COMPANY, FLEET NATIONAL BANK and NORDEA BANK FINLAND PLC, as documentation agents, and JP MORGAN SECURITIES, INC. and SALOMON SMITH BARNEY INC., as joint lead arrangers and joint book managers Exhibit 4.2 - AMENDMENT NO.1 TO THE FIVE YEAR CREDIT AGREEMENT, dated as of May 29, 2002, among York International Corporation, the lenders named therein, as lenders, and Citibank, N.A., as administrative agent for the lenders Exhibit 10.1 - York International Corporation Amended and Restated 2002 Omnibus Stock Plan, effective as of May 23, 2002, as amended and restated May 31, 2002 Exhibit 10.2 - York International Corporation 2002 Incentive Compensation Plan, effective as of January 1, 2002 Exhibit 10.3 - Form of Amendment No. 1 to Severance Agreement between the registrant and certain of its key executives Exhibit 10.4 - Form of Amendment No. 1 to Employment Agreement between the registrant and certain of its key executives Exhibit 99.1 - Certification of the Chief Executive Officer of York International Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit 99.2 - Certification of the Chief Financial Officer of York International Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) None 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned unto duly authorized. YORK INTERNATIONAL CORPORATION ------------------------------ Registrant Date August 13, 2002 /S/ C. David Myers --------------------------------- C. David Myers Corporate Vice President and Chief Financial Officer 22 EX-4.1 3 w62242exv4w1.txt 364-DAY CREDIT AGREEMENT Exhibit 4.1 364-DAY CREDIT AGREEMENT Dated as of May 29, 2002 YORK INTERNATIONAL CORPORATION, a Delaware corporation (the "Borrower"), the banks, financial institutions and other institutional lenders (the "Initial Lenders") listed on the signature pages hereof, CITIBANK, N.A. ("Citibank"), as the administrative agent (the "Agent") for the Lenders (as hereinafter defined), JPMORGAN CHASE BANK, as syndication agent, BANK OF TOKYO-MITSUBISHI TRUST COMPANY, FLEET NATIONAL BANK and NORDEA BANK FINLAND PLC, as documentation agents, and JP MORGAN SECURITIES, INC. and SALOMON SMITH BARNEY INC., as joint lead arrangers and joint book managers, agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Advance" means a Revolving Credit Advance or a Competitive Bid Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 20% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Agent's Account" means the account of the Agent maintained by the Agent at Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. 36852248, Attention: Bank Loan Syndications. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance and, in the case of a Competitive Bid Advance, the office of such Lender notified by such Lender to the Agent as its Applicable Lending Office with respect to such Competitive Bid Advance. "Applicable Margin" means, as of any date (a) for Base Rate Advances, 0.00% per annum and (b) for Eurodollar Rate Advances, a percentage per annum determined by reference to the Public Debt Rating in effect on such date as set forth below:
Applicable Margin for Applicable Margin for Eurodollar Rate Advances Eurodollar Rate Advances On Public Debt Rating Prior to the Term Loan and After the Term Loan S&P/Moody's Conversion Date Conversion Date ----------- --------------- --------------- Level 1 A- or A3 or above 0.420% 0.850% Level 2 BBB+ and Baa1 0.660% 1.100%
Level 3 BBB+ or Baa1 0.775% 1.250% Level 4 BBB or Baa2 1.075% 1.625% Level 5 Lower than Level 4 1.300% 2.250%
"Applicable Percentage" means, as of any date, a percentage per annum determined by reference to the Public Debt Rating in effect on such date as set forth below:
Public Debt Rating Applicable S&P/Moody's Percentage ----------- ---------- Level 1 A- or A3 or above 0.080% Level 2 BBB+ and Baa1 0.090% Level 3 BBB+ or Baa1 0.100% Level 4 BBB or Baa2 0.125% Level 5 Lower than Level 4 0.200%
"Applicable Utilization Fee" means, as of any date prior to the Term Loan Conversion Date that Usage exceeds 25% of the aggregate Revolving Credit Commitments, a percentage per annum determined by reference to the Public Debt Rating in effect on such date as set forth below:
Public Debt Rating Applicable S&P/Moody's Utilization Fee ----------- --------------- Level 1 A- or A3 or above 0.100% Level 2 BBB+ and Baa1 0.100% Level 3 BBB+ or Baa1 0.125% Level 4 BBB or Baa2 0.175% Level 5 Lower than Level 4 0.250%
"Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit C hereto. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; 2 (b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) -1/2 of 1% per annum, plus (ii) the rate obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average (adjusted to the basis of a year of 360 days) being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month U.S. dollar non-personal time deposits in the United States, plus (iii) the average during such three-week period of the annual assessment rates estimated by Citibank for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank in the United States; and (c) 1/2 of one percent per annum above the Federal Funds Rate. "Base Rate Advance" means a Revolving Credit Advance that bears interest as provided in Section 2.07(a)(i). "Borrowing" means a Revolving Credit Borrowing or a Competitive Bid Borrowing. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances or LIBO Rate Advances, on which dealings are carried on in the London interbank market. "Competitive Bid Advance" means an advance by a Lender to the Borrower as part of a Competitive Bid Borrowing resulting from the competitive bidding procedure described in Section 2.03 and refers to a Fixed Rate Advance or a LIBO Rate Advance. "Competitive Bid Borrowing" means a borrowing consisting of simultaneous Competitive Bid Advances from each of the Lenders whose offer to make one or more Competitive Bid Advances as part of such borrowing has been accepted under the competitive bidding procedure described in Section 2.03. "Competitive Bid Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from a Competitive Bid Advance made by such Lender. "Confidential Information" means information that the Borrower furnishes to the Agent or any Lender in a writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or becomes available to the Agent or such Lender from a source other than the Borrower. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Convert", "Conversion" and "Converted" each refers to a conversion of Revolving Credit Advances of one Type into Revolving Credit Advances of the other Type pursuant to Section 2.08 or 2.09. 3 "Covenant Debt" means the sum of, without duplication, (a) all items that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of the Borrower and its Subsidiaries, plus (b) Debt of the Borrower and its Subsidiaries of the type described in clause (f) of the definition of "Debt" and (c) the portion of any item that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of any Person that is guaranteed by the Borrower and its Subsidiaries. "Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement 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), (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (f) the portion of the cash purchase price related to the purchase of accounts receivable from such Person (including without limitation, in the case of the Borrower, the cash proceeds received from time to time from the sale of the Borrower's accounts receivable) that shall not have been recovered by the purchaser thereof (excluding up to $75,000,000 of receivables owing by foreign obligors that are sold by the Borrower and its Subsidiaries), (g) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or similar extensions of credit, (h) all obligations of such Person in respect of Hedge Agreements, (i) all Debt of others referred to in clauses (a) through (h) above or clause (j) below and other payment obligations guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (1) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (3) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (4) otherwise to assure a creditor against loss, and (j) all Debt referred to in clauses (a) through (i) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt, the amount of such Debt being the lesser of the amount of the obligations secured by such Lien and the fair market value of the assets subject to such Lien. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "EBITDA" means, for any Person for any period, net income (or net loss) plus the sum of (a) interest expense, (b) income tax expense, (c) depreciation expense, (d) amortization expense and (e) any extraordinary or non-recurring losses (inclusive of losses related to Statement of Financial Accounting Standards No. 142 and No. 144 in an aggregate amount not to exceed $350,000,000) minus any extraordinary or non-recurring gains, for such period in each case determined for such Person in accordance with GAAP. "Effective Date" has the meaning specified in Section 3.01. 4 "Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender; or (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 8.07, the Borrower, such approval not to be unreasonably withheld or delayed; provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, natural resources or, to the extent related to exposure to Hazardous Materials, health or safety, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of the Borrower's controlled group, or under common control with the Borrower, within the meaning of Section 414 of the Internal Revenue Code. "ERISA Event" means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. 5 "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on Telerate Markets Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period or, if for any reason such rate is not available, the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance comprising part of such Revolving Credit Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If the Telerate Markets Page 3750 (or any successor page) is unavailable, the Eurodollar Rate for any Interest Period for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "Eurodollar Rate Advance" means a Revolving Credit Advance that bears interest as provided in Section 2.07(a)(ii). "Eurodollar Rate Reserve Percentage" for any Interest Period for all Eurodollar Rate Advances or LIBO Rate Advances comprising part of the same Borrowing means the reserve percentage, if any, applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances or LIBO Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fixed Rate Advances" has the meaning specified in Section 2.03(a)(i). "Foreign Subsidiary" means any Subsidiary organized under the laws of a jurisdiction other than the United States of America or any political subdivision thereof. "GAAP" has the meaning specified in Section 1.03. 6 "Hazardous Materials" means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials and polychlorinated biphenyls and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements. "Information Memorandum" means the information memorandum dated April 2002 used by the Agent in connection with the syndication of the Revolving Credit Commitments. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing and each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing, the period commencing on the date of such Eurodollar Rate Advance or LIBO Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, with respect to Eurodollar Rate Advances, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, and subject to clause (iii) of this definition, nine or twelve months, as the Borrower may, upon notice received by the Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (i) the Borrower may not select any Interest Period that ends after the Termination Date except that, if the Revolving Credit Advances have been converted to term loans pursuant to Section 2.06 prior to such selection, such Borrower may not select any Interest Period that ends after the Term Loan Maturity Date; (ii) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Revolving Credit Borrowing or for LIBO Rate Advances comprising part of the same Competitive Bid Borrowing shall be of the same duration; (iii) in the case of any such Revolving Credit Borrowing, the Borrower shall not be entitled to select an Interest Period having duration of nine or twelve months unless, by 2:00 P.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, each Lender notifies the Administrative Agent that such Lender will be providing funding for such Revolving Credit Borrowing with such Interest Period (the failure of any Lender to so respond by such time being deemed for all purposes of this Agreement as an objection by such Lender to the requested duration of such Interest Period); provided that, if any or all of the Lenders object to the requested duration of such Interest Period, the duration of the Interest Period for such Revolving Credit Borrowing shall be one, two, three or six months, as specified by the Borrower requesting such Revolving Credit Borrowing in the applicable Notice of Revolving Credit Borrowing as the desired alternative to an Interest Period of nine or twelve months; (iv) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (v) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in 7 such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Lenders" means the Initial Lenders and each Person that shall become a party hereto pursuant to Section 8.07. "LIBO Rate" means, for any Interest Period for all LIBO Rate Advances comprising part of the same Competitive Bid Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on Dow Jones Markets Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period or, if for any reason such rate is not available, the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the amount that would be the Reference Banks' respective ratable shares of such Borrowing if such Borrowing were to be a Revolving Credit Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If the Dow Jones Markets Telerate Page 3750 (or any successor page) is unavailable, the LIBO Rate for any Interest Period for each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "LIBO Rate Advances" means a Competitive Bid Advance bearing interest based on the LIBO Rate. "Lien" means any lien, security interest or other charge or encumbrance of any kind, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property; provided, however, that no transfer of assets that is treated as a sale in accordance with GAAP shall be deemed to constitute a Lien for purposes of this Agreement. "Loan Document" means this Agreement and the Notes (if any). "Material Adverse Change" means any material adverse change in the business, condition (financial or otherwise), operations, performance or properties of the Borrower or the Borrower and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance or properties of the Borrower or the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or any Lender under this Agreement or any Note or (c) the ability of the Borrower to perform its obligations under this Agreement or any Note. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. 8 "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Worth" means, on any date, all amounts which, in accordance with GAAP, would be included under stockholders' equity on a Consolidated balance sheet of the Borrower and its Subsidiaries at such date, adjusted to exclude (x) accumulated foreign currency translation adjustments and (y) accumulated losses related to Statement of Financial Accounting Standards No. 142 and No. 144 in an aggregate amount not to exceed $350,000,000. "Note" means a Revolving Credit Note or a Competitive Bid Note. "Notice of Competitive Bid Borrowing" has the meaning specified in Section 2.03(a). "Notice of Revolving Credit Borrowing" has the meaning specified in Section 2.02(a). "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b) hereof; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 60 days; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; (d) easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes and (e) Liens securing performance of bids, trade contracts (other than for borrowed money), leases, surety and appeal bonds, performance bonds and similar obligations incurred in the ordinary course of business. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Public Debt Rating" means, as of any date, the rating that has been most recently announced by either S&P or Moody's, as the case may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower (and if either such rating agency has issued more than one such rating, the lowest thereof). For purposes of the foregoing, (a) if only one of S&P and Moody's shall have in effect a Public Debt Rating, the Applicable Margin, the Applicable Percentage and the Applicable Utilization Fee shall be determined by reference to the available rating; (b) if neither S&P nor Moody's shall have in effect a Public Debt Rating, the Applicable Margin, the Applicable Percentage and the Applicable Utilization Fee will be set in accordance with Level 5 under the definition of "Applicable Margin", "Applicable Percentage" or "Applicable Utilization Fee", as the case may be; (c) if any rating established by S&P or Moody's shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (d) if S&P or Moody's shall change the basis on which ratings are established, each reference to the Public Debt Rating announced by S&P or Moody's, as the case may be, shall refer to the then equivalent rating by S&P or Moody's, as the case may be. 9 "Ratable Share" means, with respect to any Lender at any time, a fraction the numerator of which is such Lender's Revolving Credit Commitment at such time and the denominator of which is the Revolving Credit Facility at such time. "Reference Banks" means Citibank, JPMorgan Chase Bank and Wachovia Bank, National Association. "Register" has the meaning specified in Section 8.07(d). "Required Lenders" means at any time Lenders owed at least a majority in interest of the then aggregate unpaid principal amount of the Revolving Credit Advances owing to Lenders, or, if no such principal amount is then outstanding, Lenders having at least a majority in interest of the Revolving Credit Commitments. "Revolving Credit Advance" means an advance by a Lender to the Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of Revolving Credit Advance). "Revolving Credit Borrowing" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by each of the Lenders pursuant to Section 2.01. "Revolving Credit Commitment" means as to any Lender (a) the amount set forth opposite such Lender's name on the signature pages hereof under the caption "Revolving Credit Commitment", or (b) if such Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(d) as such Lender's "Revolving Credit Commitment", as such amount may be reduced pursuant to Section 2.05. "Revolving Credit Facility" means the aggregate of the Revolving Credit Commitments. "Revolving Credit Note" means a promissory note of the Borrower payable to the order of any Lender, delivered pursuant to a request made under Section 2.16 in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances made by such Lender. