-----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, Sg6BYMKCw0mwhAUGN4LE6Zd6KtKYvTGI3XclPuaWCrn2kovLNYxpG2FXi5j/j1XK fn2Aq349SrVIaY3wNkafAQ== 0000908255-04-000102.txt : 20041109 0000908255-04-000102.hdr.sgml : 20041109 20041109110351 ACCESSION NUMBER: 0000908255-04-000102 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041109 DATE AS OF CHANGE: 20041109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BORGWARNER INC CENTRAL INDEX KEY: 0000908255 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 133404508 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12162 FILM NUMBER: 041127870 BUSINESS ADDRESS: STREET 1: 5435 CORPORATE DRIVE STREET 2: SUITE 150 CITY: TROY STATE: MI ZIP: 48098 BUSINESS PHONE: 28483733231 MAIL ADDRESS: STREET 1: 5435 CORPORATE DRIVE STREET 2: SUITE 150 CITY: TROY STATE: MI ZIP: 48098 FORMER COMPANY: FORMER CONFORMED NAME: BORG WARNER AUTOMOTIVE INC DATE OF NAME CHANGE: 19930628 10-Q 1 cascii.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q QUARTERLY REPORT ---------------- Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter ended September 30, 2004 Commission file number: 1-12162 BORGWARNER INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3404508 - ------------------------------ ---------------------------- State or other jurisdiction of (I.R.S. Employer Incorporation or organization Identification No.) 200 South Michigan Avenue, Chicago, Illinois 60604 - -------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 322-8500 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 12-b2 of the Exchange Act). YES [X] NO [ ] On September 30, 2004 the registrant had 56,170,603 shares of Common Stock outstanding. BORGWARNER INC. FORM 10-Q NINE MONTHS ENDED SEPTEMBER 30, 2004 INDEX
Page No. -------- PART I. Financial Information Item 1. Financial Statements Introduction .......................................................... 2 Condensed Consolidated Balance Sheets at September 30, 2004(Unaudited) and December 31, 2003................. 3 Consolidated Statements of Operations (Unaudited) for the three months ended September 30, 2004 and 2003.................. 4 Consolidated Statements of Operations (Unaudited) for the nine months ended September 30, 2004 and 2003................... 5 Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2004 and 2003................... 6 Notes to Consolidated Financial Statements(Unaudited).................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 18 Item 3. Quantitative and Qualitative Disclosures About Market Risks.............................................. 25 Item 4. Controls and Procedures............................................. 25 PART II. Other Information Item 1. Legal Proceedings................................................... 27 Item 6. Exhibits and Reports on Form 8-K.................................... 27 SIGNATURES..................................................................... 29
-2- BORGWARNER INC. FORM 10-Q NINE MONTHS ENDED SEPTEMBER 30, 2004 PART I. FINANCIAL INFORMATION Item 1. Financial Statements BorgWarner Inc. and Consolidated Subsidiaries' Financial Statements The financial statements of BorgWarner Inc. and Consolidated Subsidiaries (the "Company") have been prepared in accordance with the instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The statements are unaudited but include all adjustments, consisting only of recurring items, except as noted, which the Company considers necessary for a fair presentation of the information set forth herein. Certain prior period amounts have been reclassified to conform to current period presentation. The results of operations for the three and nine months ended September 30, 2004 are not necessarily indicative of the results to be expected for the entire year. The following financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003. -3- BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (MILLIONS OF DOLLARS EXCEPT SHARE DATA)
September 30, December 31, 2004 2003 ------------- ------------ (Unaudited) ASSETS Cash and cash equivalents ........................ $ 189.0 $ 113.1 Receivables ...................................... 497.1 414.9 Inventories ...................................... 221.4 201.3 Deferred income taxes ............................ 32.9 32.8 Investments in businesses held for sale .......... 40.3 32.0 Prepayments and other current assets ............. 38.7 30.5 ---------- ---------- Total current assets .......................... 1,019.4 824.6 Property, plant, and equipment at cost ........... 1,766.6 1,665.7 Less accumulated depreciation .................... (759.3) (680.4) ---------- ---------- Net property, plant and equipment ............. 1,007.3 985.3 Tooling, net of amortization ..................... 101.4 90.5 Investments and advances ......................... 183.4 177.3 Goodwill ......................................... 851.9 852.0 Other non-current assets ......................... 123.3 120.7 ---------- ---------- Total other assets ............................ 1,260.0 1,240.5 ---------- ---------- $ 3,286.7 $ 3,050.4 ========== ========== LIABILITIES & STOCKHOLDERS' EQUITY Notes payable and current portion of long-term debt .................................. $ 7.3 $ 10.0 Accounts payable and accrued expenses ............ 542.4 460.3 Income taxes payable ............................. 13.2 - ---------- ---------- Total current liabilities ..................... 562.9 470.3 Long-term debt ................................... 583.0 645.5 Long-term retirement-related liabilities ......... 459.1 503.0 Other long-term liabilities ...................... 213.5 154.0 ---------- ---------- Total long-term liabilities ................... 672.6 657.0 Minority interest in consolidated subsidiaries ... 19.4 17.2 Capital stock: Preferred stock, $0.01 par value; authorized 5,000,000 shares; none issued ................... - - Common stock, $0.01 par value; authorized 150,000,000 shares; issued shares: 2004- 56,174,587; 2003- 55,229,854; outstanding shares: 2004-56,170,603;2003- 55,157,190 ........ 0.6 0.3 Non-voting common stock, $0.01 par value; authorized 25,000,000 shares; none issued and outstanding in 2004 and 2003 ................ - - pital in excess of par value ................... 794.5 756.3 Retained earnings ................................ 620.7 491.3 Accumulated other comprehensive income ........... 33.1 14.0 Common stock held in treasury, at cost: 2004, 3,984 shares; 2003, 72,664 shares .......... (0.1) (1.5) ---------- ---------- Total stockholders' equity .................... 1,448.8 1,260.4 ---------- ---------- $ 3,286.7 $ 3,050.4 ========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -4- BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (MILLIONS OF DOLLARS EXCEPT SHARE DATA)
