-----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, H0wofLRGhIa5RyBxPs3z83CxlsNV7/i61NurAh1q+OAZi/hn4bixegwOwWOd+lcK REmCcRvyWk+OFuCON4/pFA== 0000893220-04-000932.txt : 20040506 0000893220-04-000932.hdr.sgml : 20040506 20040506162050 ACCESSION NUMBER: 0000893220-04-000932 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040506 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: 04785451 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 w96872e10vq.txt FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2004 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 MARCH 31, 2004 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). 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 May 6, 2004 ----- -------------------------- Common Stock, par value $.005 41,330,025 shares
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004 INDEX
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Statements of Operations - (unaudited) Three Months Ended March 31, 2004 and 2003 3 Consolidated Condensed Balance Sheets - March 31, 2004 (unaudited) and December 31, 2003 4 Consolidated Condensed Statements of Cash Flows - (unaudited) Three Months Ended March 31, 2004 and 2003 5 Supplemental Notes to Consolidated Condensed Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk 23 Item 4. Controls and Procedures 23 PART II. OTHER INFORMATION Item 1. Legal Proceedings 24 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 24 Item 3. Defaults Upon Senior Securities 24 Item 4. Submission of Matters to a Vote of Security Holders 24 Item 5. Other Information 24 Item 6. Exhibits and Reports on Form 8-K 24
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 MARCH 31, 2004 2003 --------- --------- Net sales: Products $ 833,718 $ 769,042 Services 105,649 99,315 --------- --------- Net sales 939,367 868,357 Cost of goods sold: Products (678,584) (627,205) Services (89,727) (81,052) --------- --------- Cost of goods sold (768,311) (708,257) --------- --------- Gross profit 171,056 160,100 Selling, general, and administrative expenses (166,181) (149,032) Restructuring and other charges, net -- (16,094) --------- --------- Income (loss) from operations 4,875 (5,026) Interest expense, net (10,861) (12,016) Equity in earnings of affiliates 492 1,088 --------- --------- Loss before income taxes (5,494) (15,954) Benefit from income taxes 1,291 2,318 --------- --------- Net loss $ (4,203) $ (13,636) ========= ========= Basic and diluted net loss per share $ (0.10) $ (0.34) ========= ========= Cash dividends per share $ 0.20 $ 0.15 ========= ========= Basic and diluted weighted average common shares and common equivalents outstanding 40,607 39,623
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)
MARCH 31, 2004 DECEMBER 31, (UNAUDITED) 2003 -------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 52,931 $ 49,650 Receivables, net 614,894 638,510 Inventories: Raw material 140,680 138,108 Work in progress 159,217 147,094 Finished goods 258,482 227,512 -------------- ------------ Total inventories 558,379 512,714 Prepayments and other current assets 133,959 129,921 -------------- ------------ Total current assets 1,360,163 1,330,795 Deferred income taxes 101,058 107,566 Investments in affiliates 28,335 28,200 Property, plant and equipment, net 535,625 541,118 Goodwill 526,278 529,182 Intangibles, net 35,587 36,744 Deferred charges and other assets 101,963 99,530 -------------- ------------ Total assets $ 2,689,009 $ 2,673,135 ============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 15,070 $ 30,755 Accounts payable and accrued expenses 891,976 899,093 Income taxes 27,639 38,453 -------------- ------------ Total current liabilities 934,685 968,301 Long-term warranties 48,288 46,888 Long-term debt 646,147 582,027 Postretirement and postemployment benefits 243,045 249,912 Other long-term liabilities 49,854 49,607 -------------- ------------ Total liabilities 1,922,019 1,896,735 Stockholders' equity 766,990 776,400 -------------- ------------ Total liabilities and stockholders' equity $ 2,689,009 $ 2,673,135 ============== ============
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)
THREE MONTHS ENDED MARCH 31, 2004 2003 --------- --------- Cash flows from operating activities: Net loss $ (4,203) $ (13,636) Adjustments to reconcile net loss to net cash (used) provided by operating activities: Depreciation and amortization of property, plant and equipment 17,435 16,326 Amortization of deferred charges and intangibles 790 882 Provision for doubtful receivables 3,673 2,859 Effect of non-cash charges -- 15,234 Deferred income taxes 2,145 6,829 Loss on sale of fixed assets 420 262 Other 1,866 (869) Change in assets and liabilities net of effects from acquisitions and divestitures: Receivables, net 20,997 18,951 Inventories (48,163) (31,764) Prepayments and other current assets (1,053) (18,180) Accounts payable and accrued expenses (1,058) 16,069 Income taxes (10,715) (5,461) Other long-term assets and liabilities (444) 2,250 --------- --------- Net cash (used) provided by operating activities (18,310) 9,752 --------- --------- Cash flows from investing activities: Purchases of other companies, net of cash acquired (728) (325) Capital expenditures (17,780) (15,191) Proceeds from sale of fixed assets 865 95 --------- --------- Net cash used by investing activities (17,643) (15,421) --------- --------- Cash flows from financing activities: Net (payments of) proceeds from short-term debt (12,714) 990 Proceeds from credit agreement -- 95,000 Payment of senior notes -- (100,000) Net proceeds from other long-term debt 59,470 3,394 Reduction in sale of receivables (5,000) (31,000) Common stock issued 5,843 94 Treasury stock purchases -- (5) Dividends paid (8,206) (5,948) --------- --------- Net cash provided (used) by financing activities 39,393 (37,475) --------- --------- Effect of exchange rate changes on cash and cash equivalents (159) (91) --------- --------- Net increase (decrease) in cash and cash equivalents 3,281 (43,235) Cash and cash equivalents at beginning of period 49,650 92,940 --------- --------- Cash and cash equivalents at end of period $ 52,931 $ 49,705 ========= =========
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) FINANCIAL STATEMENTS 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 accounting principles generally accepted in the United States of America have been condensed or omitted. We believe that the information presented is not misleading and the disclosures are adequate. In our opinion, the consolidated condensed financial statements contain all adjustments necessary to present fairly our financial position as of March 31, 2004 and December 31, 2003 and results of operations and cash flows for the three months ended March 31, 2004 and 2003. Our results of operations for interim periods are not necessarily indicative of results expected for the full year. Certain reclassifications have been made to the 2003 consolidated condensed financial statements to conform to the 2004 presentation. (2) STOCK-BASED COMPENSATION We apply the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for our stock-based compensation plans. Accordingly, no compensation expense has been recognized for our stock-based compensation plans other than for restricted stock and performance-based awards. Had compensation expense for all stock and employee stock purchase plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," as amended, our net loss and loss per share would have been adjusted to the pro forma amounts as follows (in thousands, except per share data):
THREE MONTHS ENDED MARCH 31, 2004 2003 -------- -------- Net loss - as reported $ (4,203) $(13,636) Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects 306 22 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (1,100) (2,190) -------- -------- Pro forma net loss $ (4,997) $(15,804) ======== ======== Basic and diluted loss per share: As reported $ (0.10) $ (0.34) Pro forma (0.12) (0.40)
Since the determination of fair value of all stock options granted includes variable factors, including volatility, and additional stock option grants are expected to be made each year, the above pro forma disclosures are not representative of pro forma effects on reported net income and earnings per share for future years. (3) RECEIVABLES, NET Pursuant to the terms of an annually renewable revolving facility, we sell certain of our trade receivables to a wholly-owned, consolidated subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis, an undivided ownership interest in the purchased trade receivables to bank-administered asset-backed commercial paper vehicles. In April 2003, we amended the facility, reducing it from $175 million to $150 million. 6 We continue to service sold trade receivables. No servicing asset or liability has been recognized as our cost to service sold trade receivables approximates the servicing income. In accordance with the facility, YRFLLC has sold $145 million and $150 million of an undivided interest in trade receivables as of March 31, 2004 and December 31, 2003, respectively. The proceeds from the sale were reflected as a reduction of net receivables in our consolidated condensed balance sheets as of March 31, 2004 and December 31, 2003. The discount rate on trade receivables sold was 1.04% and 1.12% as of March 31, 2004 and December 31, 2003, respectively. (4) GOODWILL The changes in the carrying amount of goodwill for the three months ended March 31, 2004 by segment are as follows (in thousands):
NET FOREIGN BALANCE AS OF GOODWILL CURRENCY BALANCE AS OF DEC. 31, 2003 ACQUIRED FLUCTUATION MARCH 31, 2004 ------------- -------- ----------- -------------- Global Applied: Americas $ 92,949 $ -- $ (32) $ 92,917 Europe, Middle East and Africa 130,166 403 (3,348) 127,221 Asia 109,314 -- 73 109,387 ------------- -------- ----------- -------------- 332,429 403 (3,307) 329,525 Unitary Products Group 140,440 -- -- 140,440 Bristol Compressors 56,313 -- -- 56,313 ------------- -------- ----------- -------------- $ 529,182 $ 403 $ (3,307) $ 526,278 ============= ======== =========== ==============
(5) INTANGIBLES, NET The following table summarizes the major intangible asset classes subject to amortization included in our consolidated condensed balance sheets as of March 31, 2004 and December 31, 2003 (in thousands):
GROSS CARRYING ACCUMULATED NET CARRYING March 31, 2004 AMOUNT AMORTIZATION AMOUNT -------------- ------------ ------------ Trade names and trademarks $ 40,965 $ 6,908 $ 34,057 Other 2,567 1,037 1,530 -------------- ------------ ------------ $ 43,532 $ 7,945 $ 35,587 ============== ============ ============ December 31, 2003 Trade names and trademarks $ 42,028 $ 6,723 $ 35,305 Other 2,536 1,097 1,439 -------------- ------------ ------------ $ 44,564 $ 7,820 $ 36,744 ============== ============ ============
Amortization expense for trade names and trademarks and other intangible assets for the three months ended March 31, 2004 and 2003 was $0.4 million and $0.5 million, respectively. 7 The following table estimates the amount of amortization expense for trade names and trademarks and other intangible assets for the remainder of 2004 and each of the fiscal years indicated (in thousands): 2004 (April 1 - December 31) $ 1,156 2005 1,583 2006 1,583 2007 1,483 2008 1,483 Thereafter 28,299 ------------ $ 35,587 ============
(6) NOTES PAYABLE AND LONG-TERM DEBT As of March 31, 2004 and December 31, 2003, our indebtedness consisted of senior notes and various other bank and term loans. In March 2003 and 2004, we amended our Five Year Credit Agreement and renewed our 364-Day Credit Agreement, respectively. We have a $400 million Five Year Credit Agreement, which expires on May 29, 2006, and a $200 million 364-Day Credit Agreement, which expires on March 11, 2005 (collectively, the Agreements). No amounts were outstanding under the Agreements as of March 31, 2004 and December 31, 2003. The $400 million Five Year Credit Agreement provides for borrowings at the London InterBank Offering Rate (LIBOR) plus 1.175% and the $200 million 364-Day Credit Agreement provides for borrowings at LIBOR plus 0.85%. We pay annual fees of 0.2% on the $400 million facility and 0.15% on the $200 million facility. The Agreements allow for borrowings at specified bid rates. As of March 31, 2004 and December 31, 2003, the three-month LIBOR rate was 1.1% and 1.14%, 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 March 31, 2004 and December 31, 2003. We have domestic bank lines that provide for total borrowings of up to $150 million and $135 million as of March 31, 2004 and December 31, 2003, respectively. As of March 31, 2004 and December 31, 2003, $91.5 million and $25 million, respectively, were outstanding under the domestic bank lines. In October and December 2003, we issued Danish denominated retail notes of DKK 200 million and DKK 50 million, respectively. These notes are due in October 2004 and have a coupon rate of 2%. Both the domestic bank lines and the Danish retail notes are classified as long-term as they are supported by our $400 million Five Year Credit Agreement. Our non-U.S. subsidiaries maintain bank credit facilities in various currencies that provide for total borrowings of $390.8 million and $355.2 million as of March 31, 2004 and December 31, 2003, respectively. As of March 31, 2004 and December 31, 2003, $11.7 million and $27.8 million, respectively, were outstanding under the non-U.S. facilities, with remaining availability of $264.1 million and $246.3 million, respectively, after bank guarantees and letters of credit usage. 8 Notes payable and long-term debt consist of (in thousands):
MARCH 31, DECEMBER 31, 2004 2003 --------- ------------ Notes payable and current portion of long-term debt: Bank loans (primarily foreign currency) $ 11,730 $ 27,784 Current portion of long-term debt 3,340 2,971 --------- ------------ Total $ 15,070 $ 30,755 ========= ============ Long-term debt: Domestic bank lines at an average rate of 1.78% in 2004 and 1.58% in 2003 $ 91,500 $ 25,000 Danish retail notes, 2% interest, due October 2004 40,675 41,844 Senior notes, 6.625% interest, due August 2006 200,000 200,000 Senior notes, 6.7% interest, due June 2008 200,000 200,000 Senior notes, 5.8% interest, due November 2012 100,000 100,000 Other (primarily foreign bank loans) at an average rate of 6.17% in 2004 and 6.3% in 2003 17,312 18,154 --------- ------------ Total 649,487 584,998 Less current portion (3,340) (2,971) --------- ------------ Noncurrent portion $ 646,147 $ 582,027 ========= ============
(7) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS PENSION PLANS Effective January 1, 2004, we replaced our defined benefit pension plans for U.S. salaried non-bargaining and certain U.S. salaried bargaining employees with a new defined contribution plan. Net periodic benefit cost includes the following components (in thousands):
THREE MONTHS ENDED MARCH 31, 2004 2003 --------- ---------- Components of net periodic benefit cost: Service cost $ 3,226 $ 5,805 Interest cost 8,452 9,154 Expected return on plan assets, income (10,262) (10,279) Amortization of prior service cost 572 969 Amortization of net loss 668 475 Settlement 1,049 -- --------- ---------- Net periodic benefit cost $ 3,705 $ 6,124 ========= ==========
We previously disclosed in our consolidated financial statements for the year ended December 31, 2003 that we expected to contribute $14.3 million to our pension plans in 2004. As of March 31, 2004, $7.5 million of contributions have been made. We currently anticipate contributing an additional $6.4 million to fund our plans in 2004 for a total of $13.9 million. 9 DEFINED CONTRIBUTION PLANS Effective January 1, 2004, certain U.S. employees participate in our new defined contribution plan. We contribute a cash amount to the plan on an annual basis, based on employees' eligible earnings, vesting service, and age. We recorded expense of approximately $2.8 million related to the plan in the three months ended March 31, 2004. Certain employees participate in various other investment plans. Under the plans, the employees may voluntarily contribute a percentage of their compensation. We contribute a cash amount based on the participants' contributions. Our contributions to plans were approximately $0.8 million and $0.3 million in the three months ended March 31, 2004 and 2003, respectively. We recorded expense of approximately $1.0 million and $0.4 million related to the plans in the three months ended March 31, 2004 and 2003, respectively. POSTRETIREMENT HEALTH AND LIFE INSURANCE PLANS Net periodic benefit cost includes the following components (in thousands):
THREE MONTHS ENDED MARCH 31, 2004 2003 --------- ---------- Components of net periodic benefit cost: Service cost $ 354 $ 414 Interest cost 2,061 1,919 Amortization of prior service cost (1,360) (562) Amortization of net loss 1,100 745 --------- ---------- Net periodic benefit cost $ 2,155 $ 2,516 ========= ==========
We previously disclosed in our consolidated financial statements for the year ended December 31, 2003 that we expected to contribute $7.4 million to our postretirement health and life insurance plans in 2004. As of March 31, 2004, $2.3 million of contributions have been made. We currently anticipate contributing an additional $5.4 million to fund our plans in 2004 for a total of $7.7 million. (8) GUARANTEES We issue various types of guarantees in the normal course of business. As of March 31, 2004, we have the following guarantees outstanding (in thousands): Standby letters of credit and surety bonds $ 108,380 Performance guarantees 171,976 Commercial letters of credit 8,043 Guarantee of affiliate debt 30,000