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Term Loan Conversion Date" means the Termination Date on which all Revolving Credit Advances outstanding on such date are converted into term loans pursuant to Section 2.06. 10 "Term Loan Election" has the meaning specified in Section 2.06. "Term Loan Maturity Date" means the earlier of (a) the first anniversary of the Termination Date and (b) the date of termination in whole of the aggregate Commitments pursuant to Section 2.05 or 6.01. "Termination Date" means the earlier of May 28, 2003 and the date of termination in whole of the Revolving Credit Commitments pursuant to Section 2.05(a) or 6.01. "Unused Revolving Credit Commitment" means, with respect to any Lender at any time, (a) such Lender's Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances made by such Lender and outstanding at such time plus (ii) such Lender's Ratable Share of the aggregate principal amount of all Competitive Bid Advances outstanding at such time. "Usage" means, at any time the sum of the aggregate principal amount of the Advances then outstanding. "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements of the Borrower as of December 31, 2001, as modified by the Borrower's adoption of Statement of Financial Accounting Standards No. 142 and No. 144 ("GAAP"). ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Credit Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an amount for each Revolving Credit Advance not to exceed such Lender's Unused Revolving Credit Commitment. Each Revolving Credit Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Credit Advances of the same Type made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. Within the limits of each Lender's Unused Revolving Credit Commitment, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.10 and reborrow under this Section 2.01(a). SECTION 2.02. Making the Revolving Credit Advances. (a) Each Revolving Credit Borrowing shall be made on notice, given not later than (x) 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Eurodollar Rate Advances or (y) 11:00 A.M. (New York City time) on the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which shall give to each Lender prompt notice thereof by telecopier or telex. Each such notice of a Revolving Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be by telephone, confirmed immediately in writing, or telecopier or telex in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Revolving Credit Borrowing, (ii) Type of Advances comprising such Revolving Credit Borrowing, (iii) aggregate amount of such Revolving Credit Borrowing, and (iv) in the case of a Revolving Credit 11 Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Revolving Credit Advance. Each Lender shall, before 12:00 noon (New York City time) on the date of such Revolving Credit Borrowing make available for the account of its Applicable Lending Office to the Agent at the Agent's Account, in same day funds, such Lender's ratable portion of such Revolving Credit Borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at the Agent's address referred to in Section 8.02. (b) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit Borrowing is less than $10,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or 2.12 and (ii) the Eurodollar Rate Advances may not be outstanding as part of more than ten separate Revolving Credit Borrowings. (c) Each Notice of Revolving Credit Borrowing shall be irrevocable and binding on the Borrower. In the case of any Revolving Credit Borrowing that the related Notice of Revolving Credit Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Revolving Credit Borrowing for such Revolving Credit Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Revolving Credit Advance to be made by such Lender as part of such Revolving Credit Borrowing when such Revolving Credit Advance, as a result of such failure, is not made on such date. (d) Unless the Agent shall have received notice from a Lender prior to the date of any Revolving Credit Borrowing that such Lender will not make available to the Agent such Lender's ratable portion of such Revolving Credit Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Revolving Credit Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent, such Lender and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Revolving Credit Advances comprising such Revolving Credit Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Revolving Credit Advance as part of such Revolving Credit Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Revolving Credit Advance to be made by it as part of any Revolving Credit Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Credit Advance to be made by such other Lender on the date of any Revolving Credit Borrowing. SECTION 2.03. The Competitive Bid Advances. (a) Each Lender severally agrees that the Borrower may make Competitive Bid Borrowings under this Section 2.03 from time to time on any Business Day during the period from the date hereof until the date occurring 30 days prior to the Termination Date in the manner set forth below; provided that, following the making of each Competitive Bid Borrowing, the aggregate Usage shall not exceed the Revolving Credit Facility. (i) The Borrower may request a Competitive Bid Borrowing under this Section 2.03 by delivering to the Agent, by telecopier or telex, a notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying therein the requested (v) date of such proposed Competitive Bid Borrowing, (w) aggregate amount of such proposed Competitive Bid Borrowing, (x) in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, Interest Period, or in the case of a Competitive Bid Borrowing consisting of Fixed Rate 12 Advances, maturity date for repayment of each Fixed Rate Advance to be made as part of such Competitive Bid Borrowing (which maturity date may not be earlier than the date occurring 7 days after the date of such Competitive Bid Borrowing or later than the earlier of (I) 180 days after the date of such Competitive Bid Borrowing and (II) the Termination Date), (y) interest payment date or dates relating thereto, and (z) other terms (if any) to be applicable to such Competitive Bid Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed Competitive Bid Borrowing, if the Borrower shall specify in the Notice of Competitive Bid Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum (the Advances comprising any such Competitive Bid Borrowing being referred to herein as "Fixed Rate Advances") and (B) at least four Business Days prior to the date of the proposed Competitive Bid Borrowing, if the Borrower shall instead specify in the Notice of Competitive Bid Borrowing that the Advances comprising such Competitive Bid Borrowing shall be LIBO Rate Advances. Each Notice of Competitive Bid Borrowing shall be irrevocable and binding on the Borrower. The Agent shall in turn promptly notify each Lender of each request for a Competitive Bid Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of Competitive Bid Borrowing. (ii) Each Lender may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Competitive Bid Advances to the Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Agent (which shall give prompt notice thereof to the Borrower), (A) before 9:30 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and (B) before 10:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances of the minimum amount and maximum amount of each Competitive Bid Advance which such Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts may, subject to the proviso to the first sentence of this Section 2.03(a), exceed such Lender's Revolving Credit Commitment, if any), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such Competitive Bid Advance; provided that if the Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer at least 30 minutes before the time and on the date on which notice of such election is to be given to the Agent, by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Agent before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any Competitive Bid Advance as part of such Competitive Bid Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing. (iii) The Borrower shall, in turn, (A) before 10:30 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and (B) before 11:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, either: (x) cancel such Competitive Bid Borrowing by giving the Agent notice to that effect, or (y) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in its sole discretion, by giving notice to the Agent of the amount of each Competitive Bid Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Agent on behalf of such Lender for such Competitive Bid Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such Competitive Bid Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Agent notice to that effect. The Borrower shall accept the offers made by any Lender or Lenders to make Competitive Bid Advances in 13 order of the lowest to the highest rates of interest offered by such Lenders. If two or more Lenders have offered the same interest rate, the amount to be borrowed at such interest rate will be allocated among such Lenders in proportion to the amount that each such Lender offered at such interest rate. (iv) If the Borrower notifies the Agent that such Competitive Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent shall give prompt notice thereof to the Lenders and such Competitive Bid Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such Competitive Bid Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Borrower, (B) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of the amount of each Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing, and (C) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt, that the Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. Each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing shall, before 12:00 noon (New York City time) on the date of such Competitive Bid Borrowing specified in the notice received from the Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Agent at the Agent's Account, in same day funds, such Lender's portion of such Competitive Bid Borrowing. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by the Agent of such funds, the Agent will make such funds available to the Borrower at the Agent's address referred to in Section 8.02. Promptly after each Competitive Bid Borrowing the Agent will notify each Lender of the amount of the Competitive Bid Borrowing and the dates upon which such Competitive Bid Borrowing commenced and will terminate. (vi) If the Borrower notifies the Agent that it accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, such notice of acceptance shall be irrevocable and binding on the Borrower. The Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in the related Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing when such Competitive Bid Advance, as a result of such failure, is not made on such date. (b) Each Competitive Bid Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of each Competitive Bid Borrowing, the Borrower shall be in compliance with the limitation set forth in the proviso to the first sentence of subsection (a) above. (c) Within the limits and on the conditions set forth in this Section 2.03, the Borrower may from time to time borrow under this Section 2.03, repay or prepay pursuant to subsection (d) below, and reborrow under this Section 2.03, provided that a Competitive Bid Borrowing shall not be made within three Business Days of the date of any other Competitive Bid Borrowing. (d) The Borrower shall repay to the Agent for the account of each Lender that has made a Competitive Bid Advance, on the maturity date of each Competitive Bid Advance (such maturity date being that specified by the Borrower for repayment of such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and provided in the Competitive Bid Note evidencing such Competitive Bid Advance), the then unpaid principal amount of such Competitive Bid Advance. The Borrower 14 shall have no right to prepay any principal amount of any Competitive Bid Advance unless, and then only on the terms, specified by the Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and set forth in the Competitive Bid Note evidencing such Competitive Bid Advance. (e) The Borrower shall pay interest on the unpaid principal amount of each Competitive Bid Advance from the date of such Competitive Bid Advance to the date the principal amount of such Competitive Bid Advance is repaid in full, at the rate of interest for such Competitive Bid Advance specified by the Lender making such Competitive Bid Advance in its notice with respect thereto delivered pursuant to subsection (a)(ii) above, payable on the interest payment date or dates specified by the Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above, as provided in the Competitive Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during the continuance of an Event of Default under Section 6.01(a), the Borrower shall pay interest on the amount of unpaid principal of and interest on each Competitive Bid Advance owing to a Lender, payable in arrears on the date or dates interest is payable thereon, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Competitive Bid Advance under the terms of the Competitive Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note. (f) The indebtedness of the Borrower resulting from each Competitive Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower payable to the order of the Lender making such Competitive Bid Advance. SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to pay to the Agent for the account of each Lender a facility fee on the aggregate amount of such Lender's Revolving Credit Commitment from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Applicable Percentage in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing June 30, 2002, and on the Termination Date. (b) Agent's Fees. The Borrower shall pay to the Agent for its own account such fees as may from time to time be agreed between the Borrower and the Agent. SECTION 2.05. Termination or Reduction of the Commitments. (a) Optional. The Borrower shall have the right, upon at least three Business Days' notice to the Agent, to terminate in whole or permanently reduce ratably in part the unused portions of the respective Unused Revolving Credit Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof. (b) Mandatory. On the Termination Date and, if the Borrower has made the Term Loan Election in accordance with Section 2.06 prior to such date, from time to time thereafter upon each prepayment of the Revolving Credit Advances pursuant to Section 2.10, the Commitments of the Lenders shall be automatically and permanently reduced on a pro rata basis by an amount equal to the amount by which (i) the aggregate Commitments immediately prior to such reduction exceeds (ii) the aggregate unpaid principal amount of all Revolving Credit Advances outstanding at such time. SECTION 2.06. Repayment of Revolving Credit Advances. The Borrower shall, subject to the next succeeding sentence, repay to the Agent for the ratable account of the Lenders on the Termination Date the aggregate principal amount of the Revolving Credit Advances then outstanding. The Borrower may, upon not less than 15 days' notice to the Agent, elect (the "Term Loan Election") to convert all of the Revolving Credit Advances outstanding on the Termination Date in effect at such time into term loans which the Borrower shall repay in full ratably to the Lenders on the Term Loan Maturity Date; provided that the conditions set forth in Section 3.02 have been satisfied. All Revolving Credit Advances converted into term loans pursuant to this Section 2.06 shall continue to constitute Revolving Credit Advances except that the Borrower may not reborrow pursuant to Section 2.01 after all or any portion of such Revolving Credit Advances have been prepaid pursuant to Section 2.10. 15 SECTION 2.07. Interest on Revolving Credit Advances. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Advance owing to each Lender from the date of such Revolving Credit Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full. (ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Revolving Credit Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Revolving Credit Advance plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default under Section 6.01(a), the Agent may, and upon the request of the Required Lenders shall, require the Borrower to pay interest ("Default Interest") on (i) the unpaid principal amount of each Revolving Credit Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above, provided, however, that following acceleration of the Advances pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not previously required by the Agent. SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Agent timely information for the purpose of determining each Eurodollar Rate and each LIBO Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.07(a)(i) or (ii), and the rate, if any, furnished by each Reference Bank for the purpose of determining the interest rate under Section 2.07(a)(ii). (b) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (c) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. 16 (d) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such Advances shall automatically Convert into Base Rate Advances. (e) Upon the occurrence and during the continuance of any Event of Default under Section 6.01(a), (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended. (f) If Telerate Markets Page 3750 is unavailable and fewer than two Reference Banks furnish timely information to the Agent for determining the Eurodollar Rate or LIBO Rate for any Eurodollar Rate Advances or LIBO Rate Advances, as the case may be, (i) the Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances or LIBO Rate Advances, as the case may be, (ii) with respect to Eurodollar Rate Advances, each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii) the obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.09. Optional Conversion of Revolving Credit Advances. The Borrower may on any Business Day, upon notice given to the Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12, Convert all Revolving Credit Advances of one Type comprising the same Borrowing into Revolving Credit Advances of the other Type; provided, however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b) and no Conversion of any Revolving Credit Advances shall result in more separate Revolving Credit Borrowings than permitted under Section 2.02(b). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Revolving Credit Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower. SECTION 2.10. Prepayments of Revolving Credit Advances. (a) Optional. The Borrower may, upon notice at least three Business Days' prior to the date of such prepayment, in the case of Eurodollar Rate Advances, and not later than 11:00 A.M. (New York City time) on the date of such prepayment, in the case of Base Rate Advances, to the Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given, the Borrower shall prepay the outstanding principal amount of the Revolving Credit Advances comprising part of the same Revolving Credit Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(c). (b) Mandatory. The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Revolving Credit Borrowing equal to the amount by which the aggregate principal amount of the Advances then outstanding exceeds the Revolving Credit Facility on such Business Day. 17 SECTION 2.11. Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances or LIBO Rate Advances (excluding for purposes of this Section 2.11 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to the Borrower and the Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of such type, then, upon demand by such Lender (with a copy of such demand to the Agent), the Borrower shall pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. A certificate as to such amounts submitted to the Borrower and the Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error. (c) Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.11 shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate such Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Borrower of the event giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided, further that, if the event giving rise to such increased costs or reductions is retroactive, then the 180 day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.12. Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or LIBO Rate Advances or to fund or maintain Eurodollar Rate Advances or LIBO Rate Advances hereunder, (a) each Eurodollar Rate Advance or LIBO Rate Advance, as the case may be, will automatically, at the end of the applicable Interest Period then in effect if permitted and otherwise upon such demand, Convert into a Base Rate Advance or an Advance that bears interest at the rate set forth in Section 2.07(a)(i), as the case may be, and (b) the obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurocurrency Lending Office if the making of such a designation would allow such Lender or its Eurocurrency Lending Office to continue to perform its obligations to make Eurocurrency Rate Advances or to continue to fund or maintain Eurocurrency Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION 2.13. Payments and Computations. (a) The Borrower shall make each payment hereunder, irrespective of any right of counterclaim or set-off, not later than 11:00 A.M. (New York City time) on 18 the day when due in U.S. dollars to the Agent at the Agent's Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.03, 2.11, 2.14 or 8.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Acceptance, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) All computations of interest based on the Base Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, the LIBO Rate or the Federal Funds Rate or in respect of Fixed Rate Advances and of facility fees shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or facility fees are payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.14. Taxes. (a) Any and all payments by the Borrower to or for the account of any Lender or the Agent hereunder or under the Notes or any other documents to be delivered hereunder shall be made, in accordance with Section 2.13 or the applicable provisions of such other documents, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note or any other documents to be delivered hereunder to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. 19 (b) In addition, the Borrower shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or any other documents to be delivered hereunder or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Notes or any other documents to be delivered hereunder (hereinafter referred to as "Other Taxes"). (c) The Borrower shall indemnify each Lender and the Agent for and hold it harmless against the full amount of Taxes or Other Taxes (including, without limitation, taxes of any kind imposed or asserted by any jurisdiction on amounts payable under this Section 2.14) imposed on or paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Agent, at its address referred to in Section 8.02, the original or a certified copy of a receipt evidencing such payment to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Agent. In the case of any payment hereunder or under the Notes or any other documents to be delivered hereunder by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Agent, at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender and on the date of the Assumption Agreement or the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender, and from time to time thereafter as reasonably requested in writing by the Borrower (but only so long as such Lender remains lawfully able to do so), shall provide each of the Agent and the Borrower with two original Internal Revenue Service forms W-8BEN or W-8ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the Notes. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender assignee becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8BEN or W-8ECI, that the Lender reasonably considers to be confidential, the Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. (f) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form, certificate or other document described in Section 2.14(e) (other than if such failure is due to a change in law, or in the interpretation or application thereof, occurring subsequent to the date on which a form, certificate or other document originally was required to be provided, or if such form, certificate or other document otherwise is not required under subsection (e) above), such Lender shall not be entitled to indemnification under Section 2.14(a) or (c) with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender become subject to Taxes because of its failure to deliver a form, certificate or other document required hereunder, the Borrower shall take such steps as the Lender shall reasonably request to assist the Lender to recover such Taxes. 20 SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Revolving Credit Advances owing to it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of its ratable share of payments on account of the Revolving Credit Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Revolving Credit Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. SECTION 2.16. Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Revolving Credit Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Revolving Credit Advances. The Borrower agrees that upon notice by any Lender to the Borrower (with a copy of such notice to the Agent) to the effect that a Revolving Credit Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Revolving Credit Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a Revolving Credit Note payable to the order of such Lender in a principal amount up to the Revolving Credit Commitment of such Lender. (b) The Register maintained by the Agent pursuant to Section 8.07(d) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender's share thereof. (c) Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement. SECTION 2.17. Use of Proceeds. The proceeds of the Advances shall be available (and the Borrower agrees that it shall use such proceeds) solely for general corporate purposes of the Borrower and its Subsidiaries. ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied: (a) There shall have occurred no Material Adverse Change since December 31, 2001. 21 (b) There shall exist no action, suit, investigation, litigation or proceeding affecting the Borrower or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) could be reasonably expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby. (c) Nothing shall have come to the attention of the Lenders during the course of their due diligence investigation to lead them to believe that the Information Memorandum was or has become misleading, incorrect or incomplete in any material respect; without limiting the generality of the foregoing, the Lenders shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries as they shall have requested. (d) All governmental and third party consents and approvals necessary in connection with the transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not acceptable to the Lenders) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lenders that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (e) The Borrower shall have notified the Agent, who will promptly notify each Lender, in writing as to the proposed Effective Date. (f) The Borrower shall have paid all accrued fees and expenses of the Agent and the Lenders (including the accrued fees and expenses of counsel to the Agent). (g) On the Effective Date, the following statements shall be true and the Agent shall have received for the account of each Lender a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that: (i) The representations and warranties contained in Section 4.01 are correct on and as of the Effective Date, (ii) No event has occurred and is continuing that constitutes a Default, and (iii) The Borrower has terminated the commitments of the lenders and repaid or prepaid in full all amounts outstanding the 364-Day Revolving Credit Agreement dated as of May 29, 2001 among the Borrower, the lenders parties thereto and Citibank, N.A., as agent. By execution of this Agreement, each of the Lenders that is a lender under the credit agreement referred to in clause (iii) above hereby waives the requirement set forth in Section 2.05 of such credit agreement of three business days' prior notice to the termination of their commitments thereunder. (h) The Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Agent and (except for the Revolving Credit Notes) in sufficient copies for each Lender: (i) The Revolving Credit Notes to the order of the Lenders to the extent requested by any Lender pursuant to Section 2.16. (ii) Certified copies of the resolutions of the Board of Directors of the Borrower approving the Loan Documents, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Loan Documents. 22 (iii) A certificate of the Secretary or an Assistant Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign the Loan Documents and the other documents to be delivered hereunder. (iv) A favorable opinion of each of Jane G. Davis, Vice President, Secretary and General Counsel of the Borrower, and Miles & Stockbridge P.C., counsel for the Borrower, substantially in the form of Exhibit D-1 and Exhibit D-2 hereto, respectively, and as to such other matters as any Lender through the Agent may reasonably request. (v) A favorable opinion of Shearman & Sterling, counsel for the Agent, in form and substance satisfactory to the Agent. SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing and the Term Loan Conversion Date. The obligation of each Lender to make a Revolving Credit Advance on the occasion of each Revolving Credit Borrowing and the effectiveness of the Term Loan Election pursuant to Section 2.06 shall be subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Revolving Credit Borrowing or on the Term Loan Conversion Date, as the case may be, (a) the following statements shall be true (and each of the giving of the applicable Notice of Revolving Credit Borrowing, notice of Term Loan Election and the acceptance by the Borrower of the proceeds of such Revolving Credit Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or the Term Loan Conversion Date such statements are true): (i) the representations and warranties contained in Section 4.01 (except, in the case of Revolving Credit Borrowings, the representations set forth in the last sentence of subsection (e) thereof and in subsection (f)(i) thereof) are correct on and as of such date, before and after giving effect to such Revolving Credit Borrowing and to the application of the proceeds therefrom or to the Term Loan Election, as the case may be, as though made on and as of such date, and (ii) no event has occurred and is continuing, or would result from such Revolving Credit Borrowing or from the application of the proceeds therefrom or from the effectiveness of the Term Loan Election, that constitutes a Default; and (b) the Agent shall have received such other approvals, opinions or documents as any Lender through the Agent may reasonably request. SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing. The obligation of each Lender that is to make a Competitive Bid Advance on the occasion of a Competitive Bid Borrowing to make such Competitive Bid Advance as part of such Competitive Bid Borrowing is subject to the conditions precedent that (i) the Agent shall have received the written confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on or before the date of such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note payable to the order of such Lender for each of the one or more Competitive Bid Advances to be made by such Lender as part of such Competitive Bid Borrowing, in a principal amount equal to the principal amount of the Competitive Bid Advance to be evidenced thereby and otherwise on such terms as were agreed to for such Competitive Bid Advance in accordance with Section 2.03, and (iii) on the date of such Competitive Bid Borrowing the following statements shall be true (and each of the giving of the applicable Notice of Competitive Bid Borrowing and the acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Competitive Bid Borrowing such statements are true): (a) the representations and warranties contained in Section 4.01 (except the representations set forth in the last sentence of subsection (e) thereof and in subsection (f)(i) thereof) are correct on and as of the date of such Competitive Bid Borrowing, before and after giving effect to such Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, 23 (b) no event has occurred and is continuing, or would result from such Competitive Bid Borrowing or from the application of the proceeds therefrom, that constitutes a Default, and (c) no event has occurred and no circumstance exists as a result of which the information concerning the Borrower that has been provided to the Agent and each Lender by the Borrower in connection herewith would include an untrue statement of a material fact or omit to state any material fact or any fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. SECTION 3.04. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower, by notice to the Lenders, designates as the proposed Effective Date, specifying its objection thereto. The Agent shall promptly notify the Lenders of the occurrence of the Effective Date. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) The execution, delivery and performance by the Borrower of the Loan Documents and the consummation of the transactions contemplated hereby, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's charter or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by the Borrower of the Loan Documents. (d) This Agreement has been, and each of the other Loan Documents when delivered hereunder will have been, duly executed and delivered by the Borrower. This Agreement is, and each of the other Loan Documents when delivered hereunder will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (e) The Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2001, and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of KPMG LLP, independent public accountants, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at March 31, 2002, and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the three months then ended, duly certified by the chief financial officer or the treasurer of the Borrower, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheet as at March 31, 2002, and said statements of income and cash flows for the three months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the 24 periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 2001, there has been no Material Adverse Change. (f) There is no pending or, to the knowledge of the Borrower, threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) could be reasonably expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby. (g) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. (h) The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and Environmental Laws. (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that (i) does not singly or in the aggregate exceed $25,000,000 or (ii) is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. (d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises; provided, however, that (i) the Borrower and its Subsidiaries may consummate any transaction permitted under Section 5.02(b), (ii) any Subsidiary the aggregate book value of the assets of which is less than $65,000,000 will not be subject to this Section 5.01(d) and (iii) neither the Borrower nor any of its Subsidiaries shall be required to preserve any right or franchise or, in the case of any immaterial Subsidiary, its existence, if the Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Subsidiary or the Lenders. 25 (e) Visitation Rights. At any reasonable time and from time to time upon reasonable notice, permit the Agent or any of the Lenders or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants. (f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time. (g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its material properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under this Agreement with any of their Affiliates (other than the Borrower and its Subsidiaries) on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate, except for transactions with joint ventures in which the Borrower owns, directly or indirectly, an interest of at least 20%, which could not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (i) Reporting Requirements. Furnish to the Lenders: (i) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, the Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by the chief financial officer or treasurer of the Borrower as having been prepared in accordance with generally accepted accounting principles and certificates of the chief financial officer or treasurer of the Borrower as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.03, provided that in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (ii) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, containing the Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case accompanied by an opinion without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, acceptable to the Required Lenders by KPMG LLP or other independent public accountants of nationally recognized standing and certificates of the chief financial officer or treasurer of the Borrower as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.03, provided that in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; 26 (iii) as soon as possible and in any event within five days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer or treasurer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all reports that the Borrower sends to any of its securityholders, and copies of all reports and registration statements that the Borrower or any Subsidiary files with the Securities and Exchange Commission; (v) promptly after the commencement (or, if later, promptly after the Borrower becomes aware) thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(f); (vi) promptly after the Borrower becomes aware thereof, notice of a development or event which could reasonably be expected to have a Material Adverse Effect; and (vii) such other information respecting the Borrower or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request. (j) Change in Nature of Business. Continue, and cause its Subsidiaries to continue, to engage in business of the same general type as conducted by it and its Subsidiaries, taken as a whole, on the date hereof. SECTION 5.02. Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not: (a) Liens, Etc. Create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, other than: (i) Permitted Liens and Liens on assets of Subsidiaries of the Borrower for the benefit of other Subsidiaries of the Borrower or for the benefit of the Borrower, (ii) purchase money Liens upon or in any assets acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such assets or to secure Debt incurred solely for the purpose of financing the acquisition of such assets, or Liens existing on such assets at the time of or substantially contemporaneously with its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such assets) or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided, however, that no such Lien shall extend to or cover any properties of any character other than the assets being acquired, and no such extension, renewal or replacement shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed or replaced. (iii) the Liens existing on the Effective Date and described on Schedule 5.02(a) hereto, (iv) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of the Borrower; provided that such Liens were not created in contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person so merged into or consolidated with the Borrower or such Subsidiary or acquired by the Borrower or such Subsidiary, 27 (v) the replacement, extension or renewal of any Lien permitted by clause (iii) or (iv) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby, (vi) Liens on any capital stock which is not Voting Stock, and on not more than 20% of the Voting Stock, of any Foreign Subsidiary securing Debt of the Borrower or any Foreign Subsidiary in an aggregate amount at any time outstanding for the Borrower and all Foreign Subsidiaries not to exceed 25% of Net Worth; and (vii) Liens not otherwise permitted by this Section 5.02(a) securing obligations in an aggregate amount not to exceed 10% of Net Worth. (b) Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, or permit any of its Subsidiaries to do so, except that (i) any Subsidiary of the Borrower may merge or consolidate with or into, or dispose of assets to, any other Subsidiary of the Borrower, (ii) any Subsidiary of the Borrower may merge into or dispose of assets to the Borrower and (iii) any Subsidiary of the Borrower may sell, lease, transfer or otherwise dispose of any or all of its assets in connection with an investment in a joint venture engaged in a business of the same general type as that engaged in by the Borrower and its Subsidiaries, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom and provided, further, that any Subsidiary of the Borrower the then aggregate book value of the assets of which is less than $65,000,000 shall not be subject to this Section 5.02(b). (c) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles. SECTION 5.03. Financial Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will: (a) Interest Coverage Ratio. Maintain a ratio of Consolidated EBITDA of the Borrower and its Subsidiaries for the period of four fiscal quarters most recently ended to Consolidated interest expense of the Borrower and its Subsidiaries for that period as reported on the Consolidated statements of income (or comparable statement) of not less than 3.50 : 1.00 (b) Covenant Debt to Capital. Maintain a ratio of Consolidated Covenant Debt to the sum of Consolidated Covenant Debt plus Net Worth of not greater than the ratio set forth below measured as of the end of each fiscal quarter during the year set forth below:
Year Ratio - ---- ----- 2002 0.57 : 1.00 2003 0.52 : 1.00 2004 and thereafter 0.50 : 1.00
ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: 28 (a) The Borrower shall fail to pay any principal of any Advance when the same becomes due and payable; or the Borrower shall fail to pay any interest on any Advance or make any other payment of fees or other amounts payable under this Agreement or any Note within five Business Days after the same becomes due and payable; or (b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made; or (c) (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(d), (e), (h) or (i), 5.02 or 5.03, or (ii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender; or (d) The Borrower or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Debt that is outstanding in a principal or notional amount of at least $25,000,000 in the aggregate (but excluding Debt outstanding hereunder) of the Borrower or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (e) The Borrower or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Judgments or orders for the payment of money in excess of $25,000,000 in the aggregate shall be rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) (i) Any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of the Borrower (or other securities convertible into such Voting Stock) representing 30% or more of the combined voting power of all Voting Stock of the Borrower; or (ii) during any period of up to 24 consecutive months, commencing 29 before or after the date of this Agreement, individuals who at the beginning of such 24-month period were directors of the Borrower shall cease for any reason to constitute a majority of the board of directors of the Borrower (except to the extent that individuals who at the beginning of such 24-month period were replaced by individuals (x) elected by a majority of the remaining members of the board of directors of the Borrower or (y) nominated for election by a majority of the remaining members of the board of directors of the Borrower and thereafter elected as directors by the shareholders of the Borrower) or (i) The Borrower or any of its ERISA Affiliates shall incur, or, in the reasonable opinion of the Required Lenders, shall be reasonably likely to incur liability in excess of $25,000,000 in the aggregate as a result of one or more of the following: (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of the Borrower or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (i) may treat the Lender that made any Advance as the holder of the Debt resulting therefrom until the Agent receives and accepts an Assignment and Acceptance entered into by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or the existence at any time of any Default or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall 30 incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. Citibank and Affiliates. With respect to its Commitment, the Advances made by it and the Note issued to it, Citibank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any such Subsidiary, all as if Citibank were not the Agent and without any duty to account therefor to the Lenders. The Agent shall have no duty to disclose information obtained or received by it or any of its Affiliates relating to the Borrower or its Subsidiaries to the extent such information was obtained or received in any capacity other than as Agent. SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. Indemnification. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrower) from and against such Lender's Ratable Share of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement (collectively, the "Indemnified Costs"), provided that no Lender shall be liable for any portion of the Indemnified Costs resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Agent, any Lender or a third party. SECTION 7.06. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 7.07. Other Agents. Each Lender hereby acknowledges that neither the documentation agent nor any other Lender designated as any "Agent" on the signature pages hereof has any liability hereunder other than in its capacity as a Lender. 31 EXHIBIT 4.1 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Revolving Credit Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (a) waive any of the conditions specified in Section 3.01, (b) increase the aggregate Revolving Credit Commitments of the Lenders, (c) reduce the principal of, or interest on, the Revolving Credit Advances or any fees or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Revolving Credit Advances or any fees or other amounts payable hereunder, (e) change the percentage of the Revolving Credit Commitments or of the aggregate unpaid principal amount of the Revolving Credit Advances, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder or (f) amend this Section 8.01; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note. SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed or delivered, if to the Borrower, at its address at 631 South Richland Avenue, York, Pennsylvania 17403, Attention: Treasurer, Telephone: (717) 771-7438, Fax: (717) 771-6843; if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department; or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed, telecopied, telegraphed or telexed, be effective when deposited in the mails, telecopied, delivered to the telegraph company or confirmed by telex answerback, respectively, except that notices and communications to the Agent pursuant to Article II, III or VII shall not be effective until received by the Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, (A) all due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, consultant, and audit expenses and (B) the reasonable fees and expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, reasonable fees and expenses of counsel for the Agent and each Lender in connection with the enforcement of rights under this Section 8.04(a). (b) The Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by or asserted or awarded against any Indemnified Party, in each 32 case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, equityholders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower also agrees not to assert any claim for special, indirect, consequential or punitive damages against the Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, arising out of or otherwise relating to the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance or LIBO Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10 or 2.12, acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or by an Eligible Assignee to a Lender other than on the last day of the Interest Period for such Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 8.07 as a result of a demand by the Borrower pursuant to Section 8.07(a), the Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes. SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its Affiliates may have. SECTION 8.06. Binding Effect. This Agreement shall become effective (other than Sections 2.01 and 2.03, which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by the Borrower and the Agent and when the Agent shall have been notified by each Initial Lender that such Initial Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 8.07. Assignments and Participations. (a) Each Lender may and, if demanded by the Borrower (following a demand by such Lender pursuant to Section 2.11 or 2.14) upon at least five Business Days' 33 notice to such Lender and the Agent, will assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Revolving Credit Advances owing to it and the Revolving Credit Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement (other than any right to make Competitive Bid Advances, Competitive Bid Advances owing to it and Competitive Bid Notes), (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment made as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower after consultation with the Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (v) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and until such Lender shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement, and (vi) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Revolving Credit Note subject to such assignment and a processing and recordation fee of $3,500 payable by the parties to each such assignment, provided, however, that in the case of each assignment made as a result of a demand by the Borrower, such recordation fee shall be payable by the Borrower except that no such recordation fee shall be payable in the case of an assignment made at the request of the Borrower to an Eligible Assignee that is an existing Lender, and (vii) any Lender may, without the approval of the Borrower and the Agent, assign all or a portion of its rights to any of its Affiliates. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Section 2.11, 2.14 and 8.04 to the extent any claim thereunder relates to an event arising prior such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. 34 (c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Revolving Credit Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (d) The Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Each Lender may sell participations to one or more banks or other entities (other than the Borrower or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Revolving Credit Commitment, the Advances owing to it and any Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Revolving Credit Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information relating to the Borrower received by it from such Lender. (g) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. SECTION 8.08. Confidentiality. Neither the Agent nor any Lender shall disclose any Confidential Information to any other Person without the consent of the Borrower, other than (a) to the Agent's or such Lender's Affiliates and their officers, directors, employees, agents and advisors and, as contemplated by Section 8.07(f), to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process and (c) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking. SECTION 8.09. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of 35 an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the Notes, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. The Borrower hereby agrees that service of process in any such action or proceeding brought in the any such New York State court or in such federal court may be made by the mailing thereof by any parties hereto by registered or certified mail, postage prepaid, to the Borrower at its address specified pursuant to Section 8.02. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or the Notes in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 36 SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the Agent and the Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the Notes or the actions of the Agent or any Lender in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. YORK INTERNATIONAL CORPORATION By __________________________ Title: CITIBANK, N.A., as Administrative Agent By __________________________ Title: Administrative Agent $29,000,000.00 CITIBANK, N.A. By _______________________ Name: Title: Syndication Agent $29,000,000.00 JPMORGAN CHASE BANK By _______________________ Name: Title: Documentation Agents $29,000,000.00 BANK OF TOKYO-MITSUBISHI TRUST COMPANY By _______________________ Name: Title: $29,000,000.00 FLEET NATIONAL BANK By _______________________ Name: Title:
37 $29,000,000.00 NORDEA BANK FINLAND PLC By _______________________ Name: Title: By _______________________ Name: Title: Senior Managing Agents $24,000,000.00 WACHOVIA BANK, NATIONAL ASSOCIATION By _______________________ Name: Title: $19,000,000.00 THE BANK OF NOVA SCOTIA By _______________________ Name: Title: $19,000,000.00 BNP PARIBAS By _______________________ Name: Title: By _______________________ Name: Title: $19,000,000.00 DANSKE BANK A/S CAYMAN ISLANDS BRANCH By _______________________ Name: Title: By _______________________ Name: Title: $19,000,000.00 ING BANK By _______________________ Name: Title:
38 $19,000,000.00 THE ROYAL BANK OF SCOTLAND PLC By _______________________ Name: Title: Lenders $9,000,000.00 ALLFIRST BANK By _______________________ Name: Title: $9,000,000.00 THE BANK OF NEW YORK By _______________________ Name: Title: $9,000,000.00 PNC BANK, N.A. By _______________________ Name: Title: $9,000,000.00 SOCIETE GENERALE By _______________________ Name: Title: $300,000,000 Total of the Revolving Credit Commitments
39 SCHEDULE I YORK INTERNATIONAL CORPORATION 364-DAY CREDIT AGREEMENT APPLICABLE LENDING OFFICES
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office - --------------------------------------------------------------------------------- Allfirst Bank 25 South Charles Street 25 South Charles Street Baltimore, MD 21201 Baltimore, MD 21201 Attn: Frank Lago Attn: Frank Lago T: 410 244-4289 T: 410 244-4289 F: 410 244-4294 F: 410 244-4294 - --------------------------------------------------------------------------------- The Bank of New York 1 Wall Street 1 Wall Street New York, NY 10286 New York, NY 10286 Attn: Walter Parelli Attn: Walter Parelli T: 212 635-6820 T: 212 635-6820 F: 212 635-7978 F: 212 635-7978 - --------------------------------------------------------------------------------- The Bank of Nova Scotia One Liberty Plaza One Liberty Plaza New York, NY 10006 New York, NY 10006 Attn: Meredith Wedeking Attn: Meredith Wedeking T: 212 225-5017 T: 212 225-5017 F: 212 225-5090 F: 212 225-5090 - --------------------------------------------------------------------------------- Bank of Tokyo-Mitsubishi BTM Information Services, BTM Information Trust Company Inc. Services, Inc. c/o Bank of c/o Bank of Tokyo-Mitsubishi Trust Tokyo-Mitsubishi Trust Company Company 1251 Avenue of the 1251 Avenue of the Americas Americas 12th Floor 12th Floor New York, NY 10020 New York, NY 10020 Attn: Rolando Uy Attn: Rolando Uy T: 201 413-8570 T: 201 413-8570 F: 201 5213-2304 F: 201 5213-2304 - --------------------------------------------------------------------------------- BNP Paribas 787 Seventh Avenue 787 Seventh Avenue New York, NY 10019 New York, NY 10019 Attn: Richard Pace Attn: Richard Pace T: 212 841-3266 T: 212 841-3266 F: 212 841-2745 F: 212 841-2745 - --------------------------------------------------------------------------------- Citibank, N.A. Two Penns Way, Suite 200 Two Penns Way, Suite 200 New Castle, DE 19720 New Castle, DE 19720 Attn: Bilal Aman Attn: Bilal Aman T: 302 894-6013 T: 302 894-6013 F: 302 894-6120 F: 302 894-6120 - --------------------------------------------------------------------------------- Danske Bank A/S 299 Park Avenue, 299 Park Avenue, Cayman Islands Branch 14th Floor 14th Floor New York, NY 10171 New York, NY 10171 Attn: Maria Merante Attn: Maria Merante T: 212 984-8462 T: 212 984-8462 F: 212 984-9570 F: 212 984-9570 - --------------------------------------------------------------------------------- Fleet National Bank 100 Federal Street 100 Federal Street Mail Stop: MA-DE 10010A Mail Stop: MA-DE 10010A Boston, MA 02110 Boston, MA 02110 Attn: Deanne Horn Attn: Deanne Horn T: 617 434-4028 T: 617 434-4028 F: 617 434-0601 F: 617 434-0601 - ---------------------------------------------------------------------------------