Three months ended September 30, 2004 2003 ----------- ------------ Net sales .................................. $ 839.8 $ 725.2 Cost of sales .............................. 694.7 595.9 ----------- ----------- Gross profit ............................... 145.1 129.3 Selling, general and administrative expenses 77.4 72.7 Other, net ................................. (0.5) 0.1 ----------- ----------- Operating income ........................... 68.2 56.5 Equity in affiliate earnings, net of tax ... (6.2) (3.6) Interest expense and finance charges ....... 7.5 8.1 ----------- ----------- Earnings before income taxes ............. 66.9 52.0 Provision for income taxes ................. 20.1 14.2 Minority interest, net of tax .............. 2.0 1.9 ----------- ----------- Net earnings ............................... $ 44.8 $ 35.9 =========== =========== Net earnings per share - Basic ............. $ 0.80 $ 0.66 =========== =========== Net earnings per share - Diluted ........... $ 0.79 $ 0.65 =========== =========== Average shares outstanding (thousands) Basic ...................................... 56,025 54,494 Diluted .................................... 56,650 55,064 Dividends declared per share ............... $ 0.125 $ 0.09 =========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -5- BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (MILLIONS OF DOLLARS EXCEPT SHARE DATA)
Nine months ended September 30, 2004 2003 ----------- ----------- Net sales ........................................ $ 2,636.1 $ 2,270.4 Cost of sales .................................... 2,148.7 1,842.8 ----------- ----------- Gross profit ..................................... 487.4 427.6 Selling, general and administrative expenses ..... 259.9 233.4 Other, net ....................................... 0.4 0.2 ----------- ----------- Operating income ................................. 227.1 194.0 Equity in affiliate earnings, net of tax ......... (21.2) (15.3) Interest expense and finance charges ............. 22.7 25.8 ----------- ----------- Earnings before income taxes ................... 225.6 183.5 Provision for income taxes ....................... 67.7 52.3 Minority interest, net of tax .................... 7.3 6.3 ----------- ----------- Net earnings ................................. $ 150.6 $ 124.9 =========== =========== Net earnings per share - Basic ................... $ 2.70 $ 2.32 Net earnings per share - Diluted ................. $ 2.67 $ 2.30 Average shares outstanding (thousands) Basic ............................................ 55,742 53,836 Diluted .......................................... 56,354 54,382 Dividends declared per share ..................... $ 0.375 $ 0.27 =========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -6- BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (MILLIONS OF DOLLARS)
Nine months ended September 30, 2004 2003 ------ ------ OPERATING Net earnings ....................................................... $150.6 $124.9 Non-cash charges to operations: Depreciation .................................................... 100.2 90.5 Amortization of tooling ......................................... 30.1 25.6 Employee retirement benefits funded with common stock ........... 27.7 9.9 Equity in affiliate earnings, net of dividends received, minority interest and other ................................... 4.0 (2.0) ------ ------ Net earnings adjusted for non-cash charges ................... 312.6 248.9 Changes in assets and liabilities: (Increase) in receivables ....................................... (83.1) (72.0) (Increase) in inventories ....................................... (20.0) (12.0) (Increase) decrease in prepayments and other current assets ..... (8.5) 9.6 Increase (decrease) in accounts payable and accrued expenses .... 82.8 (0.5) Increase in income taxes payable ................................ 12.9 24.3 Net change in other long-term assets and liabilities ............ 24.0 22.1 ------ ------ Net cash provided by operating activities ..................... 320.7 220.4 INVESTING Capital expenditures ............................................... (126.7) (104.1) Tooling outlays, net of customer reimbursements .................... (40.5) (28.8) Net proceeds from asset disposals .................................. 2.9 1.8 Proceeds from sale of business ..................................... - 5.4 Investment in unconsolidated subsidiary ............................ (9.0) (14.4) Contingent valuation payment on acquired business .................. - (12.8) ------ ------ Net cash used in investing activities ......................... (173.3) (152.9) FINANCING Net decrease in notes payable ...................................... (2.7) (2.5) Additions to long-term debt ........................................ 0.3 0.4 Reductions in long-term debt ....................................... (58.6) (7.9) Payments for purchases of treasury stock ........................... - (2.5) Proceeds from stock options exercised .............................. 9.8 28.1 Dividends paid ..................................................... (20.9) (14.5) ------ ------ Net cash (used in) provided by financing activities ........... (72.1) 1.1 Effect of exchange rate changes on cash and cash equivalents ....... 0.6 1.6 ------ ------ Net increase in cash and cash equivalents .......................... 75.9 70.2 Cash and cash equivalents at beginning of period ................... 113.1 36.6 ------ ------ Cash and cash equivalents at end of period ......................... $189.0 $106.8 ====== ====== SUPPLEMENTAL CASH FLOW INFORMATION Net cash paid during the period for: Interest ........................................................ $ 23.8 $ 27.4 Income taxes .................................................... 12.6 16.6 Non-cash financing transactions: Issuance of common stock for Executive Stock Performance Plan ............................................ 2.0 3.3
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -7- BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) Research and development costs charged to expense for the three and nine months ended September 30, 2004 were $33.6 million and $94.0 million. Research and development costs charged to expense for the three and nine months ended September 30, 2003 were $29.0 million and $87.4 million. (2) Inventories consisted of the following (millions of dollars):
September 30, December 31, 2004 2003 ------------- ------------ Raw materials .............. $ 91.0 $ 95.5 Work in progress ........... 88.0 65.1 Finished goods ............. 42.4 40.7 ------ ------ Total inventories ..... $221.4 $201.3 ====== ======
(3) The Company accounts for its stock-based employee compensation plans under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost is reflected in net income for stock options, as all options granted under those plans had an exercise price equal to or in excess of the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provision of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," to all stock-based employee compensation awards.