Changes in our warranty liabilities for the three months ended March 31, 2004 are as follows (in thousands):
BALANCE PAYMENTS ACCRUALS FOR BALANCE AS OF MADE UNDER WARRANTIES AS OF DEC. 31, 2003 WARRANTIES ISSUED MARCH 31, 2004 - ------------- ---------- ------------ -------------- $ 101,675 $ 17,592 $ 18,600 $ 102,683
Warranties include standard warranties and extended warranty contracts sold to customers to increase the warranty period beyond the standard period. Extended warranty contracts sold are reflected as accruals for warranties issued and amortized revenue is reflected as payments made under warranties. 10 (9) 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 hedged 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 hedged exposures. 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 loses in cost of goods sold due to the discontinuance of ineffective currency and commodity cash flow hedges for the three months ended March 31, 2004 and 2003 were immaterial. 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 U.S. 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) are matched to the underlying foreign currency exposures and are executed to minimize foreign exchange transaction costs. As of March 31, 2004, we forecasted that $0.4 million of net losses in accumulated other comprehensive losses will be reclassified into earnings within the next twelve months. Hedges of Net Investment We issued Danish denominated, retail notes as a hedge to protect the value of a portion of our net investment in a Danish subsidiary. Hedges of a net investment are accounted for under SFAS No. 52, "Foreign Currency Translation." Under SFAS No. 52, the gains or losses on a foreign-denominated, nonderivative financial instrument designated as a hedge of a net investment are recorded in foreign currency translation adjustments within accumulated other comprehensive losses. The gains and losses are accounted for in a similar manner as the foreign denominated net assets, offsetting a portion of the change in net assets due to foreign currency fluctuations. As of March 31, 2004, we have designated $40.7 million in Danish retail notes as a hedge of a net investment. 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 swap contracts to effectively fix our cost of the commodity. These contracts require each settlement between us and our counterparty to coincide with cash market purchases of the actual commodity. As of March 31, 2004, we forecasted that $15.5 million of net gains 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. In addition, we enter into interest rate swap contracts in order to achieve a balanced mix of fixed and variable rate indebtedness. As of March 31, 2004, we had interest rate swap contracts to pay variable interest, based on the six-month LIBOR rate, and receive a fixed rate of interest of 6.625% on a notional amount of $100 million. As of March 31, 2004, the fair value of these swap contracts was an unrealized gain of $8.3 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 determined to be 100% effective under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. As a result, there is no impact on current earnings resulting from hedge ineffectiveness. 11 (10) COMPREHENSIVE LOSS Comprehensive loss is determined as follows (in thousands):
THREE MONTHS ENDED MARCH 31, 2004 2003 --------- ---------- Net loss $ (4,203) $ (13,636) Other comprehensive (loss) income: Foreign currency translation adjustment (9,200) 7,731 Cash flow hedges: Reclassification adjustment, net of tax 1,290 (611) Net derivative income, net of tax 3,695 848 Available for sale securities 37 -- --------- ---------- Comprehensive loss $ (8,381) $ (5,668) ========= ==========
(11) STOCKHOLDERS' EQUITY The following table summarizes our stockholders' equity as of March 31, 2004 and December 31, 2003 (in thousands, except per share data):
MARCH 31, DECEMBER 31, 2004 2003 --------- ------------ Common stock $.005 par value; 200,000 shares authorized; issued 46,249 shares at March 31, 2004 and 46,248 shares at December 31, 2003 $ 231 $ 231 Additional paid-in capital 732,566 732,339 Retained earnings 286,786 299,195 Accumulated other comprehensive losses (55,775) (51,597) Treasury stock, at cost; 5,245 shares at March 31, 2004 and 5,420 shares at December 31, 2003 (194,352) (200,856) Unearned compensation (2,466) (2,912) --------- ------------ Total stockholders' equity $ 766,990 $ 776,400 ========= ============
(12) LOSS PER SHARE Net loss as set forth in the consolidated condensed statements of operations is used in the computation of basic and diluted loss per share. Our basic and diluted loss per share is based upon the weighted average common shares outstanding during the period. The computation of diluted loss per share excludes non-vested restricted shares and stock options of 5.6 million and 6 million for the three months ended March 31, 2004 and 2003, respectively, as their effect would have been anti-dilutive. (13) SEGMENT INFORMATION Our global business operates in the heating, ventilating, air conditioning, and refrigeration (HVAC&R) industry. Our organization consists of Global Applied, Unitary Products Group, and Bristol Compressors. The Global Applied business is comprised of three geographic regions: Americas; Europe, Middle East and Africa (EMEA); and Asia. Global Applied's three geographic regions, Unitary Products Group, and Bristol Compressors represent our reportable segments. Global Applied designs, produces, markets, and sells HVAC&R equipment and solutions and provides maintenance and service of equipment manufactured by us and by others. Types of equipment include air-cooled and water-cooled 12 chillers, central air handling units, variable air volume units, screw and reciprocating compressors, condensers, evaporators, heat exchangers, ductless minisplits, process refrigeration systems, hygienic air distribution systems, gas compression systems, and control equipment to monitor and control the entire system. Heating and air conditioning solutions are provided for buildings ranging from small office buildings and fast food restaurants to large commercial and industrial complexes. Refrigeration systems are provided for industrial applications in the food, beverage, chemical and petroleum industries. Cooling and refrigeration systems are also supplied for use on naval, commercial and passenger vessels. Unitary Products Group (UPG) produces heating and air conditioning solutions for buildings ranging from private homes and apartments to small commercial buildings. UPG products include ducted central air conditioning and heating systems (air conditioners, heat pumps, and furnaces), and light commercial heating and cooling equipment. Bristol Compressors (Bristol) manufactures reciprocating and scroll compressors for our use and for sale to original equipment manufacturers and wholesale distributors. Bristol purchases an essential component from one vendor. Due to consolidation in the vendor's industry, there are limited alternate sources of supply. We believe an alternate source of supply is attainable in the event the current vendor is unable to supply the component. However, a change in vendors would cause a delay in manufacturing and loss of sales, which would adversely impact the results of operations of Bristol and our consolidated results of operations. General corporate expenses and charges and other expenses are not allocated to the individual segments for management reporting purposes. General corporate expenses include certain incentive compensation, pension, medical and insurance costs; corporate administrative costs; development costs for information technology applications and infrastructure; and other corporate costs. Charges and other expenses in 2003 include restructuring and other charges. Non-allocated assets primarily consist of prepaid pension benefit cost, net deferred tax assets, LIFO inventory reserves, and other corporate assets. For management reporting purposes, intersegment sales are recorded on a cost-plus or market price basis. Business segment management performance is based on earnings before interest and taxes, net capital employed, and earnings per share. 13 The table below represents our operating results and assets by segment (in thousands):
THREE MONTHS ENDED MARCH 31, 2004 2003 --------- ---------- Net sales: Global Applied: Americas $ 332,799 $ 297,413 EMEA 298,421 262,052 Asia 102,784 90,119 Intragroup sales (44,991) (40,366) --------- ---------- 689,013 609,218 Unitary Products Group 180,391 163,542 Bristol Compressors 113,478 137,562 Eliminations(1) (43,515) (41,965) --------- ---------- $ 939,367 $ 868,357 ========= ========== (1)Eliminations include the following intersegment sales: Global Applied $ 731 $ 586 Unitary Products Group 13,734 12,689 Bristol Compressors 29,050 28,690 --------- ---------- Eliminations $ 43,515 $ 41,965 ========= ========== Income (loss) from operations: Global Applied: Americas $ 1,686 $ (2,756) EMEA (9) 589 Asia 9,574 9,693 --------- ---------- 11,251 7,526 Unitary Products Group 12,026 8,220 Bristol Compressors 4,078 11,329 General corporate expenses, eliminations, and other non-allocated items (22,480) (14,115) Charges and other expenses -- (17,986) --------- ---------- 4,875 (5,026) --------- ---------- Interest expense, net (10,861) (12,016) --------- ---------- Equity in earnings (loss) of affiliates: Global Applied: EMEA 384 415 Asia 116 196 --------- ---------- 500 611 Bristol Compressors (8) 477 --------- ---------- 492 1,088 --------- ---------- Loss before income taxes (5,494) (15,954) Benefit from income taxes 1,291 2,318 --------- ---------- Net loss $ (4,203) $ (13,636) ========= ==========
14
MARCH 31, 2004 DEC. 31, 2003 -------------- ------------- Total assets: Global Applied: Americas $ 732,909 $ 711,103 EMEA 888,780 937,981 Asia 396,218 389,456 Eliminations and other non-allocated assets (94,604) (111,789) -------------- ------------- 1,923,303 1,926,751 Unitary Products Group 426,241 384,355 Bristol Compressors 289,558 242,375 Eliminations and other non-allocated assets 49,907 119,654 -------------- ------------- $ 2,689,009 $ 2,673,135 ============== =============
(14) CHARGES TO OPERATIONS In 2003, we initiated actions to further reduce our overall cost structure and support the implementation of our new geographic organization. In addition to cost reductions associated with the consolidation of our former Engineered Systems Group and York Refrigeration Group segments, additional actions included the further reduction of manufacturing capacity, the elimination of certain product lines, and the exiting of several small, non-core businesses. All actions were substantially completed by December 31, 2003. In the three months ended March 31, 2003, we incurred costs by segment as follows (in thousands): Global Applied: Americas $ 3,571 EMEA 12,345 Asia 2,070 ------------- Total charges to operations, net 17,986 Charges reflected in cost of goods sold 1,892 ------------- Restructuring and other charges, net $ 16,094 =============
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. Severance and other accruals included planned reductions in workforce throughout the Company. Substantially all of the severance accrual will be utilized in 2004. Detail of activity relating to the 2003 initiatives in the three months ended March 31, 2004 is as follows (in thousands):
ACCRUALS ESTABLISHED UTILIZED IN THREE IN THREE MONTHS MONTHS REMAINING ACCRUALS AT ENDED ENDED ACCRUALS AT DEC. 31, MARCH 31, MARCH 31, MARCH 31, 2003 2004 2004 2004 ----------- ----------- --------- ----------- Severance $ 16,537 $ -- $ 6,613 $ 9,924 Contractual obligations 6,156 -- 374 5,782 Other 1,220 -- 1,002 218 ----------- ----------- --------- ----------- $ 23,913 $ -- $ 7,989 $ 15,924 =========== =========== ========= ===========
15 (15) PROPOSED ACCOUNTING STANDARDS In March 2004, the Financial Accounting Standards Board issued Proposed Statement of Financial Accounting Standards "Share-Based Payment," an amendment of FASB Statements No. 123 and 95. This proposed statement addresses the accounting for share-based compensation in which we exchange employee services for (a) our equity instruments or (b) liabilities that are based on the fair value of our equity instruments or that may be settled by the issuance of our equity instruments. Under the proposed statement, we will recognize compensation cost for share-based compensation issued to or purchased by employees under our stock-based compensation plans using a fair-value-based method effective January 1, 2005. The impact the proposed statement will have on our consolidated condensed financial statements is not known at this time, however, we expect the proposed statement to reduce net income and earnings per share similarly to the amounts disclosed in supplemental note 2 to our consolidated condensed financial statements and note 1 to our consolidated financial statements contained in the Annual Financial Statements and Review of Operations filed as Exhibit 13 to our Form 10-K/A for the year ended December 31, 2003. 16 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS CONSOLIDATED OPERATIONS Net sales grew $71 million or 8.2% to $939.4 million in the first quarter of 2004 compared to 2003. Our revenue growth is mainly attributable to the favorable impact of net strengthening foreign currencies of $41.9 million; increased equipment volume in Americas, Asia and Unitary Products Group; and overall growth in Global Applied service business sales (consisting of services, parts and replacement equipment). Currency, volume and service business improvements were partially offset by lower equipment volume at Bristol Compressors. (See further discussion below under Segment Analysis.) For the three months ended March 31, 2004, net sales in the United States increased 3.6% to $425.8 million and international net sales increased 12.3% to $513.6 million. Order backlog as of March 31, 2004 was $1,241.6 million compared to $1,075.7 million as of March 31, 2003 and $1,026.6 million as of December 31, 2003. Gross profit grew $11 million or 6.8% to $171.1 million (18.2% of net sales) in the first quarter of 2004 as compared to $160.1 million (18.4% of net sales) in 2003. Overall, gross profit increased due to the net strengthening of foreign currencies of $7.4 million and higher equipment volume in Americas, Asia and Unitary Products Group. Gross profit also benefited from our improved cost structure as a result of the 2003 restructuring initiatives. These improvements were partially offset by higher raw material (principally steel and copper) and component costs; reduced equipment volume levels at Bristol Compressors; and increased service business costs related to infrastructure and labor. While we hedge a portion of our copper and aluminum purchases and have contracts for steel purchases, we experienced cost increases for unhedged portions, components containing these commodities, as well as surcharges on our steel purchases. We expect raw material and component cost increases to be partially mitigated by raising our product prices beginning in the second quarter of 2004. In 2003, we recorded $1.9 million of costs related to our 2003 restructuring initiatives in cost of goods sold. Selling, general, and administrative (SG&A) expenses increased $17.1 million or 11.5% to $166.2 million (17.7% of net sales) in the first quarter of 2004 from $149 million (17.2% of net sales) in 2003. Our SG&A expenses increased by $7.2 million due to net strengthening of foreign currencies. The remaining increase in SG&A reflects the cost of our initiatives to improve our information technology capabilities and develop and market new products. We expect to benefit from these projects in 2005 and beyond. In 2003, we initiated actions to further reduce our overall cost structure and support the implementation of our new geographic organization. In addition to cost reductions associated with the consolidation of our former Engineered Systems Group and York Refrigeration Group segments, additional actions included the further reduction of manufacturing capacity, elimination of certain product lines, and exiting of several small, non-core businesses. In the first quarter of 2003, we recorded restructuring charges of $18 million related to these actions, including $1.9 million charged to cost of goods sold. The charges included $15.2 million in write-downs of various assets and $2.8 million in accruals for severance and other costs. Income from operations increased $9.9 million to $4.9 million (0.5% of net sales) in the first quarter of 2004 compared to a loss of $5 million (-0.6% of net sales) in 2003. (See further discussion below under Segment Analysis.) Net interest expense declined $1.2 million to $10.9 million in the first quarter of 2004 compared to 2003. The decline resulted from lower average debt levels partially offset by higher interest rates in international markets. Equity in earnings of affiliates declined $0.6 million to $0.5 million in the first quarter of 2004 compared to 2003. The reduction was primarily the result of reduced earnings at Scroll Technologies. The income tax benefit of $1.3 million for the first quarter of 2004 and $2.3 million in 2003 relates to both U.S. and non-U.S. operations. The 2004 and 2003 income tax benefits were lower than the U.S. statutory rate of 35% primarily due to pre-tax earnings and losses in non-U.S. jurisdictions where statutory rates are less than 35%. The effective tax rate was a benefit of 17 23.5% in the first quarter of 2004 as compared to 14.5% in 2003. The change in the effective tax rate is attributable to restructuring charges recorded in 2003, for which the tax benefits were recorded at a lower effective tax rate. Net loss, as a result of the above factors, was $4.2 million (-0.4% of net sales) in the first quarter of 2004 compared to $13.6 million (-1.6% of net sales) in 2003. SEGMENT ANALYSIS The following table sets forth net sales and income (loss) from operations by segment (in thousands):