ING Bank Tournooiveld 6 Tournooiveld 6 The Hague, 2501 AT The Hague, 2501 AT Attn: H. de Wit Attn: H. de Wit T: 31 70 31 89 192 T: 31 70 31 89 192 F: 31 70 31 89 411 F: 31 70 31 89 411 - --------------------------------------------------------------------------------- JPMorgan Chase Bank 270 Park Avenue, 270 Park Avenue, 47th Floor 47th Floor New York, NY 10017 New York, NY 10017 Attn: Randolph Cates Attn: Randolph Cates T: 212 270-8997 T: 212 270-8997 F: 212 270-6041 F: 212 270-6041 - --------------------------------------------------------------------------------- Nordea Bank Finland plc 437 Madison Avenue 437 Madison Avenue New York, NY 10022 New York, NY 10022 Attn: Thomas Hickey Attn: Thomas Hickey T: 212 318-9306 T: 212 318-9306 F: 212 318-9318 F: 212 318-9318 - --------------------------------------------------------------------------------- PNC Bank, N.A. 500 First Avenue 500 First Avenue Pittsburgh, PA 15219 Pittsburgh, PA 15219 Attn: Marc Accamando Attn: Marc Accamando T: 412 768-7647 T: 412 768-7647 F: 412 768-4586 F: 412 768-4586 - --------------------------------------------------------------------------------- The Royal Bank of Scotland 65 East 55th Street, 65 East 55th Street, plc Floor 21 Floor 21 New York, NY 10022 New York, NY 10022 Attn: Sheila Shaw Attn: Sheila Shaw T: 212 401-1406 T: 212 401-1406 F: 212 401-1336 F: 212 401-1336 - --------------------------------------------------------------------------------- Societe Generale 2001 Ross Avenue 2001 Ross Avenue Suite 4800 Suite 4800 Dallas, TX 75201 Dallas, TX 75201 Attn: Deanna Farhat Attn: Deanna Farhat T: 214 979-2736 T: 214 979-2736 F: 214 754-0171 F: 214 754-0171 - --------------------------------------------------------------------------------- Wachovia Bank, National 201 S. College Street 201 S. College Street Association Charlotte, NC 28288 Charlotte, NC 28288 Attn: Sherry Richards Attn: Sherry Richards T: 704 715-1459 T: 704 715-1459 F: 704 374-2802 F: 704 374-2802 - ---------------------------------------------------------------------------------
2 Schedule 5.02(a) Liens The interest of lessors under various capital leases of computer and other office equipment and other miscellaneous property and equipment with an aggregate value of less than $15,000,000. EXHIBIT A-1 - FORM OF REVOLVING CREDIT PROMISSORY NOTE U.S.$__________ Dated: __________, 200_ FOR VALUE RECEIVED, the undersigned, YORK INTERNATIONAL CORPORATION, a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _______________ (the "Lender") for the account of its Applicable Lending Office on the later of the Termination Date and the date designated pursuant to Section 2.06 of the Credit Agreement (each as defined in the Credit Agreement referred to below) the principal sum of U.S.$[amount of the Lender's Commitment in figures] or, if less, the aggregate principal amount of the Revolving Credit Advances made by the Lender to the Borrower pursuant to the 364-Day Credit Agreement dated as of May 29, 2002 among the Borrower, the Lender and certain other lenders parties thereto, and Citibank, N.A. as Agent for the Lender and such other lenders (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) outstanding on such date. The Borrower promises to pay interest on the unpaid principal amount of each Revolving Credit Advance from the date of such Revolving Credit Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citibank, as Agent, at 399 Park Avenue, New York, New York 10043, in same day funds. Each Revolving Credit Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note. This Promissory Note is one of the Revolving Credit Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Revolving Credit Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Revolving Credit Advance being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. YORK INTERNATIONAL CORPORATION By __________________________ Title: ADVANCES AND PAYMENTS OF PRINCIPAL
AMOUNT OF DATE AMOUNT OF PRINCIPAL PAID UNPAID PRINCIPAL NOTATION ADVANCE OR PREPAID BALANCE MADE BY - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------
2 EXHIBIT A-2 - FORM OF COMPETITIVE BID PROMISSORY NOTE U.S.$_______________ Dated: _______________, 200_ FOR VALUE RECEIVED, the undersigned, YORK INTERNATIONAL CORPORATION, a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the 364-Day Credit Agreement dated as of May 29, 2002 among the Borrower, the Lender and certain other lenders parties thereto, and Citibank, N.A., as Agent for the Lender and such other lenders (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined)), on _______________, 200_, the principal amount of U.S.$_______________]. The Borrower promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at the interest rate and payable on the interest payment date or dates provided below: Interest Rate: _____% per annum (calculated on the basis of a year of _____ days for the actual number of days elapsed). Both principal and interest are payable in lawful money of the United States of America to Citibank, as agent, for the account of the Lender at the office of Citibank, at _________________________ in same day funds. This Promissory Note is one of the Competitive Bid Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. The Borrower hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York. YORK INTERNATIONAL CORPORATION By __________________________ Title: EXHIBIT B-1 - FORM OF NOTICE OF REVOLVING CREDIT BORROWING Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below Two Penns Way New Castle, Delaware 19720 [Date] Attention: Bank Loan Syndications Department Ladies and Gentlemen: The undersigned, York International Corporation, refers to the 364-Day Credit Agreement, dated as of May 29, 2002 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Revolving Credit Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Revolving Credit Borrowing (the "Proposed Revolving Credit Borrowing") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed Revolving Credit Borrowing is _______________, 200_. (ii) The Type of Advances comprising the Proposed Revolving Credit Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. (iii) The aggregate amount of the Proposed Revolving Credit Borrowing is $_______________. [(iv) The initial Interest Period for each Eurodollar Rate Advance made as part of the Proposed Revolving Credit Borrowing is _____ month[s].] The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Revolving Credit Borrowing: (A) the representations and warranties contained in Section 4.01 of the Credit Agreement (except the representations set forth in the last sentence of subsection (e) thereof and in subsection (f) thereof (other than clause (ii) thereof)) are correct, before and after giving effect to the Proposed Revolving Credit Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and (B) no event has occurred and is continuing, or would result from such Proposed Revolving Credit Borrowing or from the application of the proceeds therefrom, that constitutes a Default. Very truly yours, YORK INTERNATIONAL CORPORATION By __________________________ Title: EXHIBIT B-2 - FORM OF NOTICE OF COMPETITIVE BID BORROWING Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below Two Penns Way New Castle, Delaware 19720 [Date] Attention: Bank Loan Syndications Department Ladies and Gentlemen: The undersigned, York International Corporation, refers to the 364-Day Credit Agreement, dated as of May 29, 2002 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.03 of the Credit Agreement that the undersigned hereby requests a Competitive Bid Borrowing under the Credit Agreement, and in that connection sets forth the terms on which such Competitive Bid Borrowing (the "Proposed Competitive Bid Borrowing") is requested to be made: (A) Date of Competitive Bid Borrowing ________________________ (B) Amount of Competitive Bid Borrowing ________________________ (C) [Maturity Date] [Interest Period] ________________________ (D) Interest Rate Basis ________________________ (E) Interest Payment Date(s) ________________________ (F) ___________________ ________________________ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Competitive Bid Borrowing: (a) the representations and warranties contained in Section 4.01 of the Credit Agreement (except the representations set forth in the last sentence of subsection (e) thereof and in subsection (f) thereof (other than clause (ii) thereof)) are correct, before and after giving effect to the Proposed Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; (b) no event has occurred and is continuing, or would result from the Proposed Competitive Bid Borrowing or from the application of the proceeds therefrom, that constitutes a Default; (c) no event has occurred and no circumstance exists as a result of which the information concerning the undersigned that has been provided to the Agent and each Lender by the undersigned in connection with the Credit Agreement would include an untrue statement of a material fact or omit to state any material fact or any fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; and (d) the aggregate amount of the Proposed Competitive Bid Borrowing and all other Borrowings to be made on the same day under the Credit Agreement is within the aggregate amount of the unused Revolving Credit Commitments of the Lenders. 6 The undersigned hereby confirms that the Proposed Competitive Bid Borrowing is to be made available to it in accordance with Section 2.03(a)(v) of the Credit Agreement. Very truly yours, YORK INTERNATIONAL CORPORATION By __________________________ Title: 2 EXHIBIT C - FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the 364-Day Credit Agreement dated as of May 29, 2002 (as amended or modified from time to time, the "Credit Agreement") among York International Corporation, a Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement) and Citibank, N.A., as agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule I hereto agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of Competitive Bid Advances and Competitive Bid Notes) equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement (other than in respect of Competitive Bid Advances and Competitive Bid Notes). After giving effect to such sale and assignment, the Assignee's Revolving Credit Commitment and the amount of the Revolving Credit Advances owing to the Assignee will be as set forth on Schedule 1 hereto. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iv) attaches the Revolving Credit Note, if any, held by the Assignor [and requests that the Agent exchange such Revolving Credit Note for a new Revolving Credit Note payable to the order of [the Assignee in an amount equal to the Revolving Credit Commitment assumed by the Assignee pursuant hereto or new Revolving Credit Notes payable to the order of the Assignee in an amount equal to the Revolving Credit Commitment assumed by the Assignee pursuant hereto and] the Assignor in an amount equal to the Revolving Credit Commitment retained by the Assignor under the Credit Agreement, [respectively,] as specified on Schedule 1 hereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service forms required under Section 2.14 of the Credit Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Agent, unless otherwise specified on Schedule 1 hereto. 5. Upon such acceptance and recording by the Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Revolving Credit Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and facility fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Revolving Credit Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. 2 Schedule 1 to Assignment and Acceptance Percentage interest assigned: ______% Assignee's Revolving Credit Commitment: $______ Aggregate outstanding principal amount of Revolving Credit Advances assigned: $______ Principal amount of Revolving Credit Note payable to Assignee: $______ Principal amount of Revolving Credit Note payable to Assignor: $______ Effective Date*: _______________, 200_
[NAME OF ASSIGNOR], as Assignor By __________________________ Title: Dated: _______________, 200_ [NAME OF ASSIGNEE], as Assignee By __________________________ Title: Dated: _______________, 200_ Domestic Lending Office: [Address] Eurodollar Lending Office: [Address] * This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to the Agent. 3 Accepted [and Approved]** this __________ day of _______________, 200_ CITIBANK, N.A., as Agent By Title: [Approved this __________ day of _______________, 200_ YORK INTERNATIONAL CORPORATION By ]* Title: ** Required if the Assignee is an Eligible Assignee solely by reason of clause(iii) of the definition of "Eligible Assignee". * Required if the Assignee is an Eligible Assignee solely by reason of clause(iii) of the definition of "Eligible Assignee". 4 EXHIBIT D - FORM OF OPINION OF COUNSEL FOR THE BORROWER EXECUTION COPY U.S. $300,000,000 364-DAY CREDIT AGREEMENT Dated as of May 29, 2002 Among YORK INTERNATIONAL CORPORATION as Borrower and THE INITIAL LENDERS NAMED HEREIN as Initial Lenders and CITIBANK, N.A. as Administrative Agent and JPMORGAN CHASE BANK as Syndication Agent and BANK OF TOKYO-MITSUBISHI TRUST COMPANY FLEET NATIONAL BANK and NORDEA BANK FINLAND PLC as Documentation Agents and J.P. MORGAN SECURITIES, INC. and SALOMON SMITH BARNEY INC. as Joint Lead Arrangers and Joint Bookrunners TABLE OF CONTENTS ARTICLE I SECTION 1.01. Certain Defined Terms 1 SECTION 1.02. Computation of Time Periods 11 SECTION 1.03. Accounting Terms 11 ARTICLE II SECTION 2.01. (a) The Revolving Credit Advances. The Revolving Credit Advances 11 SECTION 2.02. Making the Revolving Credit Advances 11 SECTION 2.03. The Competitive Bid Advances 12 SECTION 2.04. Fees 15 SECTION 2.05. Termination or Reduction of the Revolving Credit Commitments 15 SECTION 2.06. Repayment of Advances 15 SECTION 2.07. Interest on Revolving Credit Advances 16 SECTION 2.08. Interest Rate Determination 16 SECTION 2.09. Optional Conversion of Revolving Credit Advances 17 SECTION 2.10. Prepayments of Revolving Credit Advances 17 SECTION 2.11. Increased Costs 18 SECTION 2.12. Illegality 18 SECTION 2.13. Payments and Computations 18 SECTION 2.14. Taxes 19 SECTION 2.15. Sharing of Payments, Etc 21 SECTION 2.16. Evidence of Debt 21 SECTION 2.17. Use of Proceeds 21 ARTICLE III SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03 21
i SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing. 23 SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing 23 SECTION 3.04. Determinations Under Section 3.01 24 ARTICLE IV SECTION 4.01. Representations and Warranties of the Borrower 24 ARTICLE V SECTION 5.01. Affirmative Covenants 25 SECTION 5.02. Negative Covenants 27 SECTION 5.03. Financial Covenants 28 ARTICLE VI SECTION 6.01. Events of Default 28 ARTICLE VII SECTION 7.01. Authorization and Action 30 SECTION 7.02. Agent's Reliance, Etc 30 SECTION 7.03. Citibank and Affiliates 31 SECTION 7.04. Lender Credit Decision 31 SECTION 7.05. Indemnification 31 SECTION 7.06. Successor Agent 31 SECTION 7.07. Other Agents 31 ARTICLE VIII SECTION 8.01. Amendments, Etc 32 SECTION 8.02. Notices, Etc 32 SECTION 8.03. No Waiver; Remedies 32 SECTION 8.04. Costs and Expenses 32 SECTION 8.05. Right of Set-off 33
ii SECTION 8.06. Binding Effect 33 SECTION 8.07. Assignments and Participations 33 SECTION 8.08. Confidentiality 35 SECTION 8.09. Governing Law 35 SECTION 8.10. Execution in Counterparts 35 SECTION 8.12. Jurisdiction, Etc 36 SECTION 8.13. Waiver of Jury Trial 37
iii Schedules Schedule I - List of Applicable Lending Offices Schedule 5.02(a) - Existing Liens Exhibits Exhibit A-1 - Form of Revolving Credit Note Exhibit A-2 - Form of Competitive Bid Note Exhibit B-1 - Form of Notice of Revolving Credit Borrowing Exhibit B-2 - Form of Notice of Competitive Bid Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Opinion of Counsel for the Borrower iv EX-4.2 4 w62242exv4w2.txt AMENDMENT NO. 1 TO THE FIVE YEAR CREDIT AGREEMENT Exhibit 4.2 AMENDMENT NO. 1 TO THE FIVE YEAR CREDIT AGREEMENT Dated as of May 29, 2002 AMENDMENT NO. 1 TO THE FIVE YEAR CREDIT AGREEMENT among York International Corporation, a Delaware corporation (the "Borrower"), the banks, financial institutions and other institutional lenders parties to the Credit Agreement referred to below (collectively, the "Lenders") and Citibank, N.A., as administrative agent (the "Agent") for the Lenders. PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders, JPMorgan Chase Bank (as successor to The Chase Manhattan Bank), as syndication agent, Bank of Tokyo-Mitsubishi Trust Company, Wachovia Bank, National Association (as successor to First Union National Bank) and Fleet National Bank, as documentation agents, JP Morgan Securities, Inc. and Salomon Smith Barney Inc., as joint lead arrangers and joint bookrunners, and the Agent have entered into a Five Year Credit Agreement dated as of May 29, 2001 (the "Credit Agreement"). Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement. (2) The Borrower and the Required Lenders have agreed to amend the Credit Agreement as hereinafter set forth. AGREEMENT: SECTION 1. Amendments to Credit Agreement. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended as follows: (a) The definition of "Applicable Margin" in Section 1.01 is amended by deleting from the grid opposite Level 4 the figure "0.875%" and substituting therefor the figure "1.050%". (b) The definition of "EBITDA" in Section 1.01 is amended in full to read as follows: "EBITDA" means, for any Person for any period, net income (or net loss) plus the sum of (a) interest expense, (b) income tax expense, (c) depreciation expense, (d) amortization expense and (e) any extraordinary or non-recurring losses (inclusive of losses related to Statement of Financial Accounting Standards No. 142 and No. 144 in an aggregate amount not to exceed $350,000,000) minus any extraordinary or non-recurring gains, for such period in each case determined for such Person in accordance with GAAP. (c) The definition of "Net Worth" in Section 1.01 is amended in full to read as follows: "Net Worth" means, on any date, all amounts which, in accordance with GAAP, would be included under stockholders' equity on a Consolidated balance sheet of the Borrower and its Subsidiaries at such date, adjusted to exclude (x) accumulated foreign currency translation adjustments and (y) accumulated losses related to Statement of Financial Accounting Standards No. 142 and No. 144 in an aggregate amount not to exceed $350,000,000. (d) Section 1.03 is amended in full to read as follows: SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements of the Borrower as of December 31, 2001, as modified by the Borrower's adoption of Statement of Financial Accounting Standards No. 142 and No. 144 ("GAAP"). SECTION 2. Conditions of Effectiveness. This Amendment shall become effective as of the date first above written, provided that, on or before May 29, 2002, the Agent shall have received counterparts of this Amendment executed by the Borrower and the Required Lenders or, as to any of the Lenders, advice satisfactory to the Agent that such Lender has executed this Amendment. This Amendment is subject to the provisions of Section 8.01 of the Credit Agreement. SECTION 3. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) The execution, delivery and performance by the Borrower of this Amendment and the Credit Agreement and the Notes, as amended hereby, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action and do not (i) contravene the Borrower's charter or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery or performance by the Borrower of this Amendment or the Credit Agreement and the Notes, as amended hereby. (d) This Amendment has been duly executed and delivered by the Borrower. This Amendment and the Credit Agreement and the Notes, as amended hereby, are legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (e) There is no pending or, to the knowledge of the Borrower, threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) could be reasonably expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Amendment or the Credit Agreement or the Notes, as amended hereby. SECTION 4. Reference to and Effect on the Credit Agreement and the Notes. (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment. (b) The Credit Agreement and the Notes, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement. SECTION 5. Costs and Expenses. The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the Agent) in accordance with the terms of Section 8.04 of the Credit Agreement. SECTION 6. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. YORK INTERNATIONAL CORPORATION By _______________________ Title: ACCEPTED and AGREED: CITIBANK, N.A., as Agent and as Lender By_______________________ Title: JPMORGAN CHASE BANK By_______________________ Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY By_______________________ Title: WACHOVIA BANK, NATIONAL ASSOCIATION By_______________________ Title: FLEET NATIONAL BANK By_______________________ Title: NORDEA BANK FINLAND PLC (formerly known as Merita Bank PLC) By_______________________ Title: By_______________________ Title: THE BANK OF NOVA SCOTIA By_______________________ Title: BNP PARIBAS By_______________________ Title: By_______________________ Title: DANSKE BANK By_______________________ Title: ING BANK By_______________________ Title: PNC BANK, N.A. By_______________________ Title: THE ROYAL BANK OF SCOTLAND PLC By_______________________ Title: ALLFIRST BANK By_______________________ Title: INTESABCI - NEW YORK BRANCH By_______________________ Title: THE BANK OF NEW YORK By_______________________ Title: DRESDNER BANK LATEINAMERIKA AG, MIAMI AGENCY By_______________________ Title: EX-10.1 5 w62242exv10w1.txt YORK INT'L CORP. AMEND. & RESTATED OMNIBUS STOCK Exhibit 10.1 YORK INTERNATIONAL CORPORATION AMENDED AND RESTATED 2002 OMNIBUS STOCK PLAN 1. ESTABLISHMENT AND PURPOSE York International Corporation hereby establishes the YORK INTERNATIONAL CORPORATION 2002 OMNIBUS STOCK PLAN (the "Plan"). The Plan permits the grant of incentive stock options, non-statutory stock options, restricted stock awards, stock appreciation rights, performance awards, dividend equivalents and other stock units or any combination of the foregoing. The purpose of the Plan is to promote the growth and profitability of York International Corporation (the "Company") by (i) providing directors, certain officers and other employees of the Company and its subsidiaries with incentives to improve stockholder value and contribute to the success of the Company, and (ii) enabling the Company to attract, retain and reward the best available persons for positions of substantial responsibility. 2. DEFINITIONS "Cause" means the termination of employment of an employee for (i) providing the Company with materially false representations relied upon by the Company in furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company, (iii) misconduct causing a serious violation by the Company of state or federal laws, (iv) theft of Company funds or assets, or (v) conviction of a crime involving moral turpitude. "Change in Control" shall mean (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of subsection (c) hereof; or (b) Individuals who, as of the date of the most recent amendment hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date of the most recent amendment hereof whose election, or nomination for election by the Company's shareholders, was -1- approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board; or (c) Consummation of a reorganization, merger or consolidation involving the Company or any subsidiary of the Company or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) either (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transactions owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock or (ii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or at the time of the action of the Board, providing for such Business Combination and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; or (d) A complete liquidation or dissolution of the Company. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statue. "Disability" means the inability to perform the duties assigned by the Company to the participant by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. "Fair Market Value" of a share of the Company's Common Stock for any purpose shall mean the closing price of the Common Stock on the exchange where the Common Stock is principally traded. If the Common Stock is not traded on an exchange, but is traded in the over-the-counter market, Fair Market Value on the relevant date shall mean the last sale price reported by the National Association of Securities Dealers Automated Quotation Systems ("NASDAQ"), if the Common Stock is included in the National Market System or the average of the closing bid and asked -2- prices reported on the preceding day on which such prices were reported. If the Common Stock is not traded on an exchange or reported by NASDAQ, the Board of Directors shall determine Fair Market Value. In the case of incentive stock options, the Board's determination shall conform to the Treasury Regulations under Section 422 of the Code. "Retirement" means termination of employment on or after the date the participant either attains 62 years of age or attains 55 years of age and completes 5 years of service or a retirement with the approval of the Board of Directors. "Subsidiary" and "subsidiaries" mean only a corporation or corporations within the meaning of the definition of "subsidiary corporation" provided in Section 424(f) of the Code, or any successor thereto of similar import. 3. ADMINISTRATION The Plan shall be administered by the Compensation Committee appointed by the Board of Directors, which shall be composed of not less than two directors of the Company who are both "non-employee directors" and "outside directors." "Non-employee directors" shall have the meaning set forth in Rule 16b-3 of the Securities and Exchange Commission ("Rule 16b-3") and "outside directors" shall have the meaning set forth in Treasury Regulation Section 1.162-27(e)(3) or any successor rule. The Committee shall, consistent with the provisions of the Plan, be authorized to (i) select persons to participate in the Plan, (ii) determine all terms, conditions and restrictions of grants made under the Plan to each participant, and the conditions and restrictions, if any, subject to which such grants will be made, (iii) modify, extend or renew outstanding grants, accept the surrender of outstanding grants and substitute new grants, provided that no such action shall be taken with respect to any outstanding grant which would adversely affect the participant without his consent, and further provided that, except for adjustments pursuant to Section 15, neither the Board of Directors nor the Committee shall have the authority to reprice any stock option granted under this Plan or to accept the surrender of an outstanding option in consideration for the issuance of a new option with a lower exercise price unless such repricing or issuance has previously been approved by the stockholders of the Company, (iv) interpret the Plan and (v) adopt, amend, or rescind such rules and regulations for carrying out the Plan as it may deem appropriate. Subject to the overall limitation on the number of shares of Common Stock available under the Plan, the Committee may use available shares of Common Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a subsidiary, including the plans and arrangements of the Company or a subsidiary assumed in business combinations. The Committee may permit the deferred delivery of any shares of Common Stock under this Plan, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or dividend equivalents, and may include converting such credits into deferred Common Stock equivalents. Decisions of the Committee on all matters relating to the Plan shall be in the Committee's sole discretion and shall be conclusive and binding on all parties, including the Company, its stockholders and the participants in the Plan. The -3- validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal and state laws and rules and regulations promulgated pursuant thereto. Notwithstanding anything to the contrary herein, the Board of Directors may, in its sole discretion, at any time and from time to time resolve to administer the Plan. In such event, the term "Committee" used herein shall be deemed to mean the Board of Directors. 4. SHARES AVAILABLE FOR THE PLAN; ANNUAL LIMIT ON GRANTS The shares of Common Stock with respect to which grants may be made under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares. Subject to adjustments as provided in Section 15, as of any date the total number of shares of Common Stock with respect to which awards may be granted under the Plan shall be equal to 2,000,000 shares, provided that the number of restricted shares awarded under the Plan may not exceed 3% of the total number of shares of Common Stock outstanding at the time of any such award. Subject to adjustments as contemplated by Section 15, no person may be granted more than 300,000 restricted shares or stock appreciation rights, or options to purchase more than 300,000 shares, during any one calendar year. If any grant under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated or canceled as to any shares, the shares subject to such grants shall thereafter be available for further grants under the Plan unless such shares would not be deemed available for future grants pursuant to Rule 16b-3. If the exercise price of any stock option granted under the Plan is satisfied by tendering shares of Common Stock to the Company (by either actual delivery or by attestation), only the number of shares of Common Stock issued net of the shares of Common Stock tendered shall be deemed to have been granted for purposes of determining the number of shares of Common Stock available for grant under the Plan. 5. PARTICIPATION Participation in the Plan shall be limited to directors, officers (including directors who are officers of the Company), and other employees of the Company and its subsidiaries who are recommended by the officers and selected by the Committee. Only directors who are not officers or employees of the Company shall be eligible to participate in Section 7 of the Plan. No director who is not an officer of the Company shall be eligible to participate, except pursuant to Section 7. Nothing in the Plan or in any grant thereunder shall confer any right on an employee to continue in the employ of the Company or shall interfere in any way with the right of the Company to terminate an employee at any time. Stock options, restricted share awards, stock appreciation rights or any combination thereof may be granted to such persons and for such number of shares as the Committee shall determine, subject to the limitations in Section 4. A grant of any type made in any one year to an eligible employee shall neither guarantee nor -4- preclude a further grant of that or any other type to such employee in that year or subsequent years. -5- 6. STOCK OPTIONS Subject to the other applicable provisions of the Plan, the Committee may from time to time grant to eligible participants nonqualified stock options or incentive stock options as that term is defined in Section 422 of the Code. The options granted shall be subject to the following terms and conditions: (a) Price. The price per share payable upon the exercise of each option ("exercise price") shall not be less than 100% of the Fair Market Value of the shares on the date the option is granted. Except for adjustments pursuant to Section 15, the exercise price for any outstanding option granted under the Plan may not be decreased after the date of grant nor may an outstanding option granted under the Plan be surrendered to the Company as consideration for the grant of a new option with a lower exercise price unless previously approved by the stockholders of the Company. (b) Payment. Options may be exercised in whole or in part by payment of the exercise price of the shares to be acquired. Payment may be made in cash or, unless otherwise determined by the Committee, in shares of Common Stock (by either actual delivery of shares or by attestation) or a combination of cash and shares of Common Stock. The Fair Market Value of shares of Common Stock delivered on exercise of options shall be determined on the date of exercise. Shares of Common Stock delivered in payment of the exercise price may be previously owned shares acceptable to the Committee. A Participant may elect to pay the exercise price upon the exercise of an Option by authorizing a third party to sell shares of Common Stock acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise. Unless otherwise determined by the Committee, a participant may also deliver Common Stock of the Company, including shares acquired upon exercise of the option, in satisfaction of any amount the Company is required to withhold for taxes in connection with the exercise of an option subject, if the optionee is subject to Section 16(b) of the Exchange Act, to such restrictions as may be imposed from time to time by the Securities and Exchange Commission to comply with Section 16(b). An election to deliver Common Stock to pay withholding taxes must be made on or before the date the amount of tax to be withheld is determined and once made will be irrevocable. The withholding tax obligation that may be paid by the withholding or delivery of shares may not exceed the statutory minimum withholding for federal, state and local tax obligations in connection with the exercise of the option or the sale of shares received upon exercise of the option. The Fair Market Value of the shares to be withheld or delivered will be the Fair Market Value on the date as of which the amount of tax to be withheld is determined. (c) Term of Options. The term during which each option may be exercised shall be determined by the Committee, provided that upon a Change in Control, all outstanding options shall automatically become immediately exercisable. In no event shall an option be exercisable more than ten years from the date it is granted. Prior to the exercise of the option and delivery of the stock represented thereby, the optionee -6- shall not have any rights to receive any dividends or be entitled to any voting rights on any stock represented by outstanding options. (d) Restrictions on Incentive Stock Options. The aggregate Fair Market Value (determined as of the grant date) of shares of Common Stock with respect to which all incentive stock options first become exercisable by any participant in any calendar year under this or any other plan of the Company or any related or predecessor corporation of the Company or any related corporation (as defined in the applicable regulations under the Code) may not exceed $100,000 or such higher amount as may be permitted from time to time under Section 422 of the Code. To the extent that such aggregate fair market value shall exceed $100,000, or applicable higher amount, such options shall be treated as options which are not incentive stock options. The exercise price of any incentive stock option granted to a participant who owns (within the meaning of Section 422(b)(6) of the Code, after the application of the attribution rules in Section 424(d) of the Code) more than 10% of the combined voting power of all classes of shares of the Company or any related corporation shall be not less than 110% of the Fair Market Value of the Common Stock on the grant date and the term of such option shall not exceed five years. Incentive stock options can only be issued to employees of the Company. 