Three Months Ended September 30, --------------------- 2004 2003 ------ ------- Net earnings, as reported $ 44.8 $ 35.9 Add: Stock-based employee compensation expense included in net income, net of income tax 0.4 0.6 Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of tax effects (2.9) (2.3) ------ ------ Pro forma net earnings $ 42.3 $ 34.2 ====== ====== Net earnings per share Basic - as reported $ 0.80 $ 0.66 Basic - pro forma 0.76 0.63 Diluted - as reported 0.79 0.65 Diluted - pro forma 0.75 0.62
-8-
Nine Months Ended September 30, -------------------------- 2004 2003 ---------- --------- Net earnings, as reported $ 150.6 $ 124.9 Add: Stock-based employee compensation expense included in net income, net of income tax 1.1 3.2 Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of tax effects (5.7) (7.0) ---------- ---------- Pro forma net earnings $ 146.0 $ 121.1 ========== ========== Net earnings per share Basic - as reported $ 2.70 $ 2.32 Basic - pro forma 2.62 2.25 Diluted - as reported 2.67 2.30 Diluted - pro forma 2.59 2.23
On May 17, 2004 the Company announced a two-for-one stock split of common stock for stockholders of record on May 3, 2004. All share and per share amounts for prior periods were restated to account for the effect of the stock split. In calculating earnings per share, earnings are the same for the basic and diluted calculations. Shares increased for diluted earnings per share by 625,000 and 570,000 for the three months ended, and 612,000 and 546,000 for the nine months ended September 30, 2004 and 2003, respectively, due to the effects of stock options and shares issuable under the Executive Stock Performance Plan. (4) The Company's provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The effective rate for 2004 differed from the U.S. statutory rate primarily due to a) state income taxes, b) foreign rates which differ from those in the U.S. and c) realization of certain business tax credits, including foreign tax credits and research and development credits. The Company expects its effective tax rate for 2004 to be approximately 30.0%. This rate is about 1.5% higher than the prior year due to changes in tax laws in some of the countries where the Company does business. (5) Following is a summary of notes payable and long-term debt: -9-
September 30, 2004 December 31, 2003 ----------------------- ---------------------- Current Long-Term Current Long-Term -------- --------- -------- --------- (millions of dollars) DEBT Bank borrowings and other ............................ $ 0.6 $ 16.7 $ 2.9 $ 42.5 Term loans due through 2011 (at an average rate of 3.2% at September 30, 2004 and 3.4% at December 31, 2003) ................................. 6.7 27.8 7.1 31.4 7% Senior Notes due 2006, net of unamortized discount ........................ - 139.0 - 139.4 ($139 million converted to floating rate of 3.9% by interest rate swap at September 30, 2004) 6.5% Senior Notes due 2009, net of unamortized discount ........................ - 136.1 - 164.7 ($100 million converted to floating rate of 4.6% by interest rate swap at September 30, 2004) 8% Senior Notes due 2019, net of unamortized discount($75 million converted to floating rate of 4.8% by interest rate swap at September 30, 2004)... - 133.8 - 133.9 7.125% Senior Notes due 2029, net of unamortized discount ........................ - 119.1 - 122.1 -------- -------- -------- -------- Carrying amount of notes payable and long-term debt ................. 7.3 572.5 10.0 634.0 Fair value adjustment for interest rate swaps (a) .................................. - 10.5 - 11.5 -------- -------- -------- -------- Total notes payable and long-term debt ......................... $ 7.3 $ 583.0 $ 10.0 $ 645.5 ======== ======== ======== ========
(a) The fair value adjustment for interest rate swaps has been reclassified to long-term debt for all periods presented. The Company has a new revolving credit facility that provides for borrowings up to $600 million through July 2009. This new facility effective July 22, 2004 replaced the Company's existing facility of $350 million. At September 30, 2004 and December 31, 2003, there were no borrowings outstanding and no obligations under standby letters of credit under either facility. The line of credit is subject to the usual terms and conditions applied by banks to an investment grade company. The Company is in compliance with its credit agreement covenants as of September 30, 2004 and expects to be compliant in future periods. (6) The Company has entered into interest rate and currency swaps to manage interest rate and foreign currency risk. A summary of these instruments outstanding at September 30, 2004 follows (currency in millions): -10-
Interest rates Notional -------------- Floating interest Hedge Type Amount Receive Pay Rate basis ---------- ------ ------- --- ----------------- (Millions) Interest Rate Swaps (a) Fixed to floating Fair value $ 139 7.0% 3.9% 6 month LIBOR+1.7% Fixed to floating Fair value $ 100 6.5% 4.6% 6 month LIBOR+2.4% Fixed to floating Fair Value $ 75 8.0% 4.8% 6 month LIBOR+2.6% Cross Currency Swaps (Matures in 2006) Floating $ Investment $ 125 3.6% - 6 mo. USD LIBOR+1.4% To floating Y Y 14,930 - 1.7% 6 mo. JPY LIBOR+1.6% (Matures in 2019) Floating $ Investment $ 25 5.2% - 6 mo. USD LIBOR+3.0% To floating (euro) (euro)20 - 5.2% 6 mo. Euribor+3.0%
a) The maturity of the swaps corresponds with the maturity of the hedged item as noted in the debt summary. The ineffective portion of the swaps was not material. As of September 30, 2004 and December 31, 2003, the fair value of the fixed to floating interest rate swaps was $10.5 and $11.5 million, respectively. The cross currency swaps were recorded at their fair value of $(11.1) and $(13.6) million at September 30, 2004 and December 31, 2003, respectively. Fair value is based on quoted market prices for contracts with similar maturities. The Company also entered into certain commodity derivative instruments to protect against commodity price changes related to forecasted raw material and supplies purchases. The primary purpose of the commodity price hedging activities is to manage the volatility associated with these forecasted purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. These instruments are intended to offset the effect of changes in commodity prices on forecasted purchases. As of September 30, 2004 the Company had forward and option commodity contracts with a total notional value of $4.7 million and a market value $5.2 million, resulting in a favorable fair value of $0.5 million, which is deferred in other comprehensive income and will be reclassified and matched into income as the underlying operating transactions are realized. At December 31, 2003, the Company had forward and option commodity contracts with a total notional value of $1.1 million and a market value of $1.2 