THREE MONTHS ENDED MARCH 31, 2004 2003 --------- ---------- Net sales: Global Applied: Americas $ 332,799 $ 297,413 Europe, Middle East and Africa 298,421 262,052 Asia 102,784 90,119 Intragroup sales (44,991) (40,366) --------- ---------- 689,013 609,218 Unitary Products Group 180,391 163,542 Bristol Compressors 113,478 137,562 Eliminations (43,515) (41,965) --------- ---------- Net sales $ 939,367 $ 868,357 ========= ========== Income (loss) from operations: Global Applied: Americas $ 1,686 $ (2,756) Europe, Middle East and Africa (9) 589 Asia 9,574 9,693 --------- ---------- 11,251 7,526 Unitary Products Group 12,026 8,220 Bristol Compressors 4,078 11,329 General corporate expenses, eliminations, and other non-allocated items (22,480) (14,115) Charges and other expenses -- (17,986) --------- ---------- Income (loss) from operations $ 4,875 $ (5,026) ========= ==========
Global Applied Global Applied net sales grew $79.8 million or 13.1% to $689 million in the first quarter of 2004 compared to 2003. Net sales benefited $40.9 million or 6.7% from the net strengthening of currencies mainly in Europe, Middle East and Africa (EMEA). Improved revenue in Americas is attributable to increased equipment volume and service business growth. Asia equipment revenue continued to grow principally due to the economic expansion of China. Global Applied service business revenue increased $28.7 million or 12.7% to $254.3 million in the first quarter of 2004, of which 6.8% is due to the net strengthening of foreign currencies. Global Applied service business continued to grow on repair and replacement opportunities, as we continued to expand our multi-site commercial service activities, mainly in the Americas. Global Applied income from operations increased to $11.3 million (1.6% of net sales) in the first quarter of 2004 from $7.5 million (1.2% of net sales) in 2003. Benefits from improved equipment volume and realized savings from the 2003 restructuring initiatives in the Americas accounted for most of the increase. Asia remained relatively consistent despite increasing net sales due to unfavorable global minisplit pricing. EMEA declined due to margin-pricing pressure in Europe, as some markets remained weak, partially offset by benefits from the 2003 restructuring initiatives. Overall, Global Applied was negatively impacted by an increase in raw material costs and continued investments in service business infrastructure, information technology capabilities, and product development. 18 Unitary Products Group (UPG) UPG net sales grew $16.8 million or 10.3% to $180.4 million in the first quarter of 2004 compared to 2003. Equipment volume increased driven by market share gains as well as growth in the overall North American unitary air conditioning and heating market. In the first quarter of 2004, UPG introduced the new, more efficient "Affinity" line of products. We expect new products and improvements in construction markets to increase sales for the 2004 year above 2003 levels. UPG income from operations grew to $12 million (6.7% of net sales) in the first quarter of 2004 from $8.2 million (5% of net sales) in 2003. Improved results are mainly attributable to increased equipment volume, production efficiencies, and a favorable product mix partially offset by higher raw material costs. Bristol Compressors (Bristol) Bristol net sales declined $24.1 million or 17.5% to $113.5 million in the first quarter of 2004 compared to 2003. The decrease primarily relates to lower shipments to domestic and international unitary customers. Domestic shipments were negatively impacted by the loss of a customer in the fourth quarter of 2003 partially offset by higher equipment volumes to other domestic customers. During the first quarter of 2004, Bristol introduced the Benchmark compressor. This compressor is designed to meet future industry energy standards while reducing noise levels. Bristol income from operations decreased to $4.1 million (3.6% of net sales) in the first quarter of 2004 from $11.3 million (8.2% of net sales) in 2003. The impact of reduced volume and higher raw material costs negatively impacted income from operations. The successful introduction and market acceptance of the Benchmark compressor is expected to improve Bristol's results beyond 2004. Other General corporate expenses, eliminations, and other non-allocated items grew $8.4 million to $22.5 million in the first quarter of 2004 as compared to $14.1 million in 2003. The increase was primarily due to increased costs of $4.5 million related to improving our technology capabilities in both applications and infrastructure and $3.9 million related to other non-allocated costs. The year-over-year cost increases are expected to continue for the second quarter and, to a lesser extent, the remainder of 2004. Charges and other expenses are as follows (in thousands):
THREE MONTHS ENDED MARCH 31, 2003 By segment -------------- Global Applied: Americas $ 3,571 EMEA 12,345 Asia 2,070 -------------- $ 17,986 ============== By type Restructuring and other charges, net $ 16,094 Restructuring and other charges reflected in cost of goods sold 1,892 -------------- $ 17,986 ==============
No charges and other expenses were recorded in the first quarter of 2004 as the 2003 restructuring initiatives were initiated and substantially completed during 2003. LIQUIDITY AND CAPITAL RESOURCES Our significant liquidity and capital funding needs are working capital, operating expenses, capital expenditures, debt repayments, restructuring costs, dividends to our shareholders, contractual obligations, and commercial commitments. Liquidity and capital resource needs are met through cash flows from operations, borrowings under our credit agreements and 19 bank lines of credit, financing of trade receivables, and credit terms from suppliers, which approximate receivable terms to our customers. Additional sources of cash include customer deposits and progress payments. 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 uncommitted credit lines and committed bank lines of credit. Uncommitted credit lines and committed bank lines of credit support seasonal working capital needs and are available for general corporate purposes. Since certain of our long-term debt obligations and our revolving trade receivables purchase facility bear interest at floating rates, our interest costs are sensitive to changes in prevailing interest rates. WORKING CAPITAL Our working capital is mainly comprised of inventories, net receivables, and accounts payable and accrued expenses. Working capital increased $63 million to $425.5 million as of March 31, 2004 compared to $362.5 million as of December 31, 2003. The increase resulted from higher inventories and reduced current liabilities partially offset by a decline in net receivables. Net Receivables Net receivables decreased $23.6 million due to improved collection efforts in all businesses. Overall, days sales outstanding decreased to 48 days in the first quarter of 2004 from 50 days at December 31, 2003. Inventories Inventories increased $45.7 million mainly due to increases in work-in-progress and finished goods. The increase in our work-in-progress inventory is the result of increased demand for longer lead time equipment in our Global Applied business. Our work-in-progress and finished goods increase as we manufacture inventory during the first half of the year to support demand in the second half of the year. Notes Payable and Current Portion of Long-Term Debt Notes payable and current portion of long-term debt decreased $15.7 million due to less borrowing under non-U.S. bank credit facilities, mainly in Brazil. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses declined $7.1 million primarily due to payment of year-end incentive compensation and restructuring accruals and net weakening of foreign currencies since December 31, 2003. These increases were partially offset by higher accruals for customer deposits, insurance, and interest. Income Taxes Income taxes decreased $10.8 million primarily due to U.S. tax benefits recorded in the first quarter of 2004, as well as foreign tax payments. CASH FLOWS Operating Activities We used $18.3 million of cash for operating activities in the first quarter of 2004. Net cash flows of $40.4 million were used by the change in assets and liabilities net of effects from acquisitions and divestitures, mainly due to the increase in inventory as discussed above. Remaining cash flows of $22.1 million were generated from operations. Investing Activities Cash used in investing activities of $17.6 million was mainly comprised of capital expenditures for manufacturing equipment and information technology systems. Financing Activities Cash provided by financing activities of $39.4 million included proceeds of $41.8 million from net borrowings and $5.8 million from issuance of common stock partially offset by common stock dividend payments of $8.2 million. Net borrowings are consistent with the typical seasonality of our businesses to finance increasing working capital needs during the first half of the year. Proceeds from issuance of common stock represent cash received from employee stock purchases and exercise of stock options under our employee stock plans. We paid a cash dividend of $0.20 per share in the first quarter of 2004 representing a 33% increase compared to 2003. 20 BORROWINGS AND AVAILABILITY Total indebtedness was $661.2 million as of March 31, 2004, primarily consisting of $500 million of senior notes, $91.5 million outstanding under domestic bank lines, and $40.7 million of Danish retail notes. The senior notes mature at dates ranging from 2006 to 2012 and carry fixed rates ranging from 5.8% to 6.7%. We have a $400 million Five Year Credit Agreement, which expires on May 29, 2006, and a $200 million 364-Day Credit Agreement, which expires on March 11, 2005 (collectively, the Agreements). As of March 31, 2004 and December 31, 2003, no amounts were outstanding under our Agreements. We renewed our $200 million 364-Day Credit Agreement in March 2004. The $400 million Five Year Credit Agreement provides for borrowings at the London InterBank Offering Rate (LIBOR) plus 1.175%, and the $200 million 364-Day Credit Agreement provides for borrowings at LIBOR plus 0.85%. We pay annual fees of 0.2% on the $400 million facility and 0.15% on the $200 million facility. The Agreements allow for borrowings at specified bid rates. As of March 31, 2004 and December 31, 2003, the three-month LIBOR rate was 1.1% and 1.14%, 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 March 31, 2004 and December 31, 2003. In October and December 2003, we issued Danish denominated retail notes of DKK 200 million and DKK 50 million, respectively. These notes are due in October 2004 and have a coupon rate of 2%. We have domestic bank lines that provide for total borrowings of up to $150 million and $135 million as of March 31, 2004 and December 31, 2003, respectively. The domestic bank lines are uncommitted and may be unavailable for renewal at maturity. As of March 31, 2004 and December 31, 2003, $91.5 million and $25 million, respectively, were outstanding under the domestic bank lines. Our non-U.S. subsidiaries maintain bank credit facilities in various currencies that provide for total borrowings of $390.8 million and $355.2 million as of March 31, 2004 and December 31, 2003, respectively. As of March 31, 2004 and December 31, 2003, $11.7 million and $27.8 million, respectively, were outstanding under the non-U.S. facilities, with remaining availability of $264.1 million and $246.3 million, respectively, after bank guarantees and letters of credit usage. We have access to bank lines of credit and 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, depreciation, and amortization (EBITDA) interest coverage and the debt to capital ratio, as defined under the Agreements. As of March 31, 2004, our EBITDA interest coverage was 4.7 times, exceeding the minimum requirement of 3.5 times. As of March 31, 2004, our debt to capital ratio, as defined in the agreement, was 44%, below the maximum allowed of 50%. Our ability to issue commercial paper is limited due to our credit ratings. We also maintain an annually renewable revolving facility under which we sell certain trade receivables - see "Off-Balance Sheet Arrangements" section below. OFF-BALANCE SHEET ARRANGEMENTS Our off-balance sheet arrangements are comprised of a trade receivable revolving facility and operating leases. Trade Receivable Revolving Facility Pursuant to the terms of an annually renewable revolving facility, we sell certain of our trade receivables to a wholly owned consolidated subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis, an undivided ownership interest in the trade receivables to bank-administered asset-backed commercial paper vehicles. In April 2003, we amended the facility, reducing it from $175 million to $150 million. The facility is expected to be renewed in 2004 at a level equal to or greater than $150 million. We continue to service sold trade receivables. No servicing asset or liability has been recognized as our cost to service sold trade receivables approximates the servicing income. In accordance with the facility, YRFLLC has sold $145 million and $150 million of an undivided interest in trade receivables as of March 31, 2004 and December 31, 2003, respectively, resulting in a reduction of net receivables reflected in our consolidated condensed balance sheets. The discount rate on trade receivables sold was 1.04% and 1.12% as of March 31, 2004 and December 31, 2003, respectively. The program fee on trade receivables sold was 0.5% as of March 31, 2004 and December 31, 2003. 21 Operating Leases Operating leases provide us with the flexibility to use property, plant and equipment without assuming ownership and related debt. Operating leases reduce our risk associated with disposal and residual fair value of property, plant and equipment at the end of the lease. OUTLOOK Overall, we expect improved net sales and net income in fiscal year 2004 as compared to 2003. We anticipate continued strength in our service businesses' (services, parts, and replacement equipment) sales within Global Applied; growth in our UPG equipment business; and increased sales of large commercial equipment in our Asian business. Further savings from our 2003 cost reduction actions are expected to be realized throughout 2004. Overall growth and savings are expected to be partially offset by declines in large commercial equipment in EMEA; a decline in Bristol sales; increased costs for pension, healthcare, insurance, copper, steel, and components containing copper and steel; and continued investments in new products and information technology projects. PROPOSED ACCOUNTING STANDARDS In March 2004, the Financial Accounting Standards Board issued Proposed Statement of Financial Accounting Standards "Share-Based Payment," an amendment of FASB Statements No. 123 and 95. This proposed statement addresses the accounting for share-based compensation in which we exchange employee services for (a) our equity instruments or (b) liabilities that are based on the fair value of our equity instruments or that may be settled by the issuance of our equity instruments. Under the proposed statement, we will recognize compensation cost for share-based compensation issued to or purchased by employees under our stock-based compensation plans using a fair-value-based method effective January 1, 2005. The impact the proposed statement will have on our consolidated condensed financial statements is not known at this time, however, we expect the proposed statement to reduce net income and earnings per share similarly to the amounts disclosed in supplemental note 2 to our consolidated condensed financial statements and note 1 to our consolidated financial statements contained in the Annual Financial Statements and Review of Operations filed as Exhibit 13 to our Form 10-K/A for the year ended December 31, 2003. FORWARD-LOOKING INFORMATION - RISK FACTORS This document contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These forward-looking statements are intended to provide our current expectations or plans for future operating and financial performance based on assumptions currently believed to be valid. 