7. DIRECTOR STOCK OPTIONS Each person who is a director of the Company and who is not an officer or employee of the Company (a "non-employee director") as of immediately following the election of directors at the Company's annual stockholder meeting, or who became a non-employee director at any time within six months thereafter, shall be granted as of such date (or on the next day the New York Stock Exchange is open for trading) an option exercisable for such number of shares of Common Stock as shall be approved by the Committee. Each option shall terminate, and cease to be exercisable, on the earlier of the occurrence of: (i) the tenth anniversary of the date of grant of the option, or (ii) five years following the date on which the grantee is no longer a director eligible to receive options under this Section (including, but not limited to, such date as the director resigns or dies). The exercise price of each option granted pursuant to this Section shall not be less than 100% of the Fair Market Value of the shares on the date the option is granted. Each option granted pursuant to this Section shall be exercisable as follows: (a) On or before the first anniversary of the date the option is granted, the option will not be exercisable with respect to any of the shares subject to the option, and (b) On the first anniversary of the grant date, the option will become exercisable to the extent of 25% of the shares subject to the option, and to the extent -7- of an additional 25% of such shares on each subsequent anniversary of the date of grant, provided that upon a Change in Control any outstanding option shall automatically become immediately exercisable in full, in accordance with Section 15. In addition to the options to be granted to non-employee directors in the manner set forth above, the Committee may at any time and from time to time grant stock options to non-employee directors on such terms and conditions as the Committee may determine, subject to the provisions of Section 6 and the other applicable provisions of the Plan. 8. RESTRICTED SHARE AWARDS Subject to the other applicable provisions of the Plan, the Committee may at any time and from time to time award shares of Common Stock to such participants and in such amounts and for such consideration, as it determines. Each award of shares shall specify the applicable restrictions on such shares, the duration of such restrictions, and the time or times at which such restrictions shall lapse, or the performance or other objectives upon the achievement of which such restrictions shall lapse, with respect to all or a specified number of shares that are part of the award. The duration of such restrictions shall not be less than three years, except that, in the case of restricted shares with performance or other objectives, the duration of such restrictions shall not be less than one year. The Committee may reduce or shorten the duration of any restriction applicable to any shares awarded to any participant under the Plan only in the event of an unusual, non-recurring situation. Restricted shares may be issued at the time of award, subject to forfeiture if the restrictions do not lapse, or upon lapse of the restrictions. If shares are issued at the time of the award, the participant may be required to deposit the certificates with the Company during the period of any restriction thereon and to execute a blank stock power therefor. Except as otherwise provided by the Committee, during such period of restriction the participant shall have all of the rights of a holder of Common Stock, including but not limited to the rights to receive dividends (or amounts equivalent to dividends) and to vote. If shares are issued upon lapse of restrictions, the Committee may provide that the participant will be entitled to receive any amounts per share pursuant to any dividend or distribution paid by the Company on its Common Stock to stockholders of record after the award and prior to the issuance of the shares. Except as otherwise provided by the Committee, upon termination of a grantee's employment due to death or Disability during any period of restriction, all restrictions on shares awarded to such grantee shall lapse. Except as otherwise provided by the Committee, on termination of a grantee's employment for any other reason (including Retirement), all restricted shares subject to awards made to such grantee shall be forfeited to the Company. The Committee may designate whether any award being granted to any grantee is intended to be "performance-based compensation" as that term is used in section 162(m) of the Code. Any such awards designated as intended to be "performance-based compensation" shall be conditioned on the achievement of one or more performance measures, to the extent required by Code section 162(m). The performance measures that may be used by the Committee for such awards shall be -8- based on any one or more of the following, as selected by the Committee: fully diluted earnings per share, Corporate or Division earnings before interest and taxes (with or without a pro forma charge for the cost of capital) in absolute dollars or as a percentage of sales, revenue, sales, profit after tax, gross profit, operating profit, unit volume, return on equity, changes in working capital, return on capital, cash flow, total shareholder return, return on net capital employed, average net capital as a percent of sales, manufacturing efficiency, new product development project milestone dates, information technology systems implementation project milestone dates, cost of quality, and purchase price variance. For awards under this Section 8 intended to be "performance-based compensation," the grant of the awards and the establishment of the performance measures shall be made during the period required under Code section 162(m). 9. STOCK APPRECIATION RIGHTS The Committee may grant stock appreciation rights, entitling the grantee to receive, in cash or stock, value equal to (or otherwise based on) the excess of: (a) the Fair Market Value of a specified number of shares of Common Stock at the time of exercise; over (b) an exercise price established by the Committee that shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant. The stock appreciation rights shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee. 10. WITHHOLDING OF TAXES The Company may permit or require, as a condition to any grant under the Plan or to the delivery of certificates for shares issued hereunder, that the grantee pay to the Company, in cash or, unless otherwise determined by the Company, in shares of Company Common Stock valued at Fair Market Value on the date as of which the withholding tax liability is determined, any federal, state or local taxes of any kind required by law to be withheld with respect to any grant or any delivery of shares. The Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee any federal, state or local taxes of any kind required by law to be withheld with respect to any grant or to the delivery of shares under the Plan, or to retain or sell without notice a sufficient number of the shares to be issued to such grantee to cover any such taxes. In the event of a transfer of an option pursuant to Section 12, the grantee shall remain liable for any tax required to be withheld. 11. WRITTEN AGREEMENT Each person to whom a grant is made under the Plan shall enter into a written agreement with the Company that shall contain such provisions, consistent with the provisions of the Plan, as may be established by the Committee. 12. TRANSFERABILITY To the extent required to comply with Rule 16b-3 and in any event in the case of an incentive stock option, no option or restricted share award granted under the Plan shall be transferable by a participant otherwise than by will or the laws of descent and -9- distribution, or as permitted by this Section 12. The Committee may, in its discretion, authorize all or a portion of the options granted to a participant to be transferred to: (a) a member of the participant's family; (b) a trust or trusts for the exclusive benefit of members of the participant's family; (c) a family partnership, family limited partnership, or family limited liability partnership or company; (d) a charitable or non-profit organization, trust or foundation under Section 501(c)(3) of the Code; or (e) such other person or entity as the Committee may in its discretion permit. An option may be exercised only by the grantee thereof, his permitted transferee or his or her guardian or legal representative. Subsequent transfers of options transferred pursuant to this Section 12 shall be prohibited except those by will or the laws of descent and distribution. Following any permitted transfer, any transferred options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer and such options shall be exercisable by the transferee only to the extent and for the periods that they would have been exercisable by the participant. 13. LISTING AND REGISTRATION If the Company determines that the listing, registration or qualification upon any securities exchange or under any law of shares subject to any option or restricted share award is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of shares thereunder, no such option may be exercised in whole or in part and no restrictions on such restricted share award shall lapse, unless such listing, registration or qualification is effected free of any conditions not acceptable to the Company. Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933) and the applicable requirements of any securities exchange. 14. TRANSFER OF EMPLOYEE Transfer of an employee from the Company to a subsidiary, from a subsidiary to the Company, and from one subsidiary to another shall not be considered a termination of employment. Nor shall it be considered a termination of employment if an employee is placed on military or sick leave or such other leave of absence which is considered as continuing intact the employment relationship; in such a case, the employment relationship shall be continued until the date when an employee's right to reemployment shall no longer be guaranteed either by law or contract. -10- 15. ADJUSTMENTS; BUSINESS COMBINATIONS In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, share exchange, consolidation, distribution of assets, or any other change in the corporate structure or shares of the Company, the Committee shall make such adjustments as it deems appropriate in the number and kind of shares reserved for issuance under the Plan, in the number and kind of shares covered by outstanding options, stock appreciation rights and restricted share awards made under the Plan, and in the exercise price of outstanding options and stock appreciation rights. In the event of any Change in Control, all outstanding options, stock appreciation rights and restricted share awards shall vest and shall be exercisable notwithstanding any restriction on vesting or exercise, at a date to be determined by the Committee not later than the effective date of the transaction. 16. TERMINATION AND MODIFICATION OF THE PLAN The Board of Directors, without further approval of stockholders may modify or terminate the Plan, except that no modification shall become effective without prior approval of the stockholders of the Company if stockholder approval would be required for continued compliance with Rule 16b-3, or if such modification would materially increase the benefits to participants under the Plan, materially increase the number of securities which may be issued under the Plan, or materially modify the requirements for participation in the Plan. Except with the approval of the Company's stockholders, no modification may be made to the provisions of Section 3 or Section 6(a) concerning the repricing of any outstanding stock option. The Committee shall be authorized to make minor or administrative modifications to the Plan as well as modifications to the Plan that may be dictated by requirements of federal or state laws applicable to the Company or that may be authorized or made desirable by such laws. 17. LIMITATION ON BENEFITS With respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under such Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 18. EFFECTIVE DATE; TERMINATION DATE The Plan is effective as of May 23, 2002,, as amended and restated May 31, 2002. Unless previously terminated, the Plan shall terminate at the close of business on May 23, 2012, ten years from the effective date. -11- EX-10.2 6 w62242exv10w2.txt YORK INT'L CORP. 2002 INCENTIVE COMPENSATION PLAN Exhibit 10.2 YORK INTERNATIONAL CORPORATION 2002 INCENTIVE COMPENSATION PLAN The purpose of the York International Corporation 2002 Incentive Compensation Plan (the "Plan") is to give certain management and key employees who are in a position to contribute materially to the success and profitability of York International Corporation (the "Company") an incentive and reward for doing so; and to assist the Company in attracting and retaining the highest caliber of management and key employees. This will be accomplished through incentive compensation in the form of annual awards and mid-term performance awards. ARTICLE 1 - DEFINITIONS. For purposes of the Plan, the following terms shall have the meaning indicated: 1.1. Annual Award - the annual award granted a Participant under the Annual Program. 1.2. Annual Performance Objectives - the performance objectives set forth in Section 3.2 used to determine Annual Awards. 1.3. Annual Program - the annual program portion of the Plan set forth in Article 3. 1.4. Annual Target Bonus - the annual target bonus amount under Article 3 for a Participant for a Fiscal Year. 1.5. Board - The Board of Directors of York International Corporation. 1.6. Change in Control - any one or more of the following: (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1 Exchange Act) of 30% or more of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of subsection (c) of this Section 1.6; or (b) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board') cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board; or (c) consummation of a reorganization, merger or consolidation involving the Company or any subsidiary of the Company or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) either (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting 2 power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including without limitation, a corporation which as a result of such transactions owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock or (ii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or at the time of the action of the Board, providing for such Business Combination and (B) no person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; or (d) a complete liquidation or dissolution of the Company. 1.7. Code - the Internal Revenue Code of 1986, as amended. 1.8. Company - York International Corporation and except for purposes of Sections 1.6 and 1.13, any other company which is a subsidiary within the meaning of Section 424(f) of the Code with respect to York International Corporation. 1.9. Compensation Committee - the compensation committee of the Board appointed by the Board that is solely composed of two or more persons who are "outside directors" in accordance with 3 the meaning of Treasury Regulation Section 1.162-27(e)(3) and "disinterested persons" in accordance with the meaning set forth in Rule 16b-3 of the Exchange Act. 1.10. Covered Employee - any individual who is, or is determined by the Board to be likely to become, a "covered employee" within the meaning of Section 162(m) of the Code, as amended. 1.11. Disability - an inability to perform the duties assigned by the Company to the Participant by reason of any medically determined physical or mental impairment which has lasted for a continuous period of more than six months. 1.12. Effective Date - January 1, 2002 1.13. Fiscal Year - the fiscal year of the Company. 1.14. Measurement Period - three consecutive Fiscal Years or such other period selected and established by the Compensation Committee with respect to any Mid-Term Program. 1.15. Mid-Term Target Bonus - the mid-term target bonus amount under Article 4 for a Participant for a Measurement Period. 1.16. Mid-Term Award - the award earned by a Participant under the Mid-Term Program at the end of a Measurement Period. 1.17. Mid-Term Performance Objectives - the performance objectives set forth in Section 4.2 used to determine Mid-Term Award. 1.18. Mid-Term Program - the mid-term program portion of the Plan set forth in Article 4. 1.19. Participant - an individual eligible to participate in the Plan in accordance with Article 2. 1.20. Plan - The York International Corporation 2002 Incentive Compensation Plan. 1.21. Retirement - termination of employment with the Company on or after the date the employee either attains 62 years of age or attains 55 years of age and completes 5 years of service or a retirement with the approval of the Board of Directors. 4 1.22. Termination of Employment - a termination of employment with the Company other than by reason of death, incurring a Disability, or Retirement. 1.23. Termination for Cause - a Termination of Employment if the employee was terminated for (i) providing the Company with materially false representations relied upon by the Company in furnishing information to shareholders, a stock exchange or the Securities and Exchange Commission, (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company, (iii) misconduct causing a serious violation by the Company of state or federal laws, (iv) theft of Company funds or assets, or (v) conviction of a crime involving moral turpitude. ARTICLE 2 - ELIGIBILITY. (a) An individual shall be eligible for the Annual Program if he is (i) a Covered Employee or (ii) a management or key employee who is approved by the Compensation Committee to participate in the Annual Program for the specified Fiscal Year. (b) An individual who is hired or has changed position after the beginning of the Fiscal Year shall be eligible for the Annual Program if he is a management or key employee who is approved by the Compensation Committee to participate in the Annual Program for the specified Fiscal Year. Such a Participant shall be entitled to a pro-rated Annual Cash Award as described in Section 3.3(c) for that Fiscal Year payable in the same form and at the same time as Annual Cash Awards are paid to other Participants. (c) An individual shall be eligible for the Mid-Term Program if he is (i) a Covered Employee or (ii) a management or key employee who is approved by the Compensation Committee to participate in the Mid-Term Program for the specified Measurement Period. An individual who previously received an award under the Mid-Term Program, but is not currently 5 eligible to do so will nonetheless participate in the Mid-Term Program with respect to any Mid-Term Award previously granted until such Mid-Term Award is paid out or such Mid-Term Award expires. (d) An individual who is hired or has changed position after the beginning of a Measurement Period shall be eligible for the Mid-Term Program if he is a management or key employee who is approved by the Compensation Committee to participate in the Mid-Term Program for the specified Measurement Period. Such a Participant shall be entitled to a pro-rated Mid-Term Award as described in Section 4.3(c) for that Measurement Period payable in the same form and at the same time as Mid-Term Awards are paid to other Participants for that Measurement Period. ARTICLE 3 - ANNUAL PROGRAM. 3.1. Annual Award Grants (a) Annual Awards shall be determined in accordance with pre-established Annual Performance Objectives as described in Section 3.2. Once established, the Compensation Committee shall not have discretion to modify the terms of the Annual Awards, except that the Compensation Committee shall have the discretion to reduce the payout under any Annual Award, if in the sole judgment of the Compensation Committee, the amount of such payout does not reflect the design intentions of the Plan. It is intended that all Annual Awards under the Plan to Covered Employees will satisfy the requirements for deductibility under Section 162(m) of the Code. (b) Not later than 90 days after the beginning of the Fiscal Year (or, if earlier, the date as of which 25% of the Participant's period of service for the Fiscal Year has elapsed), the Compensation Committee will approve the Annual Target Bonus for each Participant's Annual 6 Award. The Annual Target Bonus will be based on several factors, including market competitive data, job responsibilities, the aggressiveness of the financial budget relative to prior year performance and market conditions and other factors considered relevant by the Compensation Committee. The Compensation Committee shall approve in writing a schedule setting forth the percentage of Annual Target Bonus payable based on the level of performance objectives achieved. (c) At the end of a Fiscal Year the Compensation Committee shall approve the payment to each Participant of his Annual Award, if any. The Annual Award shall be based on the degree to which the predetermined Annual Performance Objectives for that Fiscal Year are achieved. Prior to the payment of any Annual Awards the Compensation Committee shall certify the degree of achievement of the applicable Annual Performance Objective. The maximum amount payable to any individual Participant as an Annual Award for a Fiscal Year shall be $4,000,000. 