million, resulting in a favorable fair value of $0.1 million. During the nine months ended September 30, 2004 and 2003, hedge ineffectiveness of these contracts was not material. The Company uses foreign exchange forward contracts to protect against exchange rate movements for forecasted cash flows for purchases or sales transactions designated in currencies other than the functional currency of the operating unit. Most contracts mature in less than one year, however certain long-term sales contracts are covered by forward currency arrangements to protect against currency risk through the second quarter of 2009. Foreign currency contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for primarily U.S. Dollars, Euro, Japanese Yen and British Pounds Sterling. Contracts outstanding as of September 30, 2004 had a total notional value of $91.7 million and a market value of $94.3 million, resulting in a favorable fair value of $2.7 million, which is deferred in other comprehensive income and will be reclassified and matched into income as the underlying operating transactions are realized. Contracts outstanding as of December 31, 2003 had a total notional value of $25.5 million and a market value of $26.6 million, resulting in a favorable fair value of $1.1 million. (7) The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency (EPA) and certain state environmental agencies and private parties as potentially responsible parties (PRPs) at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund) and equivalent state laws and, as such, may presently be liable for the cost of clean-up and other remedial activities at 41 such sites. Responsibility for clean-up and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation formula. Based on the information available to the Company, which in most cases, includes: an estimate of allocation of liability among PRPs; the probability that other PRPs, many of whom are large solvent public companies, will fully pay the cost apportioned to them; currently available information from PRPs and/or federal or state environmental agencies concerning the scope of contamination and estimated remediation costs; remediation alternatives; estimated legal fees; and other factors, the Company has established a reserve for indicated environmental liabilities with a balance at September 30, 2004 of approximately $21.3 million. The Company expects this amount to be expended over the next three to five years. The Company believes that none of these matters, individually or in the aggregate, will have a material adverse effect on its financial condition or future operating results, generally either because estimates of the maximum potential liability at a site are not large or because liability will be shared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any such matter. In connection with the sale of Kuhlman Electric Corporation, the Company agreed to indemnify the buyer and Kuhlman Electric for certain environmental liabilities relating to the past operations of Kuhlman Electric. During 2000, Kuhlman Electric notified the Company that it discovered potential environmental contamination at its Crystal Springs, Mississippi plant while undertaking an expansion of the plant. The Company has been working with the Mississippi Department of Environmental Quality, the EPA and Kuhlman Electric to investigate the extent of and remediate the contamination. The investigation revealed the presence of Polychlorinated Biphenyls (PCBs) in portions of the soil at the plant and neighboring areas. Clean up began in 2000 and is continuing. Kuhlman Electric and others, including the Company, have been sued in numerous related lawsuits, in which multiple claimants allege personal injury and property damage. The first of these lawsuits -12- is scheduled to go to trial in March 2005. The Company believes that the reserve for environmental liabilities and any insurance recoveries are adequate to cover any potential liability associated with environmental matters. However, due to the nature of environmental remediation, there can be no assurance that the actual amount of environmental liabilities will not exceed the amount reserved. The Company has guaranteed the residual values of certain leased machinery and equipment at one of its facilities. The guarantees extend through the maturity of the underlying lease, which is in 2005. In the event the Company exercises its option not to purchase the machinery and equipment, the Company has guaranteed a residual value of $16.3 million. The Company does not believe it has any loss exposure due to this guarantee. The Company entered into two separate royalty agreements with Honeywell International for certain variable turbine geometry (VTG) turbochargers in order to continue shipping to its OEM customers after a German court ruled in favor of Honeywell in a patent infringement action. The two separate royalty agreements were signed in July 2002 and June 2003, respectively. The July 2002 agreement was effective immediately and expired in June 2003. The June 2003 agreement was effective July 2003 and covers the period through 2006 with a minimum royalty for shipments up to certain volume levels and a per unit royalty for any units sold above these stated amounts. The royalty costs recognized under the agreements were $2.4 million in the third quarter 2004 and $5.7 million in the third quarter 2003. The royalty costs incurred for the nine months ended September 30, 2004 and 2003 were $12.0 million and $17.2, respectively. These costs were all recognized as part of cost of goods sold. These costs will continue to decrease in 2004 and be at minimal levels in 2005 and 2006 as the Company's primary customers have converted most of their requirements to the next generation VTG turbocharger. The Company provides warranties on some of its products. The warranty terms are typically from one to three years. Provisions for estimated expenses related to product warranty are made at the time products are sold. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. Management actively studies trends of warranty claims and takes action to improve vehicle quality and minimize warranty claims. Management believes that the warranty reserve is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. The reserve is represented in both long-term and short-term liabilities on the balance sheet. The following table summarizes the activity in the warranty accrual accounts (in millions):
For the nine months ended September 30, ------------------- 2004 ------------------- Beginning balance $ 28.7 Provision 10.6 Incurred (7.4) ------ Ending balance $ 31.9 ======