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: - Changes in competition within specific markets or geographies - Introduction of new competitive products - Changes in government regulation, including environmental and tax laws - Legal actions, including pending and unasserted claims - Loss of patented technology - Events that create a negative image for our trademarks - Work stoppages - Price and availability of raw materials and components - Realization of benefits from our cost reduction initiatives - Changes in individual country economics, including but not limited to: Argentina; Brazil; China; Mexico; Saudi Arabia; United Arab Emirates; and Venezuela 22 - Acts of war or terrorism - Changes in commercial and residential construction markets - Significant changes in customer orders - Significant product defects or failures Unseasonably cool weather in various parts of the world could adversely affect our UPG and Global Applied air conditioning businesses and, similarly, the Bristol compressor business. Bristol and UPG are also impacted by the successful development, introduction, and customer acceptance of new products. The Global Applied air conditioning business could also be affected by a further slowdown in the large chiller market and by the acceptance of new product introductions. Global Applied could be negatively impacted by reductions in commercial construction. Our ability to effectively implement price increases to offset higher costs is dependent on market conditions and the competitive environment. The financial position and financial results of our foreign locations could be negatively impacted by the translation effect of currency fluctuations and by political changes including nationalization or expropriation of assets. In addition, our overall performance could be affected by declining worldwide economic conditions or slowdowns resulting from world events. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information responsive to this item as of December 31, 2003 appears under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations, Market Risk," on pages 14 to 16 of the Annual Financial Statements and Review of Operations filed as Exhibit 13 to our Form 10-K/A for the year ended December 31, 2003. There was no material change in such information as of March 31, 2004. ITEM 4. CONTROLS AND PROCEDURES As of March 31, 2004, we carried out an evaluation, under the supervision and with the participation of company management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 23 PART II - OTHER INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS Not Applicable ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 4.1 - 364-DAY CREDIT AGREEMENT, dated as of March 12, 2004, among YORK INTERNATIONAL CORPORATION, as borrower, the initial lenders named therein, as initial lenders, CITIBANK, N.A., as administrative agent, JPMORGAN CHASE BANK, as syndication agent, BANK OF TOKYO-MITSUBISHI TRUST COMPANY, FLEET NATIONAL BANK, NORDEA BANK FINLAND PLC and BNP PARIBAS, as documentation agents, and CITIGROUP GLOBAL MARKETS INC. and J.P. MORGAN SECURITIES, INC., as joint lead arrangers and joint book managers Exhibit 10.1 - Employment Agreement between York International Corporation and David Kornblatt, dated March 24, 2004 Exhibit 10.2 - Employment Agreement between York International Corporation and Iain A. Campbell, dated March 24, 2004 Exhibit 10.3 - Employment Agreement between York International Corporation and Jeffrey D. Gard, dated March 24, 2004 Exhibit 31.1 - Certification of the Chief Executive Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31.2 - Certification of the Chief Financial Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 24 Exhibit 32.1 - Certification of the Chief Executive Officer and Chief Financial Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K Current report on Form 8-K dated February 13, 2004, containing a press release, dated February 13, 2004, announcing that C. David Myers had assumed the position of Chief Executive Officer upon the retirement of Michael R. Young Current report on Form 8-K dated February 18, 2004, containing a press release, dated February 18, 2004, concerning dividend payments in 2004 Current report on Form 8-K dated February 19, 2004, containing a press release, dated February 19, 2004, setting forth our fourth quarter and full year 2003 results (Such press release is not incorporated by reference herein or deemed "filed" within the meaning of Section 18 of the Securities Act of 1933.) 25 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 May 6, 2004 /s/ M. David Kornblatt ---------------------------------------- M. David Kornblatt Vice President and Chief Financial Officer 26 EX-4.1 2 w96872exv4w1.txt 364-DAY CREDIT AGREEMENT DATED AS OF 3/12/2004 Exhibit 4.1 364-DAY CREDIT AGREEMENT Dated as of March 12, 2004 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, NORDEA BANK FINLAND PLC and BNP PARIBAS, as documentation agents, and CITIGROUP GLOBAL MARKETS INC. and J.P. MORGAN SECURITIES 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 prior to the Term Loan Conversion Date, 0.00% per annum and (b) for (i) Base Rate Advances on and after the Term Loan Conversion Date and (ii) 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 Applicable Margin for Eurodollar Rate Eurodollar Rate Base Rate Advance On Advances Prior to the Advances On and After Public Debt Rating and After the Term Term Loan Conversion the Term Loan S&P/Moody's Loan Conversion Date Date Conversion Date - ------------------ -------------------- --------------------- --------------------- Level 1 A- or A3 or above 0.000% 0.420% 0.850%
Level 2 BBB+ and Baa1 0.000% 0.535% 1.000% Level 3 BBB+ or Baa1 0.000% 0.650% 1.375% Level 4 BBB or Baa2 0.125% 0.850% 1.625% Level 5 BBB- and Baa3 0.250% 0.925% 1.750% Level 6 Lower than Level 5 1.500% 1.450% 3.000%
"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 0.150% Level 5 BBB- and Baa3 0.200% Level 6 Lower than Level 5 0.300%
"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 0.125% Level 3 BBB+ or Baa1 0.125% Level 4 BBB or Baa2 0.125% Level 5 BBB- and Baa3 0.125% Level 6 Lower than Level 5 0.250%
2 "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; (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). "Borrower Information" has the meaning specified in Section 8.08. "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. 3 "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. "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 (in the case of the Borrower and its Subsidiaries, inclusive of losses related to restructuring charges and operating expenses related to restructuring actions in an amount not to exceed $103,000,000 taken not later than December 31, 2003, of which not more than $50,000,000 4 shall be cash charges or expenses, and 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. "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 5 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. "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. 6 "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. "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 February 2004 used by the Agent in connection with the syndication of the Revolving Credit Commitments, as supplemented by reports of the Borrower filed with the Securities and Exchange Commission referenced in the information memorandum, by reports filed by the Borrower with the Securities and Exchange Commission subsequent to the date of the information memorandum but prior to March 1, 2004 and by the Borrower's 2003 fourth quarter and full year results announced on February 19, 2004. "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 7 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 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. "Interim Financial Statements" has the meaning specified in Section 4.01(e). "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). 8 "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. "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, (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 and (z) accumulated losses related to restructuring charges and operating expenses related to restructuring actions in an amount not to exceed $103,000,000 taken not later than December 31, 2003, of which not more than $50,000,000 shall be cash charges and expenses. "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. 9 "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 6 under the definition of "Applicable Margin", "Applicable Percentage" or "Applicable Utilization Fee", as the case may be; (c) if the ratings established by S&P and Moody's shall fall within different levels, the Applicable Margin, the Applicable Percentage and the Applicable Utilization Fee shall be based upon the higher rating unless such ratings differ by two or more levels, in which case the applicable level will be deemed to be one level above the lower of such levels; (d) 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 (e) 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. "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 Fleet National Bank. "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. 10 "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. "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 March 11, 2005 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 11 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. Each such notice of a Revolving Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be by telephone, confirmed immediately in writing, or telecopier 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 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. 12 (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, 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 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. 13 (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 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 14 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 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 March 31, 2004, 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. 15 (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. 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 16 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. (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. 17 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. 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 18 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 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 withholding taxes, including levies, imposts, deductions, charges or 19 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. (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, but excluding all other United States federal taxes other than withholding taxes (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) 20 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. 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 21 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, 2002, except as disclosed in the Interim Financial Statements. (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 under the 364-Day Revolving Credit Agreement dated as of March 14, 2003 among the Borrower, the lenders parties thereto and Citibank, N.A., as agent. 22 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. (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 LLP, 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 23 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, (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 24 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, 2002, 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 September 30, 2003, and the related Consolidated statements of income and cash flows (together with said balance sheet, the "Interim Financial Statements") of the Borrower and its Subsidiaries for the nine months then ended, duly certified by the chief financial officer of the Borrower, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheet as at September 30, 2003, and said statements of income and cash flows for the nine 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 periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 2002, there has been no Material Adverse Change, except as disclosed in the Interim Financial Statements. (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. 25 (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. (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; 26 (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; (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 27 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, (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 28 (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 0.50 : 1.00, measured as of the end of each fiscal quarter. 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: (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 29 (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 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 30 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 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 or telegram) 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. Each Lender agrees 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 such Lender's 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 31 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 syndication agent, any documentation agent nor any other Lender designated as any "Agent" on the signature pages hereof (other than the Agent) has any liability hereunder other than in its capacity as a Lender. 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 or telegraphic communication) and mailed, telecopied, telegraphed 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 or telegraphed, be effective when deposited in the mails, telecopied or delivered to the telegraph company, 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, 32 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 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 33 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' 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 to 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 34 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. (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 Borrower 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. 35 SECTION 8.08. Confidentiality. Neither the Agent nor any Lender may disclose to any Person any information that the Borrower furnishes to the Agent or any Lender in a writing designated as confidential or that is otherwise specifically identified as being confidential (such information being referred to collectively herein as the "Borrower Information"), except that each of the Agent and each of the Lenders may disclose Borrower Information (i) to its and its affiliates' employees, officers, directors, agents and advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Borrower Information and will expressly agree to keep such Borrower Information confidential on substantially the same terms as provided herein), (ii) to the extent requested by any regulatory authority, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section 8.08, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement, (vii) to the extent such Borrower Information (A) is or becomes generally available to the public on a non-confidential basis other than as a result of a breach of this Section 8.08 by the Agent or such Lender, or (B) is or becomes available to the Agent or such Lender on a nonconfidential basis from a source other than the Borrower and (viii) with the written consent of the Borrower. 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 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 $20,000,000 CITIBANK, N.A. By _______________________ Name: Title: Syndication Agent $20,000,000 JPMORGAN CHASE BANK By _______________________ Name: Title: Co-Documentation Agents $17,000,000 BANK OF TOKYO-MITSUBISHI TRUST COMPANY By _______________________ Name: Title: $17,000,000 FLEET NATIONAL BANK By _______________________ Name: Title: 37 $17,000,000 NORDEA BANK FINLAND PLC By _______________________ Name: Title: By _______________________ Name: Title: $17,000,000 BNP PARIBAS By _______________________ Name: Title: By _______________________ Name: Title: Lenders $12,000,000 BANK AUSTRIA CREDITANSTALT AG By _______________________ Name: Title: $12,000,000 THE BANK OF NOVA SCOTIA By _______________________ Name: Title: $12,000,000 DANSKE BANK A/S CAYMAN ISLANDS BRANCH By _______________________ Name: Title: By _______________________ Name: Title: $12,000,000 ING BANK N.V. By _______________________ Name: Title: $12,000,000 THE ROYAL BANK OF SCOTLAND PLC By _______________________ Name: Title: 38 $12,000,000 WACHOVIA BANK, NATIONAL ASSOCIATION By _______________________ Name: Title: $10,000,000 THE BANK OF NEW YORK By _______________________ Name: Title: $10,000,000 NATIONAL CITY BANK By _______________________ Name: Title: $200,000,000.00 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 ---------------------- ----------------------- ------------------------- Bank Austria Creditanstalt AG A-1030 Vienna A-1030 Vienna Vordere Zollamtsstrasse 13 Vordere Zollamtsstrasse 13 Austria Austria Attn: Inge Grienauer Attn: Inge Grienauer T: 43 (0) 50505-44222 T: 43 (0) 50505-44222 F: 43 (0) 50505-4934 F: 43 (0) 50505-4934 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 Trust BTM Information Services, Inc. BTM Information Services, Inc. Company c/o Bank of Tokyo-Mitsubishi Trust c/o Bank of Tokyo-Mitsubishi Trust Company Company 1251 Avenue of the Americas 1251 Avenue of the 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: 212 994-0961 F: 212 994-0961 Danske Bank A/S 299 Park Avenue, 14th Floor 299 Park Avenue, 14th Floor Cayman Islands Branch 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: Christopher J. Wickles Attn: Christopher J. Wickles T: 617 434-8144 T: 617 434-8144 F: 617 434-0601 F: 617 434-0601