3.2. Annual Performance Objectives. Annual Performance Objectives shall be developed through the Company's business planning process and shall be approved by the Compensation Committee in writing not later than 90 days after the beginning of the Fiscal Year. The Annual Performance Objectives shall be composed of one or more of the following: fully diluted earnings per share, Corporate or Division earnings before interest and taxes (with or without a pro forma charge for the cost of capital) in absolute dollars or as a percentage of sales, revenue, sales, profit after tax, gross profit, operating profit, unit volume, return on equity, changes in working capital, return on capital, cash flow, total shareholder return, return on net capital employed, average net capital as a percent of sales, manufacturing efficiency, new product development project milestone dates, information technology systems implementation project milestone dates, cost of quality, 7 purchase price variance or, for Participants other than Covered Employees, other objectively measurable goals approved by the Compensation Committee. In establishing the goals, the Compensation Committee will keep in mind the requirement of Reg. Section 1.162-27(e)(2) that the outcome must be substantially uncertain at the time the Annual Performance Objectives are established. The Compensation Committee will determine whether the attainment of Annual Performance Objectives will be impacted by extraordinary, unusual, or non-recurring items or changes in Generally Accepted Accounting Principles. A different combination of goals may be used for different Participants or different positions (including differences between Corporate and Division positions). The goals used may vary for each Fiscal Year. However, the specific goals to be used for a Participant or a class of Participants for a specific Fiscal Year shall be approved in writing by the Compensation Committee. 3.3. Forfeitability of Annual Award. (a) Except as provided in Section 3.3(b) and Article 5, a Participant must remain employed by the Company until the last day of the Fiscal Year to receive his Annual Award, if any. If a Participant has a termination of Employment which is a Termination for Cause or which is voluntary prior to the end of the Fiscal Year, all rights to the Annual Award for that Fiscal Year shall be forfeited. (b) If a Participant dies, incurs a Disability, has a Retirement or has a Termination of Employment other than a termination described in 3.3(a) before the end of the Fiscal Year or takes an unpaid leave of absence of longer than 30 days during the Fiscal Year, then such Participant shall be entitled to a pro-rated Annual Award for that Fiscal Year as described in Section 3.3(c), payable at the same time applicable to other Participants. (c) The amount of the pro-rated Annual Award referred to in Section 3.3(b) shall be 8 equal to the product of (i) the amount of the Annual Award for that Participant determined under Section 3.1 and 3.2 and (ii) a fraction, the numerator of which is the number of completed calendar months of service performed (in the case of a Disability, the number of completed months through the date of Disability) by the Participant for the Fiscal Year and the denominator of which is twelve. 3.4 Payment of Annual Award. A Participant's Annual Award for a Fiscal Year shall be paid in a single cash payment within 75 days of the end of that Fiscal Year; provided, however, that any award in excess of 150% of a Participant's then current salary may be paid in the Company's common stock or in a combination of cash and common stock, in the sole discretion of the Compensation Committee. ARTICLE 4 - MID-TERM PROGRAM. 4.1. Mid-Term Award Grants. (a) Mid-Term Awards shall be determined in accordance with pre-established Mid-Term Performance Objectives as described in Section 4.2. Once established, the Compensation Committee shall not have discretion to modify the terms of the Mid-Term Awards, except that the Compensation Committee shall have the discretion to reduce the payout under any Mid-Term Award, if in the sole judgment of the Compensation Committee, the amount of such payout does not reflect the design intentions of the Plan. It is intended that all payments hereunder to Covered Employees will satisfy the requirements for deductibility under Section 162(m) of the Code. (b) The Mid-Term Target Bonus for each Participant's Mid-Term Award for the Measurement Period shall be approved by the Compensation Committee no later than 90 days after the commencement of the Participant's period of service during the Measurement Period. 9 The Mid-Term Target Bonus will be based on several factors, including market competitive data, job responsibilities and market conditions and other factors considered relevant by the Compensation Committee. The Mid-Term Award shall be based on the degree to which the predetermined Mid-Term Performance Objectives for that Measurement Period are achieved. The Compensation Committee shall approve in writing a schedule setting forth the percentage of Mid-Term Target Bonus payable based on the level of performance objective achieved. (c) At the end of the Measurement Period, the Compensation Committee shall approve the payment to each Participant of his Mid-Term Award, if any. Prior to the payment of any Mid-Term Awards, the Compensation Committee shall certify that degree of achievement of the applicable Mid-Term Performance Objectives. The maximum amount payable to any individual Participant as a Mid-Term Award for a given Measurement Period is $3,000,000. 4.2. Mid-Term Performance Objectives. The Mid-Term Performance Objectives shall be developed through the Company's business planning process and shall be approved by the Compensation Committee in writing not later than 90 days after the beginning of the Measurement Period to which they apply. The Mid-Term Performance Objectives shall be composed of one or more of the following: cumulative earnings per share over a specified period, fully diluted earnings per share, Corporate or Division earnings before interest and taxes (with or without a pro forma charge for the cost of capital) in absolute dollars or as a percentage of sales, revenue, sales, profit after tax, gross profit, operating profit, unit volume, return on equity, changes in working capital, Corporate or Division return on net capital employed, cash flow, total shareholder return, total return to shareholders as compared to a relevant index of publicly traded companies as approved by the Compensation Committee or, for Participants other than Covered Employees, other objectively measurable 10 goals approved by the Compensation Committee. The Compensation Committee will determine whether the achievement of Mid-Term Performance Objectives will be impacted by any extraordinary, unusual or non-recurring items or changes in Generally Accepted Accounting Principles. In establishing the goals, the Compensation Committee will keep in mind the requirements of Reg. Section 1.162-27(e)(2) that the outcome must be substantially uncertain at the time the Mid-Term Performance Objectives are established. A different combination of goals may be used for different Participants or different positions (including differences between corporate and division positions). The goals used may vary for each Measurement Period. However, the specific goals to be used for a Participant or a class of Participants for a specific Measurement Period shall be approved in writing by the Compensation Committee. 4.3. Forfeitability of the Mid-Term Award. (a) Except as provided in Section 4.3(b) and Article 5, a Participant must remain employed by the Company until the end of the applicable Measurement Period to receive his Mid-Term Award. If the Participant has a Termination of Employment which is a Termination for Cause or which is voluntary prior to the end of the applicable Measurement Period, all rights to the Mid-Term Award shall be forfeited. (b) If a Participant dies, incurs a Disability, has a Retirement or has a termination of Employment other than a termination described in Section 4.3(a) before the end of the applicable Measurement Period or takes an unpaid leave of absence of longer than 30 days during the Measurement Period, then such Participant shall be entitled to a pro-rated Mid-Term Award for the Measurement Period, as described in Section 4.3(c). (c) The amount of the pro-rated Mid-Term Award referred to in Section 4.3(b) shall be equal to the product of (i) the amount of the Mid-Term Award for that Participant determined 11 under Section 4.1 and 4.2 and (ii) a fraction, the numerator of which is the number of completed calendar months of service performed (in the case of a Disability, the number of completed months through the date of Disability) by the Participant for the Measurement Period and the denominator of which is the number of months in the Measurement Period. 4.4. Payment of Mid-Term Award. The payment of the Mid-Term Award, if any, will be made in cash within 75 days after the end of the Measurement Period, provided, however, that any award in excess of 100% of a Participant's then current salary may be paid in the Company's common stock or in a combination of cash and common stock, in the sole discretion of the Compensation Committee. ARTICLE 5 - CHANGE IN CONTROL. 5.1. Effect of Change in Control. In the event of a Change in Control, the Plan shall terminate and the Participants' right to receive an Annual Cash Award and Mid-Term Awards under the Annual Program and any Mid-Term Programs then in effect shall be measured as of the end of the fiscal month immediately preceding the date of the Change in Control pursuant to Sections 5.2 and 5.3. 5.2. Measurement of Achievement under Annual Program. (a) To the extent the percentage of an Annual Performance Objective that was anticipated to be achieved as of the date for measurement set forth in Section 5.1 can be ascertained from the financial operating budget on which the Annual Program was based, achievement of such Annual Performance Objective shall be measured based on actual achievement as of such time versus anticipated achievement as of such time. (b) In the event Section 5.2(a) above shall not apply, if any Annual Performance Objective is based on a measure that is not subject to proration, achievement of such Annual 12 Performance Objective shall be measured as of the date set forth in Section 5.1 above. To the extent any Annual Performance Award is capable of proration, achievement of such Annual Performance Objective shall be measured as of the date set forth in Section 5.1 on a prorated basis. The prorated Annual Performance Objective shall be equal to the product of the (i) the Annual Performance Objective and (ii) a fraction, the numerator of which is the number of fiscal months elapsed under the Annual Program and the denominator of which is twelve. 5.3. Measurement of Achievement under Mid-Term Programs. (a) Achievement of that portion of any Mid-Term Awards outstanding as of the date of a Change in Control that is based on performance against an index shall be measured against such index as of the date set forth in Section 5.1 above. (b) To the extent the percentage of a Mid-Term Performance Objective that was anticipated to be achieved as of the date for measurement set forth in Section 5.1 can be ascertained from the long-term plan on which the Mid-Term Program was based, achievement of such Mid-Term Performance Objective shall be measured based on actual achievement as of such time versus anticipated achievement as of such time. (c) In the event that Sections 5.3(a) or 5.3(b) shall not be applicable, if any Mid-Term Performance Objective is based on a measure which is not subject to proration, achievement of such Mid-Term Performance Objective shall be measured as of the date set forth in Section 5.1 above. To the extent any such Mid-Term Performance Objective is capable of proration, achievement of such Mid-Term Performance Objective shall be measured as of the date set forth in Section 5.1 on a prorated basis. The prorated Mid-Term Performance Objective shall be equal to the product of (i) the Mid-Term Performance Objective and (ii) a fraction, the numerator of which is the number of fiscal months elapsed in the Measurement Period and the denominator of 13 which is the total number of fiscal months in the Measurement Period. 5.4. Payment of Awards. To the extent any Annual Award or Mid-Term Award has been earned, based on the methods of measurement set forth in Sections 5.2 and 5.3 above, respectively, such Annual Award or Mid-Term Award shall be payable without any further approval by the Compensation Committee and without proration based on the amount of time elapsed under either the Annual Program or any Mid-Term Program. All payments shall be made as soon as practicable after the Change in Control, but in no event later than forty-five (45) days after the Change in Control. ARTICLE 6 - GENERAL. 6.1. Nonassignability of Incentive Awards. No right under the Plan shall be subject to anticipation, sale, assignment, encumbrance or transfer other than by will or the laws of intestate succession. 6.2. Unsecured Interest. A Participant shall have no interest in any fund or specified asset of the Company. Any amounts which are or may be set aside under the provisions of this Plan shall continue for all purposes to be a part of the general funds of the Company, and no person or entity other than the Company shall, by virtue of the provisions of this Plan, have any interest in such assets. No right to receive payments from the Company pursuant to this Plan shall be greater than the right of any unsecured creditor of the Company. 6.3. No Right or Obligation of Continued Employment. Nothing contained in the Plan shall require the Company or a related company to continue to employ a Participant, nor shall the Participant be required to remain in the employment of the Company or a related company. 6.4. Withholding. The Company shall withhold all required local, state and federal and foreign taxes from the amount of any award. If awards are made in stock, the employee may deliver shares in satisfaction of the tax. 14 6.5. Amendment and Termination of the Plan. The Plan may be amended or terminated at any time by the Board or by the Compensation Committee as delegated by the Board, provided that such termination or amendment shall not, without the consent of any Participant, affect such Participant's rights with respect to awards previously awarded to him. With the consent of the Participant affected, the Board, or by delegation of authority by the Board, the Committee, may amend outstanding awards in a manner not inconsistent with the Plan. Further, no amendment that would require shareholder approval under Section 162(m) of the Code shall be made without that approval. 6.6. Binding on Successors. The obligations of the Company under the Plan shall be binding upon any organization which shall succeed to all or substantially all of the assets of the Company, and the term "Company," whenever used in the Plan, shall mean and include any such organization after the succession. 6.7. References. Any masculine personal pronoun shall be considered to mean also the corresponding feminine or neuter personal pronoun, as the context requires. 6.8. Applicable Law. The Plan shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania, without reference to principles of conflicts of laws. IN WITNESS WHEREOF, the York International Corporation 2002 Incentive Compensation Plan is, by the authority of the Board of Directors of the Corporation, executed as of the day of , 2002. Attest YORK INTERNATIONAL CORPORATION By: - ------------------------- --------------------------- Secretary [Corporate Seal] 15 EX-10.3 7 w62242exv10w3.txt FORM OF AMEND. NO. 1 TO SEVERANCE AGREEMENT Exhibit 10.3 AMENDMENT NO. 1 TO SEVERANCE AGREEMENT This Amendment No. 1 is made to that Severance Agreement by and between York International Corporation, a Delaware corporation (the "Company"), and _______________________________________ (the "Executive"), dated as of ____________________ (the "Agreement"), and is effective as of May 23, 2002. The parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 6.1(A) (ii) of the Agreement shall be modified by deleting the term "Annual EV Amount" each time it appears and substituting the term "Annual Target Bonus," and by deleting the term "1996 Incentive Compensation Plan" and substituting "2002 Incentive Compensation Plan." 2. All other provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Severance Agreement as of the day and year first above written. _____________________________________ YORK INTERNATIONAL CORPORATION By:__________________________________ EX-10.4 8 w62242exv10w4.txt FORM OF AMEND. NO. 1 TO EMPLOYMENT AGREEMENT Exhibit 10.4 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT This Amendment No. 1 is made to the Employment Agreement by and between York International Corporation, a Delaware corporation (the "Company"), and _______________________________________ (the "Executive"), dated as of the ________ day of _____________, _______ (the "Agreement"), and is effective the 23rd day of May, 2002. The parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 3(b) (ii) of the Agreement shall be modified to delete the reference to "the 1996 Incentive Compensation Plan" and to substitute "the 2002 Incentive Compensation Plan." 2. Section 5(a) (i) B of the Agreement shall be modified by deleting the parenthetical "(based on the adjusted EV bonus amount for the Fiscal Year in which the Date of Termination occurs, the "Adjusted EV Bonus")" and replacing it with "(based on the annual target bonus for the Fiscal Year in which the Date of Termination occurs, the "Annual Target Bonus"). 3. Section 5(a) (i) C of the Agreement shall be modified by deleting the term "Adjusted EV Bonus" and substituting "Annual Target Bonus." 4. Section 9(d) of the Agreement shall be modified by deleting "Adjusted EV Bonus" and substituting "Annual Target Bonus." 5. All other provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Employment Agreement as of the day and year first above written. _____________________________________ YORK INTERNATIONAL CORPORATION By:__________________________________ EX-99.1 9 w62242exv99w1.txt CERTIFICATION OF C.E.O. PURSUANT TO SECTION 906 Exhibit 99.1 CERTIFICATION OF PERIODIC REPORT I, MICHAEL R. YOUNG, Chief Executive Officer of York International Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2002 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 13, 2002 /s/ Michael R. Young ---------------------------------- Michael R. Young, Chief Executive Officer EX-99.2 10 w62242exv99w2.txt CERTIFICATION OF C.F.O. PURSUANT TO SECTION 906 Exhibit 99.2 CERTIFICATION OF PERIODIC REPORT I, C. DAVID MYERS, Chief Financial Officer of York International Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2002 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 13, 2002 /s/ C. David Myers ------------------------------------ C. David Myers, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----