(8) Comprehensive income is a measurement of all changes in stockholders' equity -13- that result from transactions and other economic events other than transactions with stockholders. For the Company, this includes foreign currency translation adjustments, changes in the minimum pension liability adjustment and market value changes in certain hedge instruments. The amounts presented as other comprehensive income, net of related taxes, are added to net income resulting in comprehensive income. The following summarizes the components of other comprehensive income on a pretax and after-tax basis for the periods ended September 30, (in millions)
Three Months Ended ------------------------------------------------------ 2004 2003 ------------------------- -------------------------- Income Income Tax After- Tax After- Pretax Effect tax Pretax Effect tax ------ ------ ------ ------ ------ ------ Foreign currency translation adjustments.................... $ 18.6 $ 1.9 $ 20.5 $ 3.3 $ (4.0) $ (0.7) Market value change in hedge instruments.......................... ( 0.9) - ( 0.9) - - - Net earnings as reported.................... 44.8 35.9 ------ ------ Total comprehensive income $ 64.4 $ 35.2 ====== ======
(in millions)
Nine Months Ended ------------------------------------------------------ 2004 2003 ------------------------- -------------------------- Income Income Tax After- Tax After- Pretax Effect tax Pretax Effect tax ------ ------ ------ ------ ------ ------ Foreign currency translation adjustments................... $ 12.3 $ 1.1 $ 13.4 $ 50.8 $ (4.0) $ 46.8 Market value change in hedge instruments........................ 2.0 - 2.0 - - - Net earnings as reported.................... 150.6 124.9 ------ ------ Total comprehensive income $166.0 $171.7 ====== ======
The components of accumulated other comprehensive income, net of tax, in the Condensed Consolidated Balance Sheets are as follows: (in millions)
September 30, December 31, 2004 2003 ------------- ------------ Foreign currency translation adjustments.................. $ 86.7 $ 73.3 Market value change in hedge instruments.................. 3.2 1.2 Minimum pension liability adjustment...................... (56.8) (60.5) -------- ------ Total accumulated other comprehensive income.............. $ 33.1 $ 14.0 ======== ======
(9) The following tables show net sales, earnings before interest and taxes and total assets for the Company's reportable operating segments (millions of dollars). -14-
NET SALES THREE MONTHS ENDED SEPTEMBER 30, -------------------------------------------------------------------- 2004 2003 ------------------------------ --------------------------------- Inter- Inter- Customer segment Net Customer segment Net -------- ------- ------ -------- ------- ------- Drivetrain $ 318.7 $ - $318.7 $ 284.3 $ - $ 284.3 Engine 521.1 11.6 532.7 440.9 10.5 451.4 Inter-segment eliminations - (11.6) (11.6) - (10.5) (10.5) -------- ------- ------ -------- ------- ------- Consolidated $ 839.8 $ - $839.8 $ 725.2 $ - $ 725.2 ======== ======= ====== ======== ======= =======
NET SALES NINE MONTHS ENDED SEPTEMBER 30, -------------------------------------------------------------------- 2004 2003 -------------------------------- ---------------------------------- Inter- Inter- Customer segment Net Customer segment Net -------- ------- -------- -------- ------- -------- Drivetrain $1,025.7 $ - $1,025.7 $ 915.3 $ - $ 915.3 Engine 1,610.4 39.0 1,649.4 1,355.1 33.7 1,388.8 Inter-segment eliminations - (39.0) (39.0) - (33.7) (33.7) -------- ------- -------- -------- ------- -------- Consolidated $2,636.1 $ - $2,636.1 $2,270.4 $ - $2,270.4 ======== ======= ======== ======== ======= ========
EARNINGS BEFORE EARNINGS BEFORE INTEREST & TAXES INTEREST & TAXES THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ------------------------ 2004 2003 2004 2003 -------- -------- --------- -------- Drivetrain $ 24.4 $ 16.7 $ 78.9 $ 66.5 Engine 65.2 55.6 208.8 178.3 -------- -------- -------- -------- Total segments 89.6 72.3 287.7 244.8 Corporate, including equity in affiliates (15.2) (12.2) (39.4) (35.5) -------- -------- -------- -------- Earnings before interest and taxes Interest expense and finance charges 74.4 60.1 248.3 209.3 Earnings before income taxes (7.5) (8.1) (22.7) (25.8) -------- -------- -------- -------- $ 66.9 $ 52.0 $ 225.6 $ 183.5 ======== ======== ======== ========
TOTAL ASSETS SEPTEMBER 30 DECEMBER 31 2004 2003 ------------ -------------- Drivetrain $ 824.1 $ 778.8 Engine 2,063.9 1,925.1 -------- -------- Total segments 2,888.0 2,703.9 Corporate, including investment in affiliates 398.7 346.5 -------- -------- Consolidated $3,286.7 $3,050.4 ======== ========
-15- (10) The Company securitizes and sells certain receivables through third party financial institutions without recourse. The amount sold can vary each month based on the amount of underlying receivables, up to a maximum of $50 million. During the nine months ended September 30, 2004, the amount of receivables sold remained constant at $50 million and total cash proceeds from sales of accounts receivable were $450.0 million. For the nine months ended September 30, 2004, the Company paid a servicing fee of $0.6 million related to these receivables, which is included in interest expense and finance charges. (11) The changes in the carrying amount of goodwill (in millions of dollars) for the nine months ended September 30, 2004, are as follows:
Drivetrain Engine Total ---------- ------ ------ Balance at December 31, 2003 $134.3 $717.7 $852.0 Translation adjustment - (0.1) (0.1) ------ ------ ------ Balance at September 30, 2004 $134.3 $717.6 $851.9 ====== ====== ======
(12) The Company has a number of defined benefit pension plans and other postretirement benefit plans covering eligible salaried and hourly employees. The other postretirement benefits plans, which provide medical and life insurance benefits, are unfunded plans. The estimated contributions for 2004 range from $34 to $36 million, of which about $34 million has been contributed through the first nine months of the year. The components of net periodic benefit cost recorded in the Company's Consolidated Statement of Operations, are as follows:
Other Pension Postretirement Benefits Benefits Three months Ended September 30 ---------------------------------------- 2004 2003 2004 2003 ----- ----- ----- ----- Service cost $ 3.4 $ 2.5 $ 1.5 $ 1.3 Interest cost 11.4 7.0 6.8 7.4 Expected return on plan assets (14.7) (6.6) - - Amortization of unrecognized transition asset - - - - Amortization of unrecognized 0.8 0.4 - Prior service cost (0.1) Amortization of unrecognized loss 2.1 2.4 2.5 1.5 ----- ----- ----- ----- Net periodic benefit cost $ 3.0 $ 5.7 $10.8 $10.1 ===== ===== ===== =====
Other Pension Postretirement Benefits Benefits Nine months Ended September 30 ---------------------------------------- 2004 2003 2004 2003 ----- ------ ------ ----- Service cost $ 9.9 $ 7.5 $ 4.5 $ 3.9 Interest cost 27.5 21.0 21.6 22.3 Expected return on plan assets (30.5) (19.8) - -