ING Bank N.V. Weena 505 Weena 505 3013 AL Rotterdam 3013 AL Rotterdam The Netherlands The Netherlands Attn. J. de Vos Attn. J. de Vos T: 31 10 4446854 T: 31 10 4446854 F: 31 10 4446783 F: 31 10 4446783 JPMorgan Chase Bank 270 Park Avenue, 47th Floor 270 Park Avenue, 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 National City Bank One South Broad Street One South Broad Street 13th Floor, Locator 01-5997 13th Floor, Locator 01-5997 Philadelphia, PA 19107 Philadelphia, PA 19107 Attn: Heather McIntyre Attn: Heather McIntyre 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 The Royal Bank of Scotland plc 65 East 55th Street, Floor 21 65 East 55th Street, 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 Wachovia Bank, National Association 201 S. College Street 201 S. College Street 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 (i) 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 March 12, 2004 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
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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 March 12, 2004 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 March 12, 2004 (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 March 12, 2004 (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. 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 March 12, 2004 (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, 42 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. $200,000,000 364-DAY CREDIT AGREEMENT Dated as of March 12, 2004 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 NORDEA BANK FINLAND PLC and BNP PARIBAS as Documentation Agents and CITIGROUP GLOBAL MARKETS INC. and J.P. MORGAN SECURITIES 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 12 SECTION 2.02. Making the Revolving Credit Advances 12 SECTION 2.03. The Competitive Bid Advances 13 SECTION 2.04. Fees 15 SECTION 2.05. Termination or Reduction of the Revolving Credit Commitments 15 SECTION 2.06. Repayment of Advances 16 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 18 SECTION 2.11. Increased Costs 18 SECTION 2.12. Illegality 18 SECTION 2.13. Payments and Computations 19 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 22 ARTICLE III
i SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03 22 SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing. 23 SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing 24 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 29 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. 32 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
ii SECTION 8.05. Right of Set-off 33 SECTION 8.06. Binding Effect 34 SECTION 8.07. Assignments and Participations 34 SECTION 8.08. Confidentiality 36 SECTION 8.09. Governing Law 36 SECTION 8.10. Execution in Counterparts 36 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-10.1 3 w96872exv10w1.txt EMPLOYMENT AGREEMENT WITH DAVID KORNBLATT Exhibit 10.1 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and David Kornblatt (the "Executive") dated as of the 24th day of March, 2004. The Board of Directors of the Company (the "Board") has determined that it is in the Company's best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean March 24, 2004. 2. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue in the employment of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary thereof (the "Initial Period"). Notwithstanding the foregoing, Executive's employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions, for an additional period of one year (each, an "Additional Period"), in each such case commencing upon the expiration of the Initial Period or the then current Additional Period, as the case may be, unless, at least 30 days prior to the expiration of the Initial Period or such Additional Period, either party shall give written notice to the other (a "Non-Extension Notice") of its intention not to extend the term hereof. A Non-Extension Notice by the Company shall constitute a Notice of Termination (as defined in Section 4(e)) by the Company of the Executive's employment without "Cause" (as defined in Section 4(b)). A Non-Extension Notice by the Executive shall constitute a Notice of Termination by the Executive of the Executive's employment without "Good Reason" (as defined in Section 4(c)). The entire period during which the Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period." 3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Executive shall serve as Vice President and Chief Financial Officer or in such other position as the Company and Executive shall agree with authority and responsibilities for the Company's financial matters; (ii) Executive shall report to the President, York International and/or such other officers as the Board may designate from time to time; and (iii) the Executive's services shall be performed in York, Pennsylvania or such other location as the Company and Executive shall agree, except for occasional travel which may be required for the Executive to perform his duties under this Agreement. During the Employment Period, the Executive shall devote all of his business time, attention and energies to the performance of his duties under this Agreement and shall not, without the prior written consent of the Board, be engaged in any other business activity whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that the Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by the Executive of his duties and responsibilities hereunder, (a) to manage the Executive's personal, financial and legal affairs, and (b) serve on civic or charitable boards or committees. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $356,400 ("Annual Base Salary"), which shall be paid in accordance with the Company's normal payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Incentive Compensation. During the Employment Period, the Executive shall be eligible (1) for annual performance bonuses (the "Annual Bonus") and for mid-term performance bonuses in accordance with the provisions of the Company's 2002 Incentive Compensation Plan or its successor (the "Incentive Plan"), as the Incentive Plan may be in effect from time to time, (2) for awards under the Company's 2002 Amended and Restated Omnibus Stock Plan or its successor (the "Stock Plan"), as the Stock Plan may be in effect from time to time, and (3) to participate in the Company's Management Stock Purchase Plan or its successor (the "Purchase Plan") as the Purchase Plan may be in effect from time to time. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in the retirement, health, welfare and miscellaneous executive benefit plans and programs set forth on Schedule A, as such plans and programs may be in effect from time to time. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive in accordance with the Company's policies, as such policies may be in effect from time to time. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the "Disability" of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's inability to perform his full duties with the Company for 180 calendar days in any twelve month period as a result of incapacity due to mental or physical illness. In the event of a dispute under this Section 4(a), the -2- Executive shall submit to an examination by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative, and the determination of such physician shall be determinative. (b) Cause. The Company may terminate the Executive's employment at any time during the Employment Period for "Cause." For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company or its affiliates with materially false representations relied upon by the Company or its affiliates including, but not limited to furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company or its affiliates, or (iii) willful misconduct or gross negligence which is or may be demonstrably and materially injurious to the Company or its affiliates, or (iv) theft or misappropriation of the funds or assets of the Company or its affiliates, or (v) conviction of or pleading nolo contendere to a crime involving moral turpitude or any felony, or (vi) a willful and material breach by the Executive of this Agreement. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. As used in this Agreement, the term "affiliates" shall mean any company controlled by, controlling or under common control with the Company. (c) Good Reason. The Executive may terminate his employment with the Company at any time during the Employment Period for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Employment Period: (i) a substantial and adverse change in the Executive's authority or responsibilities as specified in Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; -3- (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(iii) hereof, unless these requirements are remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iv) a material breach by the Company of this Agreement; or (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, any action or inaction shall constitute Good Reason only for the 90 day period from the date on which such action or inaction first occurs. (d) Termination Without Cause or Good Reason. The Company may terminate the Executive's employment without Cause, and the Executive may terminate his employment without Good Reason, at any time during the Employment Period. (e) Notice of Termination. Any termination of the Executive's employment during the Employment Period by the Company or by the Executive, shall be communicated by "Notice of Termination" to the other party hereto given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall, (A) in all cases other than a voluntary termination by the Executive for other than Good Reason, be not more than thirty days after the giving of such notice, and (B) in the case of a voluntary termination by the Executive for other than Good Reason, thirty days after the Company receives such notice; provided that in a termination described in either (A) or (B), during the notice period, the Board, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (f) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within -4- 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date specified therein within 30 days of such notice, as the case may be, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is voluntarily terminated by the Executive for other than Good Reason, 30 days following the date of receipt of the Notice of Termination. 5. Obligations of the Company upon Termination. (a) Good Reason or Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, then (i) the Company shall pay to the Executive, the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, and any accrued but unused vacation pay (this amount shall be hereinafter referred to as the "Accrued Obligations"), in accordance with the Company's normal payroll practices, and (ii) to the extent not already paid or provided, the Company shall pay or provide to the Executive (in accordance with the terms of the applicable plan or program) any other amounts or benefits previously earned and vested or which the Executive is eligible to receive for his service prior to the Date of Termination under any retirement, incentive, health, welfare or miscellaneous executive benefit plan or program specified on Schedule A (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), and (iii) subject to Section 5(e), the Company shall pay to the Executive in a cash lump sum within 30 days after the Date of Termination the aggregate of the following amounts: A. an amount equal to one times the sum of (i) Executive's Annual Base Salary plus (ii) the Executive's target Annual Bonus for the year in which the Date of Termination occurs (the "Bonus Amount"); and B. an amount equal to the Company contribution (other than matching contributions) that would be made under any Company tax-qualified defined contribution retirement plan (the "DC Plan") with respect to the Executive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming for this purpose that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount; and -5- C. an amount equal to the excess of (a) the sum of the actuarial equivalent of the benefit under any Company tax-qualified defined benefit retirement plan (the "DB Plan") and any Company non-qualified retirement plan (the "Non-Qualified Plan") (utilizing the actuarial assumptions as in effect under the DB Plan at the time such payment is made) which the Executive would receive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming solely for purposes of this calculation that all accrued benefits are fully vested, and, assuming that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount, over (b) the actuarial equivalent of the Executive's actual benefits, if any, which have been paid or that would be payable under the DB Plan and Non-Qualified Plan as of the Date of Termination, assuming solely for purposes of this calculation that the Executive is vested in his benefits under the DB Plan and the Non-Qualified Plan; provided, however, that nothing in this Agreement shall cause the Executive to become vested in any benefits under the DB Plan or Non-Qualified Plan; and (iv) subject to Section 5(e), the Company shall continue to provide health benefits (as specified on Schedule A) to the Executive and his eligible dependants for a period of 36 months from the Date of Termination on the same basis that such benefits were provided to him immediately prior to the Date of Termination; provided, however, that if the Company modifies, reduces or eliminates a health benefit or changes the employee contribution for similarly situated executives who remain employed by the Company then the Company may apply such change to the Executive; and (v) subject to Section 5(e), if the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's continued employment during the period of 36 months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's eligible dependents on the same terms applicable to such coverage for similarly-situated retirees of the Company commencing on the date on which benefits described in Section 5(a)(iv) terminate, if the Executive elects such coverage; (vi) all other benefits (not described in paragraphs (i) through (v) of this Section) shall cease as of the Date of Termination. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of -6- Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include life insurance benefits as in effect with respect to the Executive on the date of the Executive's death. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include disability benefits as in effect with respect to the Executive on the Executive's Disability Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. (e) General Release. Notwithstanding anything in this Section 5 to the contrary, no payments shall be made or benefits provided by the Company under Sections 5(a)(iii), 5(a)(iv) or 5(a)(v) prior to the execution by the Executive at the time of termination of a general release in favor of the Company and its affiliates, and their officers, employees, and directors, substantially in the form attached hereto as Exhibit I. 6. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be reduced by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others, regarding the validity or enforceability of, or liability under, any provision of this Agreement (including any contest by the Executive about the amount of any payment pursuant to this Agreement), provided that the Executive substantially prevails in such contest by reason of litigation, arbitration or settlement. 7. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the -7- Company and those designated by it. Upon termination of the Executive's employment, the Executive shall immediately return to the Company all confidential information in his possession as well as any other documents or property of the Company. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in competition with the business conducted by the Company or its affiliates anywhere in the world where the Company or its affiliates does business. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person or entity, solicit for employment or other commercial engagement any person employed by the Company or its affiliates as of the date of the solicitation or for the preceding six months. (c) During the Employment Period and at any time thereafter, Executive shall not, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or its affiliates, or any products or services offered by any of these, nor shall he engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of any of them. (d) (i) Executive acknowledges and agrees that the restrictions contained in this Section 8 and in Section 7 above are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section 8 or Section 7 above. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 8 and Section 7 above are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 8 or Section 7 above cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 8, or Section 7 above which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the -8- provisions of this Section 8 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The time periods set forth above shall be tolled during any period of violation by the Executive. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 8 or Section 7 above, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 8. (e) In exchange for the covenants set forth in this Section 8, and provided the Executive is not terminated for Cause and does not leave other than for Good Reason, the Company agrees to pay to the Executive a lump sum amount equal to two times the Executive's Annual Base Salary plus the Bonus Amount, within 30 days after the Date of Termination. (f) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8, and the Company shall be permitted to assign its rights under this Section 9. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive' s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean York International Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. -9- 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Mr. David Kornblatt 4117 Copperfield Drive Harrisburg, PA 17112 If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of any other provision or right under this Agreement. (f) This Agreement supersedes and terminates the prior Severance Agreement dated July 25, 2002 between the Company and the Executive. (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. -10- (h) Except for claims arising under Sections 7 or 8 , any controversy or claim arising out of or relating to this Agreement or the breach thereof, and any other disputes arising between the Executive and the Company or its affiliates including without limitation claims arising under any employment discrimination laws, shall be settled exclusively through binding arbitration in accordance with the then applicable rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court having jurisdiction thereof. Any arbitration shall be conducted in York, Pennsylvania or such other location as mutually agreed by the parties. The arbitration provisions of this section shall be interpreted according to, and governed by, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. The costs of the arbitration shall be borne by the Company. The Executive shall be entitled to recover his legal fees and expenses in accordance with the provisions of Section 6 of this Agreement, or applicable law to the extent it provides for a greater recovery. (i) In the event that any language, section, clause, phrase or word used in this Agreement is determined to be ambiguous, no presumption shall arise against or in favor of either party and that no rule of strict construction shall be applied against either party with respect to such ambiguity. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ___________________________________ David Kornblatt YORK INTERNATIONAL CORPORATION By:________________________________ -11- SCHEDULE A - - RETIREMENT BENEFITS - Pension Plan Number One - Investment Plan - Supplemental Executive Retirement Plan - Executive Deferred Compensation Plan - - INCENTIVE COMPENSATION - 2002 Incentive Compensation Plan - 2002 Amended and Restated Omnibus Stock Plan - Management Stock Purchase Plan - - HEALTH BENEFITS - Medical - Dental - Vision - Prescription Drug - - WELFARE BENEFITS - Short-Term Disability - Long-Term Disability - Life - Vacation - - MISCELLANEOUS EXECUTIVE BENEFITS - Financial Planning - Executive Physical EXHIBIT I GENERAL RELEASE IN CONSIDERATION OF the terms and conditions contained in the Executive Employment Agreement, dated as of the 24th day of March, 2004, (the "Employment Agreement") by and between David Kornblatt (the "Executive") and York International Corporation (the "Company"), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges the Company and its subsidiaries, divisions, affiliates and parents, and their respective past, current and future officers, directors, employees, agents, and/or owners, and their respective successors, and assigns and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (collectively the "Released Parties") from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever ("Claims ") which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have, against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof. This General Release of Claims, includes without limitation, any and all matters relating to the Executive's employment by the Company and the cessation thereof, and any and all matters arising under any federal, state, or local statute, rule, or regulation, or principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sections 2000 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 et seq. ("ERISA"), the Pennsylvania Human Relations Act, as amended, 43 P.S. Sections 955 et. seq., and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from (i) any of the Company's obligations to him under the Employment Agreement, and (ii) any vested benefits to which he may be entitled under any employee benefit plan or program subject to ERISA. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied. The Executive represents and warrants that he fully understands the terms of this General Release, that he is hereby advised to consult with legal counsel before signing, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise. The Executive further represents and warrants that he has not filed, and will not initiate, or cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the Released Parties before any federal, state, or local agency, court, or other body relating to any claims barred or released in this General Release thereof, and will not voluntarily participate in such a proceeding. However, nothing in this general release shall preclude or prevent the Executive from filing a claim, which challenges the validity of this general release solely with respect to the Executive's waiver of any Losses arising under the ADEA. The Executive shall not accept any relief obtained on his behalf by any government agency, private party, class, or otherwise with respect to any claims covered by this General Release. The Executive may take twenty-one (21) days to consider whether to execute this General Release. Upon the Executive's execution of this General Release, the Executive will have seven (7) days after such execution in which he may revoke such execution. In the event of revocation, the Executive must present written notice of such revocation to the Company's Chief Executive Officer. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective on the eighth (8th) day after the execution hereof (the "Effective Date"). INTENDING TO BE LEGALLY BOUND, I hereby set my hand below: ______________________________ David Kornblatt Dated:________________________ NOTARIZATION State of ______________________ ) County of _____________________ ) ss. On this ______ day of ______________ in the year 2004 before me, the undersigned, personally appeared __________________________________; personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity as an individual, and that by his signature on the instrument he executed such instrument, and that such individual made such appearance before the undersigned. _______________________________ Notary Public -2- EX-10.2 4 w96872exv10w2.txt EMPLOYMENT AGREEMENT WITH IAIN A. CAMPBELL Exhibit 10.2 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and Iain A. Campbell (the "Executive") dated as of the 24th day of March, 2004. The Board of Directors of the Company (the "Board") has determined that it is in the Company's best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean March 24, 2004. 2. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue in the employment of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary thereof (the "Initial Period"). Notwithstanding the foregoing, Executive's employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions, for an additional period of one year (each, an "Additional Period"), in each such case commencing upon the expiration of the Initial Period or the then current Additional Period, as the case may be, unless, at least 30 days prior to the expiration of the Initial Period or such Additional Period, either party shall give written notice to the other (a "Non-Extension Notice") of its intention not to extend the term hereof. A Non-Extension Notice by the Company shall constitute a Notice of Termination (as defined in Section 4(e)) by the Company of the Executive's employment without "Cause" (as defined in Section 4(b)). A Non-Extension Notice by the Executive shall constitute a Notice of Termination by the Executive of the Executive's employment without "Good Reason" (as defined in Section 4(c)). The entire period during which the Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period." 3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Executive shall serve as President, Americas or in such other position as the Company and Executive shall agree with authority and responsibilities for operations of Americas; (ii) Executive shall report to the President, York International and/or such other officers as the Board may designate from time to time; and (iii) the Executive's services shall be performed in York, Pennsylvania or such other location as the Company and Executive shall agree, except for occasional travel which may be required for the Executive to perform his duties under this Agreement. During the Employment Period, the Executive shall devote all of his business time, attention and energies to the performance of his duties under this Agreement and shall not, without the prior written consent of the Board, be engaged in any other business activity whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that the Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by the Executive of his duties and responsibilities hereunder, (a) to manage the Executive's personal, financial and legal affairs, and (b) serve on civic or charitable boards or committees. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $375,000 ("Annual Base Salary"), which shall be paid in accordance with the Company's normal payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Incentive Compensation. During the Employment Period, the Executive shall be eligible (1) for annual performance bonuses (the "Annual Bonus") and for mid-term performance bonuses in accordance with the provisions of the Company's 2002 Incentive Compensation Plan or its successor (the "Incentive Plan"), as the Incentive Plan may be in effect from time to time, (2) for awards under the Company's 2002 Amended and Restated Omnibus Stock Plan or its successor (the "Stock Plan"), as the Stock Plan may be in effect from time to time, and (3) to participate in the Company's Management Stock Purchase Plan or its successor (the "Purchase Plan") as the Purchase Plan may be in effect from time to time. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in the retirement, health, welfare and miscellaneous executive benefit plans and programs set forth on Schedule A, as such plans and programs may be in effect from time to time. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive in accordance with the Company's policies, as such policies may be in effect from time to time. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the "Disability" of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's inability to perform his full duties with the Company for 180 calendar days in any twelve month period as a result of incapacity due to mental or physical illness. In the event of a dispute under this Section 4(a), the -2- Executive shall submit to an examination by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative, and the determination of such physician shall be determinative. (b) Cause. The Company may terminate the Executive's employment at any time during the Employment Period for "Cause." For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company or its affiliates with materially false representations relied upon by the Company or its affiliates including, but not limited to furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company or its affiliates, or (iii) willful misconduct or gross negligence which is or may be demonstrably and materially injurious to the Company or its affiliates, or (iv) theft or misappropriation of the funds or assets of the Company or its affiliates, or (v) conviction of or pleading nolo contendere to a crime involving moral turpitude or any felony, or (vi) a willful and material breach by the Executive of this Agreement. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. As used in this Agreement, the term "affiliates" shall mean any company controlled by, controlling or under common control with the Company. (c) Good Reason. The Executive may terminate his employment with the Company at any time during the Employment Period for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Employment Period: (i) a substantial and adverse change in the Executive's authority or responsibilities as specified in Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; -3- (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(iii) hereof, unless these requirements are remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iv) a material breach by the Company of this Agreement; or (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, any action or inaction shall constitute Good Reason only for the 90 day period from the date on which such action or inaction first occurs. (d) Termination Without Cause or Good Reason. The Company may terminate the Executive's employment without Cause, and the Executive may terminate his employment without Good Reason, at any time during the Employment Period. (e) Notice of Termination. Any termination of the Executive's employment during the Employment Period by the Company or by the Executive, shall be communicated by "Notice of Termination" to the other party hereto given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall, (A) in all cases other than a voluntary termination by the Executive for other than Good Reason, be not more than thirty days after the giving of such notice, and (B) in the case of a voluntary termination by the Executive for other than Good Reason, thirty days after the Company receives such notice; provided that in a termination described in either (A) or (B), during the notice period, the Board, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (f) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within -4- 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date specified therein within 30 days of such notice, as the case may be, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is voluntarily terminated by the Executive for other than Good Reason, 30 days following the date of receipt of the Notice of Termination. 5. Obligations of the Company upon Termination. (a) Good Reason or Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, then (i) the Company shall pay to the Executive, the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, and any accrued but unused vacation pay (this amount shall be hereinafter referred to as the "Accrued Obligations"), in accordance with the Company's normal payroll practices, and (ii) to the extent not already paid or provided, the Company shall pay or provide to the Executive (in accordance with the terms of the applicable plan or program) any other amounts or benefits previously earned and vested or which the Executive is eligible to receive for his service prior to the Date of Termination under any retirement, incentive, health, welfare or miscellaneous executive benefit plan or program specified on Schedule A (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), and (iii) subject to Section 5(e), the Company shall pay to the Executive in a cash lump sum within 30 days after the Date of Termination the aggregate of the following amounts: A. an amount equal to one times the sum of (i) Executive's Annual Base Salary plus (ii) the Executive's target Annual Bonus for the year in which the Date of Termination occurs (the "Bonus Amount"); and B. an amount equal to the Company contribution (other than matching contributions) that would be made under any Company tax-qualified defined contribution retirement plan (the "DC Plan") with respect to the Executive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming for this purpose that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount; and -5- C. an amount equal to the excess of (a) the sum of the actuarial equivalent of the benefit under any Company tax-qualified defined benefit retirement plan (the "DB Plan") and any Company non-qualified retirement plan (the "Non-Qualified Plan") (utilizing the actuarial assumptions as in effect under the DB Plan at the time such payment is made) which the Executive would receive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming solely for purposes of this calculation that all accrued benefits are fully vested, and, assuming that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount, over (b) the actuarial equivalent of the Executive's actual benefits, if any, which have been paid or that would be payable under the DB Plan and Non-Qualified Plan as of the Date of Termination, assuming solely for purposes of this calculation that the Executive is vested in his benefits under the DB Plan and the Non-Qualified Plan; provided, however, that nothing in this Agreement shall cause the Executive to become vested in any benefits under the DB Plan or Non-Qualified Plan; and (iv) subject to Section 5(e), the Company shall continue to provide health benefits (as specified on Schedule A) to the Executive and his eligible dependants for a period of 36 months from the Date of Termination on the same basis that such benefits were provided to him immediately prior to the Date of Termination; provided, however, that if the Company modifies, reduces or eliminates a health benefit or changes the employee contribution for similarly situated executives who remain employed by the Company then the Company may apply such change to the Executive; and (v) subject to Section 5(e), if the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's continued employment during the period of 36 months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's eligible dependents on the same terms applicable to such coverage for similarly-situated retirees of the Company commencing on the date on which benefits described in Section 5(a)(iv) terminate, if the Executive elects such coverage; (vi) all other benefits (not described in paragraphs (i) through (v) of this Section) shall cease as of the Date of Termination. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of -6- Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include life insurance benefits as in effect with respect to the Executive on the date of the Executive's death. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include disability benefits as in effect with respect to the Executive on the Executive's Disability Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. (e) General Release. Notwithstanding anything in this Section 5 to the contrary, no payments shall be made or benefits provided by the Company under Sections 5(a)(iii), 5(a)(iv) or 5(a)(v) prior to the execution by the Executive at the time of termination of a general release in favor of the Company and its affiliates, and their officers, employees, and directors, substantially in the form attached hereto as Exhibit I. 6. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be reduced by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others, regarding the validity or enforceability of, or liability under, any provision of this Agreement (including any contest by the Executive about the amount of any payment pursuant to this Agreement), provided that the Executive substantially prevails in such contest by reason of litigation, arbitration or settlement. 7. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the -7- Company and those designated by it. Upon termination of the Executive's employment, the Executive shall immediately return to the Company all confidential information in his possession as well as any other documents or property of the Company. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in competition with the business conducted by the Company or its affiliates anywhere in the world where the Company or its affiliates does business. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person or entity, solicit for employment or other commercial engagement any person employed by the Company or its affiliates as of the date of the solicitation or for the preceding six months. (c) During the Employment Period and at any time thereafter, Executive shall not, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or its affiliates, or any products or services offered by any of these, nor shall he engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of any of them. (d) (i) Executive acknowledges and agrees that the restrictions contained in this Section 8 and in Section 7 above are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section 8 or Section 7 above. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 8 and Section 7 above are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 8 or Section 7 above cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 8, or Section 7 above which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the -8- provisions of this Section 8 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The time periods set forth above shall be tolled during any period of violation by the Executive. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 8 or Section 7 above, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 8. (e) In exchange for the covenants set forth in this Section 8, and provided the Executive is not terminated for Cause and does not leave other than for Good Reason, the Company agrees to pay to the Executive a lump sum amount equal to two times the Executive's Annual Base Salary plus the Bonus Amount, within 30 days after the Date of Termination. (f) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8, and the Company shall be permitted to assign its rights under this Section 9. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive' s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean York International Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. -9- 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Mr. Iain A. Campbell 1740 Wyndham Drive South York, PA 17403 If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of any other provision or right under this Agreement. (f) This Agreement supersedes and terminates the prior Severance Agreement dated August 18, 1997 between the Company and the Executive. (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. -10- (h) Except for claims arising under Sections 7 or 8 , any controversy or claim arising out of or relating to this Agreement or the breach thereof, and any other disputes arising between the Executive and the Company or its affiliates including without limitation claims arising under any employment discrimination laws, shall be settled exclusively through binding arbitration in accordance with the then applicable rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court having jurisdiction thereof. Any arbitration shall be conducted in York, Pennsylvania or such other location as mutually agreed by the parties. The arbitration provisions of this section shall be interpreted according to, and governed by, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. The costs of the arbitration shall be borne by the Company. The Executive shall be entitled to recover his legal fees and expenses in accordance with the provisions of Section 6 of this Agreement, or applicable law to the extent it provides for a greater recovery. (i) In the event that any language, section, clause, phrase or word used in this Agreement is determined to be ambiguous, no presumption shall arise against or in favor of either party and that no rule of strict construction shall be applied against either party with respect to such ambiguity. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ___________________________________ Iain A. Campbell YORK INTERNATIONAL CORPORATION By: _______________________________ -11- SCHEDULE A - - RETIREMENT BENEFITS - Pension Plan Number One - Investment Plan - Supplemental Executive Retirement Plan - Executive Deferred Compensation Plan - - INCENTIVE COMPENSATION - 2002 Incentive Compensation Plan - 2002 Amended and Restated Omnibus Stock Plan - Management Stock Purchase Plan - - HEALTH BENEFITS - Medical - Dental - Vision - Prescription Drug - - WELFARE BENEFITS - Short-Term Disability - Long-Term Disability - Life - Vacation - - MISCELLANEOUS EXECUTIVE BENEFITS - Financial Planning - Executive Physical EXHIBIT I GENERAL RELEASE IN CONSIDERATION OF the terms and conditions contained in the Executive Employment Agreement, dated as of the 24th day of March, 2004, (the "Employment Agreement") by and between Iain A. Campbell (the "Executive") and York International Corporation (the "Company"), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges the Company and its subsidiaries, divisions, affiliates and parents, and their respective past, current and future officers, directors, employees, agents, and/or owners, and their respective successors, and assigns and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (collectively the "Released Parties") from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever ("Claims ") which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have, against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof. This General Release of Claims, includes without limitation, any and all matters relating to the Executive's employment by the Company and the cessation thereof, and any and all matters arising under any federal, state, or local statute, rule, or regulation, or principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sections 2000 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 et seq. ("ERISA"), the Pennsylvania Human Relations Act, as amended, 43 P.S. Sections 955 et. seq., and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from (i) any of the Company's obligations to him under the Employment Agreement, and (ii) any vested benefits to which he may be entitled under any employee benefit plan or program subject to ERISA. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied. The Executive represents and warrants that he fully understands the terms of this General Release, that he is hereby advised to consult with legal counsel before signing, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise. The Executive further represents and warrants that he has not filed, and will not initiate, or cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the Released Parties before any federal, state, or local agency, court, or other body relating to any claims barred or released in this General Release thereof, and will not voluntarily participate in such a proceeding. However, nothing in this general release shall preclude or prevent the Executive from filing a claim, which challenges the validity of this general release solely with respect to the Executive's waiver of any Losses arising under the ADEA. The Executive shall not accept any relief obtained on his behalf by any government agency, private party, class, or otherwise with respect to any claims covered by this General Release. The Executive may take twenty-one (21) days to consider whether to execute this General Release. Upon the Executive's execution of this General Release, the Executive will have seven (7) days after such execution in which he may revoke such execution. In the event of revocation, the Executive must present written notice of such revocation to the Company's Chief Executive Officer. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective on the eighth (8th) day after the execution hereof (the "Effective Date"). INTENDING TO BE LEGALLY BOUND, I hereby set my hand below: ______________________________ Iain A. Campbell Dated:________________________ NOTARIZATION State of __________________________________ ) County of _________________________________ ) ss. On this ______ day of ______________ in the year 2004 before me, the undersigned, personally appeared __________________________________; personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity as an individual, and that by his signature on the instrument he executed such instrument, and that such individual made such appearance before the undersigned. _______________________________ Notary Public -2- EX-10.3 5 w96872exv10w3.txt EMPLOYMENT AGREEMENT WITH JEFFREY D. GARD Exhibit 10.3 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and Jeffrey D. Gard (the "Executive") dated as of the 24th day of March, 2004. The Board of Directors of the Company (the "Board") has determined that it is in the Company's best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean March 24, 2004. 2. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue in the employment of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary thereof (the "Initial Period"). Notwithstanding the foregoing, Executive's employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions, for an additional period of one year (each, an "Additional Period"), in each such case commencing upon the expiration of the Initial Period or the then current Additional Period, as the case may be, unless, at least 30 days prior to the expiration of the Initial Period or such Additional Period, either party shall give written notice to the other (a "Non-Extension Notice") of its intention not to extend the term hereof. A Non-Extension Notice by the Company shall constitute a Notice of Termination (as defined in Section 4(e)) by the Company of the Executive's employment without "Cause" (as defined in Section 4(b)). A Non-Extension Notice by the Executive shall constitute a Notice of Termination by the Executive of the Executive's employment without "Good Reason" (as defined in Section 4(c)). The entire period during which the Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period." 3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Executive shall serve as Vice President - Human Resources or in such other position as the Company and Executive shall agree with authority and responsibilities for the Company's human resources matters; (ii) Executive shall report to the President, York International and/or such other officers as the Board may designate from time to time; and (iii) the Executive's services shall be performed in York, Pennsylvania or such other location as the Company and Executive shall agree, except for occasional travel which may be required for the Executive to perform his duties under this Agreement. During the Employment Period, the Executive shall devote all of his business time, attention and energies to the performance of his duties under this Agreement and shall not, without the prior written consent of the Board, be engaged in any other business activity whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that the Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by the Executive of his duties and responsibilities hereunder, (a) to manage the Executive's personal, financial and legal affairs, and (b) serve on civic or charitable boards or committees. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $246,100 ("Annual Base Salary"), which shall be paid in accordance with the Company's normal payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Incentive Compensation. During the Employment Period, the Executive shall be eligible (1) for annual performance bonuses (the "Annual Bonus") and for mid-term performance bonuses in accordance with the provisions of the Company's 2002 Incentive Compensation Plan or its successor (the "Incentive Plan"), as the Incentive Plan may be in effect from time to time, (2) for awards under the Company's 2002 Amended and Restated Omnibus Stock Plan or its successor (the "Stock Plan"), as the Stock Plan may be in effect from time to time, and (3) to participate in the Company's Management Stock Purchase Plan or its successor (the "Purchase Plan") as the Purchase Plan may be in effect from time to time. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in the retirement, health, welfare and miscellaneous executive benefit plans and programs set forth on Schedule A, as such plans and programs may be in effect from time to time. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive in accordance with the Company's policies, as such policies may be in effect from time to time. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the "Disability" of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's inability to perform his full duties with the Company for 180 calendar days in any twelve month period as a result of incapacity due to mental or physical illness. In the event of a dispute under this Section 4(a), the -2- Executive shall submit to an examination by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative, and the determination of such physician shall be determinative. (b) Cause. The Company may terminate the Executive's employment at any time during the Employment Period for "Cause." For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company or its affiliates with materially false representations relied upon by the Company or its affiliates including, but not limited to furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company or its affiliates, or (iii) willful misconduct or gross negligence which is or may be demonstrably and materially injurious to the Company or its affiliates, or (iv) theft or misappropriation of the funds or assets of the Company or its affiliates, or (v) conviction of or pleading nolo contendere to a crime involving moral turpitude or any felony, or (vi) a willful and material breach by the Executive of this Agreement. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. As used in this Agreement, the term "affiliates" shall mean any company controlled by, controlling or under common control with the Company. (c) Good Reason. The Executive may terminate his employment with the Company at any time during the Employment Period for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Employment Period: (i) a substantial and adverse change in the Executive's authority or responsibilities as specified in Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; -3- (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(iii) hereof, unless these requirements are remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iv) a material breach by the Company of this Agreement; or (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, any action or inaction shall constitute Good Reason only for the 90 day period from the date on which such action or inaction first occurs. (d) Termination Without Cause or Good Reason. The Company may terminate the Executive's employment without Cause, and the Executive may terminate his employment without Good Reason, at any time during the Employment Period. (e) Notice of Termination. Any termination of the Executive's employment during the Employment Period by the Company or by the Executive, shall be communicated by "Notice of Termination" to the other party hereto given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall, (A) in all cases other than a voluntary termination by the Executive for other than Good Reason, be not more than thirty days after the giving of such notice, and (B) in the case of a voluntary termination by the Executive for other than Good Reason, thirty days after the Company receives such notice; provided that in a termination described in either (A) or (B), during the notice period, the Board, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (f) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within -4- 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date specified therein within 30 days of such notice, as the case may be, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is voluntarily terminated by the Executive for other than Good Reason, 30 days following the date of receipt of the Notice of Termination. 5. Obligations of the Company upon Termination. (a) Good Reason or Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, then (i) the Company shall pay to the Executive, the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, and any accrued but unused vacation pay (this amount shall be hereinafter referred to as the "Accrued Obligations"), in accordance with the Company's normal payroll practices, and (ii) to the extent not already paid or provided, the Company shall pay or provide to the Executive (in accordance with the terms of the applicable plan or program) any other amounts or benefits previously earned and vested or which the Executive is eligible to receive for his service prior to the Date of Termination under any retirement, incentive, health, welfare or miscellaneous executive benefit plan or program specified on Schedule A (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), and (iii) subject to Section 5(e), the Company shall pay to the Executive in a cash lump sum within 30 days after the Date of Termination the aggregate of the following amounts: A. an amount equal to one times the sum of (i) Executive's Annual Base Salary plus (ii) the Executive's target Annual Bonus for the year in which the Date of Termination occurs (the "Bonus Amount"); and B. an amount equal to the Company contribution (other than matching contributions) that would be made under any Company tax-qualified defined contribution retirement plan (the "DC Plan") with respect to the Executive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming for this purpose that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount; and -5- C. an amount equal to the excess of (a) the sum of the actuarial equivalent of the benefit under any Company tax-qualified defined benefit retirement plan (the "DB Plan") and any Company non-qualified retirement plan (the "Non-Qualified Plan") (utilizing the actuarial assumptions as in effect under the DB Plan at the time such payment is made) which the Executive would receive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming solely for purposes of this calculation that all accrued benefits are fully vested, and, assuming that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount, over (b) the actuarial equivalent of the Executive's actual benefits, if any, which have been paid or that would be payable under the DB Plan and Non-Qualified Plan as of the Date of Termination, assuming solely for purposes of this calculation that the Executive is vested in his benefits under the DB Plan and the Non-Qualified Plan; provided, however, that nothing in this Agreement shall cause the Executive to become vested in any benefits under the DB Plan or Non-Qualified Plan; and (iv) subject to Section 5(e), the Company shall continue to provide health benefits (as specified on Schedule A) to the Executive and his eligible dependants for a period of 36 months from the Date of Termination on the same basis that such benefits were provided to him immediately prior to the Date of Termination; provided, however, that if the Company modifies, reduces or eliminates a health benefit or changes the employee contribution for similarly situated executives who remain employed by the Company then the Company may apply such change to the Executive; and (v) subject to Section 5(e), if the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's continued employment during the period of 36 months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's eligible dependents on the same terms applicable to such coverage for similarly-situated retirees of the Company commencing on the date on which benefits described in Section 5(a)(iv) terminate, if the Executive elects such coverage; (vi) all other benefits (not described in paragraphs (i) through (v) of this Section) shall cease as of the Date of Termination. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of -6- Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include life insurance benefits as in effect with respect to the Executive on the date of the Executive's death. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include disability benefits as in effect with respect to the Executive on the Executive's Disability Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. (e) General Release. Notwithstanding anything in this Section 5 to the contrary, no payments shall be made or benefits provided by the Company under Sections 5(a)(iii), 5(a)(iv) or 5(a)(v) prior to the execution by the Executive at the time of termination of a general release in favor of the Company and its affiliates, and their officers, employees, and directors, substantially in the form attached hereto as Exhibit I. 6. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be reduced by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others, regarding the validity or enforceability of, or liability under, any provision of this Agreement (including any contest by the Executive about the amount of any payment pursuant to this Agreement), provided that the Executive substantially prevails in such contest by reason of litigation, arbitration or settlement. 7. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the -7- Company and those designated by it. Upon termination of the Executive's employment, the Executive shall immediately return to the Company all confidential information in his possession as well as any other documents or property of the Company. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in competition with the business conducted by the Company or its affiliates anywhere in the world where the Company or its affiliates does business. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person or entity, solicit for employment or other commercial engagement any person employed by the Company or its affiliates as of the date of the solicitation or for the preceding six months. (c) During the Employment Period and at any time thereafter, Executive shall not, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or its affiliates, or any products or services offered by any of these, nor shall he engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of any of them. (d) (i) Executive acknowledges and agrees that the restrictions contained in this Section 8 and in Section 7 above are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section 8 or Section 7 above. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 8 and Section 7 above are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 8 or Section 7 above cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 8, or Section 7 above which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the -8- provisions of this Section 8 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The time periods set forth above shall be tolled during any period of violation by the Executive. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 8 or Section 7 above, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 8. (e) In exchange for the covenants set forth in this Section 8, and provided the Executive is not terminated for Cause and does not leave other than for Good Reason, the Company agrees to pay to the Executive a lump sum amount equal to two times the Executive's Annual Base Salary plus the Bonus Amount, within 30 days after the Date of Termination. (f) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8, and the Company shall be permitted to assign its rights under this Section 9. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive' s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean York International Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. -9- 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Mr. Jeffrey D. Gard 67 Broad Street Plainville, MA 02762 If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of any other provision or right under this Agreement. (f) This Agreement supersedes and terminates the prior Severance Agreement dated March 1, 2000 between the Company and the Executive. (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. -10- (h) Except for claims arising under Sections 7 or 8 , any controversy or claim arising out of or relating to this Agreement or the breach thereof, and any other disputes arising between the Executive and the Company or its affiliates including without limitation claims arising under any employment discrimination laws, shall be settled exclusively through binding arbitration in accordance with the then applicable rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court having jurisdiction thereof. Any arbitration shall be conducted in York, Pennsylvania or such other location as mutually agreed by the parties. The arbitration provisions of this section shall be interpreted according to, and governed by, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. The costs of the arbitration shall be borne by the Company. The Executive shall be entitled to recover his legal fees and expenses in accordance with the provisions of Section 6 of this Agreement, or applicable law to the extent it provides for a greater recovery. (i) In the event that any language, section, clause, phrase or word used in this Agreement is determined to be ambiguous, no presumption shall arise against or in favor of either party and that no rule of strict construction shall be applied against either party with respect to such ambiguity. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. Jeffrey D. Gard YORK INTERNATIONAL CORPORATION By: ___________________________ -11- SCHEDULE A - - RETIREMENT BENEFITS - Pension Plan Number One - Investment Plan - Supplemental Executive Retirement Plan - Executive Deferred Compensation Plan - - INCENTIVE COMPENSATION - 2002 Incentive Compensation Plan - 2002 Amended and Restated Omnibus Stock Plan - Management Stock Purchase Plan - - HEALTH BENEFITS - Medical - Dental - Vision - Prescription Drug - - WELFARE BENEFITS - Short-Term Disability - Long-Term Disability - Life - Vacation - - MISCELLANEOUS EXECUTIVE BENEFITS - Financial Planning - Executive Physical EXHIBIT I GENERAL RELEASE IN CONSIDERATION OF the terms and conditions contained in the Executive Employment Agreement, dated as of the 24th day of March, 2004, (the "Employment Agreement") by and between Jeffrey D. Gard (the "Executive") and York International Corporation (the "Company"), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges the Company and its subsidiaries, divisions, affiliates and parents, and their respective past, current and future officers, directors, employees, agents, and/or owners, and their respective successors, and assigns and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (collectively the "Released Parties") from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever ("Claims ") which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have, against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof. This General Release of Claims, includes without limitation, any and all matters relating to the Executive's employment by the Company and the cessation thereof, and any and all matters arising under any federal, state, or local statute, rule, or regulation, or principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sections 2000 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 et seq. ("ERISA"), the Pennsylvania Human Relations Act, as amended, 43 P.S. Sections 955 et. seq., and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from (i) any of the Company's obligations to him under the Employment Agreement, and (ii) any vested benefits to which he may be entitled under any employee benefit plan or program subject to ERISA. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied. The Executive represents and warrants that he fully understands the terms of this General Release, that he is hereby advised to consult with legal counsel before signing, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise. The Executive further represents and warrants that he has not filed, and will not initiate, or cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the Released Parties before any federal, state, or local agency, court, or other body relating to any claims barred or released in this General Release thereof, and will not voluntarily participate in such a proceeding. However, nothing in this general release shall preclude or prevent the Executive from filing a claim, which challenges the validity of this general release solely with respect to the Executive's waiver of any Losses arising under the ADEA. The Executive shall not accept any relief obtained on his behalf by any government agency, private party, class, or otherwise with respect to any claims covered by this General Release. The Executive may take twenty-one (21) days to consider whether to execute this General Release. Upon the Executive's execution of this General Release, the Executive will have seven (7) days after such execution in which he may revoke such execution. In the event of revocation, the Executive must present written notice of such revocation to the Company's Chief Executive Officer. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective on the eighth (8th) day after the execution hereof (the "Effective Date"). INTENDING TO BE LEGALLY BOUND, I hereby set my hand below: ______________________________ Jeffrey D. Gard Dated:________________________ NOTARIZATION State of ___________________________________ ) County of __________________________________ ) ss. On this ______ day of ______________ in the year 2004 before me, the undersigned, personally appeared __________________________________; personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity as an individual, and that by his signature on the instrument he executed such instrument, and that such individual made such appearance before the undersigned. _______________________________ Notary Public -2- EX-31.1 6 w96872exv31w1.txt CEO CERTIFICATION PURSUANT TO SECTION 302 Exhibit 31.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, C. DAVID MYERS, Chief Executive Officer of York International Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-Q of York International Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: May 6, 2004 /s/ C. David Myers ----------------------------------- C. David Myers, President and Chief Executive Officer EX-31.2 7 w96872exv31w2.txt CFO CERTIFICATION PURSUANT TO SECTION 302 Exhibit 31.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, M. DAVID KORNBLATT, Chief Financial Officer of York International Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-Q of York International Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: May 6, 2004 /s/ M. David Kornblatt ------------------------------------- M. David Kornblatt, Vice President and Chief Financial Officer EX-32.1 8 w96872exv32w1.txt CEO AND CFO CERTIFICATION PURSUANT TO SECTION 906 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of York International Corporation (the "Company") for the quarter ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned C. David Myers, President and Chief Executive Officer of York International Corporation, and M. David Kornblatt, Vice President and Chief Financial Officer of York International Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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: May 6, 2004 /s/ C. David Myers ------------------------------------- C. David Myers, President and Chief Executive Officer /s/ M. David Kornblatt ------------------------------------- M. David Kornblatt, Vice President and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to York International Corporation and will be retained by York International Corporation and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----