-16- Amortization of unrecognized transition asset - 0.2 - - Amortization of unrecognized 1.7 1.1 - (0.1) Prior service cost Amortization of unrecognized loss 6.3 7.2 6.3 4.5 ----- ------ ------ ----- Net periodic benefit cost $14.9 $ 17.2 $ 32.4 $30.6 ===== ====== ====== =====
(13) In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation (FIN) No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,"which was revised in December 2003. FIN No. 46R requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the entity that has the controlling financial interest. FIN No. 46R also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. For the Company, this Interpretation, as revised, was effective January 1, 2004. The Company has no variable interest entities required to be consolidated as a result of adopting FIN No. 46R, therefore, there was no impact on our Consolidated Financial Statements. In December 2003, the FASB issued a revised SFAS No. 132, "Employer's Disclosures About Pensions and Other Postretirement Benefits." SFAS No. 132 changes employers' disclosures about pension plans and other postretirement benefits and requires additional disclosures about assets, obligations, cash flows and net periodic benefit cost. The Statement is effective for annual and interim periods ended after December 15, 2003. The Company adopted SFAS No. 132 as of December 31, 2003, resulting in additional disclosures in the Company's annual and interim Consolidated Financial Statements. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") was enacted in the United States. The Act provides, among other things, expanded existing Medicare healthcare benefits to include an outpatient prescription drug benefit to Medicare eligible residents of the U.S. (Medicare Part D) beginning in 2006. Prescription drug coverage will be available to eligible individuals who enroll under the Part D plan. As an alternative, employers may provide drug coverage at least "actuarially equivalent to standard coverage" and receive-free federal subsidy equal to 28% of a portion of a Medicare beneficiary's drug costs for covered retirees who do not enroll in a Part D plan. In May 2004, the FASB issued Staff Position FAS No. 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," to provide guidance on accounting for effects of the Act. The Staff Position requires treating the effect of the employer subsidy on the accumulated post retirement benefit obligation (APBO) as an actuarial gain. The effect of the subsidy is to be reflected in the estimate of service cost in measuring the cost of benefits attributable to current service. The effects of plan amendments adopted subsequent to the Act to qualify plans as actuarially equivalent are to be treated as actuarial gains if the effect of the amendments reduces the APBO. The net effect on the APBO of any plan amendments that (a) reduce benefits under the plan and thus disqualify the benefits as actuarially equivalent and (b) eliminate the subsidy are to be accounted for as prior service cost. The effect of the adoption was a $6.8 million reduction of the Company's 2004 post-retirement benefits expense. -17- (14) On November 1, 2004, the Company announced that its wholly-owned German subsidiary, BorgWarner Germany GmbH ("BorgWarner Germany"), entered into a Sale and Purchase Agreement, dated October 30, 2004 (the "Sale and Purchase Agreement"), with CEP BE 00 Beteiligungs GmbH, Frau Ingelore Ruprecht, Wolfram Birkel, Elsa Birkel, Annegret Birkel, Christoph Birkel, Catharina Birkel, Klosterfeld Beteiligungen GmbH + Co. KG, and Meier-Birkel GmbH & Co. KG to purchase an aggregate of 6,221,170 shares or 62.21% of the outstanding shares of Beru AG, a German publicly-traded company ("Beru"), for Euro 59 per share. BorgWarner Germany also entered into an option agreement (the "Option Agreement") to acquire an additional 81,500 shares of Beru for Euro 59 per share from Annegret Birkel at any time after January 3, 2005 and prior to March 31, 2005. The completion of the transactions contemplated by the agreements is conditioned on obtaining regulatory approval and other customary conditions. Assuming regulatory approval, the closing is anticipated to occur around year-end. On November 1, 2004, the Company also announced that BorgWarner Germany intends, as required by German law, to commence a tender offer in Germany (the "Tender Offer") to acquire the remaining shares of approximately 37% (or approximately 3.7 million shares) of the outstanding stock of Beru at a price of Euro 67.50 per share. The total transaction, assuming purchase of all the remaining outstanding shares of Beru in the Tender Offer, is valued at Euro 621 million (or approximately $764 million). The Company intends to initially fund the transaction with cash and funds available under its existing revolving credit facility. The Company intends to ultimately fund the transaction in a manner consistent with maintaining the Company's current investment grade capital structure. Beru is a leading global automotive supplier and manufacturer of diesel cold starting technology (glow plugs and instant starting systems); gasoline ignition technology (spark plugs and ignition coils); and electronic and sensor technology (tire pressure sensors, diesel cabin heaters and selected sensors.) The company's major customers include, among others, BMW, DCX, GM/Fiat, VW/ Audi, Ford, Porsche, PSA, Renault, Isuzu, Siemens VDO, Valeo, Deutz, and MAN. The company employs approximately 2,700 employees and reported 2004 fiscal year (ended March 31) revenues of (euro)354.5 million. -18- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION BorgWarner Inc. and Consolidated Subsidiaries (the "Company") is a leading global supplier of highly engineered systems and components for vehicle powertrain applications. Our products help improve vehicle performance, fuel efficiency, handling, and air quality. They are manufactured and sold worldwide, primarily to original equipment manufacturers (OEMs) of passenger cars, sport utility vehicles, trucks, and commercial transportation products. The Company operates manufacturing facilities serving customers in the Americas, Europe and Asia, and is an original equipment supplier to every major OEM in the world. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2004 VS. THREE MONTHS ENDED SEPTEMBER 30, 2003 Consolidated net sales for the third quarter ended September 30, 2004 totaled $839.8 million, a 15.8% increase over the third quarter of 2003. This increase occurred in a market where production was up slightly from the previous year's quarter. Production in North America was down 1.5%. Light vehicle production was up in both Europe and Asia. Net sales increased $24.2 million due to stronger currencies, primarily the Euro. Turbochargers and automatic transmissions are the products most affected by currency fluctuations in Europe and Asia. Without the currency impact, the increase in net sales would have been 12.5% due to strong demand for the Company's products in Europe and Asia. Gross profit and gross margin were $145.1 million and 17.3% for the third quarter 2004 as compared to $129.3 million and 17.8% for the third quarter 2003. Gross profit margins were impacted negatively by higher prices for commodities, including steel, copper and aluminum. The increase in commodity costs was approximately $12 million for the third quarter, of which steel was the single largest contributor. These higher commodity costs were offset by improved productivity on greater sales volume and by cost reductions in our operations. For the third quarter selling, general and administrative costs increased $4.7 million from $72.7 million to $77.4 million, but decreased as a percentage of sales from 10.0% to 9.2% of net sales. The majority of the increase $4.6 million was for research and development costs, which are included in selling, general and administrative expenses. Spending on research and development totaled $33.6 million, or 4.0% of net sales versus $29.0 million, or 4.0% of net sales for the third quarter of 2003. Third quarter interest expense and finance charges decreased $0.6 million from third quarter 2003 as a result of reduced debt levels, which more than offset year-over-year interest rate increases. Equity in affiliate earnings, which consist primarily of the Company's 50% share of NSK-Warner in Japan, was up $2.6 million in the third quarter of 2004 as compared to the third quarter of 2003. NSK-Warner realized both strong sales and profits in the third quarter from its operations. -19- The Company's provision for income taxes is based on estimated annual tax rates for the year applied to federal, state and foreign income. The effective rate for 2004 differed from the U.S. statutory rate primarily due to a) state income taxes, b) foreign rates which differ from those in the U.S. and c) realization of certain business tax credits, including foreign tax credits and research and development credits. The Company expects its effective tax rate for 2004 to be approximately 30.0%. This represents a 1.5% increase over last year due to changes in tax laws in some of the countries where the Company does business. Net income was $44.8 million for the third quarter, or $0.79 per diluted share, an increase of $0.14 over the previous year's third quarter. The increase from prior years third quarter was due to operations of $0.15 per share, favorable currency of $0.04 per share offset by an increase in effective tax rate change of $(0.03) per share and by a share dilution impact of $(0.02) per share. Shares outstanding increased due to shares issuable under the Executive Stock Performance Plan and contributions of Company stock to benefit plans. NINE MONTHS ENDED SEPTEMBER 30, 2004 VS. NINE MONTHS ENDED SEPTEMBER 30, 2003 Consolidated net sales in the first nine months of 2004 were $2,636.1 million as compared to $2,270.4 million in the first nine months of 2003, an increase of $365.7 million or 16.1%. This increase occurred in a market where production was up 4% from the previous year's nine months. Light vehicle production in North America and Europe was relatively flat. Light vehicle production was up in Asia. Net sales increased $85.8 million due to stronger currencies, primarily the Euro. Turbochargers and automatic transmissions are the products most affected by currency fluctuations in Europe and Asia. Without the currency impact, the increase in net sales would have been 12.3% due to the growing demand for our products in Europe and Asia. Gross profit and gross margin were $487.4 million and 18.5% in the first nine months of 2004 as compared to $427.6 million and 18.8% in the first nine months of 2003. Gross profit margins were impacted negatively by higher prices for commodities, including steel, copper and aluminum. The increases in commodity costs were approximately $20 million in the first nine months of 2004, of which steel was the single largest contributor. These higher commodity costs were offset by productivity gains due to higher sales volumes and cost reductions in our operations. Selling, general and administrative costs, including research and development costs, increased $26.5 million from $233.4 million to $259.9 million, but decreased as a percentage of sales from 10.3% to 9.9% of net sales. Spending on research and development, totaled $94.0 million, or 3.6% of net sales in the first nine months of 2004 as compared to $87.4 million, or 3.9% of net sales in the first nine months of 2003. Interest expense and finance charges decreased by $3.1 million from $25.8 million to $22.7 million in the first nine months of 2004 as compared to the first nine months of 2003. The interest expense decrease was a result of reduced debt levels which more than offset interest rate increases during the first nine months of 2004. At September 30, 2004, the amount of net debt with fixed interest rates was 55% of total net debt. -20- Equity in affiliate earnings, which consist primarily of the Company's 50% share of NSK-Warner in Japan, increased by $5.9 million from $15.3 million to $21.2 million. NSK-Warner realized both strong sales volume and profit gains from operations in the first nine months of 2004. The Company's provision for income taxes is based on estimated annual tax rates for the year applied to federal, state and foreign income. The effective rate for 2004 differed from the U.S. statutory rate primarily due to a) state income taxes, b) foreign rates which differ from those in the U.S. and c) realization of certain business tax credits, including foreign tax credits and research and development credits. The Company expects its effective tax rate for 2004 to be approximately 30.0%. This represents a 1.5% increase over last year due to changes in tax laws in some of the countries where the Company does business. Net income was $150.6 million, or $2.67 per diluted share, in the first nine months of 2004 as compared to $124.9 million, or $2.30 per diluted share in the first nine months of 2003, an increase of $0.37 per diluted share. The increase from the first nine months of 2003 was due to operations of $0.39 per share, favorable currency of $0.14 per share offset by an increase in effective tax rate change of $(0.06) per share and by a share dilution impact of $(0.10) per share. Shares outstanding increased due to shares issuable under the Executive Stock Performance Plan and contributions of Company stock to benefit plans. REPORTABLE OPERATING SEGMENTS The Company's products fall into two reportable operating segments: Drivetrain and Engine. The following tables present net sales and earnings before interest and income taxes (EBIT) by segment for the three and nine months ended September 30, 2004 and 2003 in millions of dollars.
Three Months Nine Months September 30, September 30, Net Sales 2004 2003 2004 2003 - ------------- -------- -------- -------- -------- Drivetrain $ 318.7 $ 284.3 $1,025.7 $ 915.3 Engine 532.7 451.4 1,649.4 1,388.8 Inter-segment eliminations (11.6) (10.5) (39.0) (33.7) -------- -------- -------- -------- Net sales $ 839.8 $ 725.2 $2,636.1 $2,270.4 ======== ======== ======== ========
Three Months Nine Months September 30, September 30, EBIT 2004 2003 2004 2003 - ------------ ------ ------ ------ ------ Drivetrain $ 24.4 $ 16.7 $ 78.9 $ 66.5 Engine 65.2 55.6 208.8 178.3 ------ ------ ------ ------ Segment EBIT $ 89.6 $ 72.3 $287.7 $244.8 ====== ====== ====== ======
THREE MONTHS ENDED SEPTEMBER 30, 2004 VS. THREE MONTHS ENDED SEPTEMBER 30, 2003 The Drivetrain segment sales increased $34.4 million, or 12.1% and EBIT increased $7.7 million, or 46.1% from the third quarter of 2003. The strong sales gain was a result of four-wheel drive transfer case programs with General Motors and Ford and steady demand for transmission components and systems, especially with -21- increased automatic transmission penetration in Europe. The EBIT margin increase was due primarily to the increase in sales and improved productivity, lower pension expense from increased pension funding in 2004 and a reduction of start up costs for new products that were expensed in the third quarter of 2003. The Engine segment sales increased $81.3 million, or 18.0% and EBIT increased $9.6 million, or 17.3% from third quarter of 2003. This business benefited from continued demand for the Company's turbochargers for European passenger cars and commercial vehicles. Sales of timing chains increased as well, particularly to our Asian customers. The EBIT margin was flat as the incremental profits of the increased sales volumes were offset by higher commodity prices, primarily steel. NINE MONTHS ENDED SEPTEMBER 30, 2004 VS. NINE MONTHS ENDED SEPTEMBER 30, 2003 The Drivetrain segment sales increased $110.4 million, or 12.1% and EBIT increased $12.4 million, or 18.8% from the first nine months of 2003. The strong sales gain was a result continued demand of four-wheel drive transfer case programs with General Motors and Ford and steady demand for transmission components and systems, especially with increased automatic transmission penetration in Europe. The EBIT margin increase was due primarily to the increase in sales and improved productivity, which offset higher commodity costs. The Engine segment sales increased $260.6 million, or 18.8% and EBIT increased $30.5 million, or 17.1% from the first nine months of 2003. This business benefited from continued demand for the Company's turbochargers for European passenger cars and commercial vehicles. Sales of timing chains increased as well, particularly to our Asian customers. The EBIT margin was flat as the incremental profits of the increased sales volumes were offset by higher commodity prices, primarily steel. OUTLOOK FOR THE REMAINDER OF 2004 For the remainder of 2004, the trends that are driving our growth are expected to continue. These trends include the growth of diesel engines in Europe, the popularity of cross-over vehicles in North America and the move to chain engine timing systems in both Europe and Asia. North American vehicle production is expected to be down year-over-year for the remainder of 2004 and into 2005. The Company continues to focus on its cost reduction efforts to offset the effects of commodity price increases. We anticipate commodity price increases will approach $40 million for 2004, of which we estimate steel to be $25 million. The Company maintains a positive long-term outlook for its business and is committed to ongoing strategic investments in capital and new product development to enhance its product leadership strategy. FINANCIAL CONDITION AND LIQUIDITY Net cash provided by operating activities increased $100.3 million from $220.4 million in 2003 to $320.7 million in 2004. The main factors driving this increase were higher net income and improved working capital management. The Company made a scheduled royalty payment of $14.2 million in the first quarter of 2004. Dividend receipts, net of withheld taxes from non-consolidated affiliates were $15.6 million in the first nine months of 2004 compared to $3.7 million for the -22- first nine months of 2003. Capital spending for the nine months was $126.7 million compared with $104.1 million last year. Selective capital spending remains an area of focus for the Company, both in order to support new business and for cost reductions and productivity improvements. The Company expects to spend $180 million to $190 million on capital in 2004, but this expectation is subject to ongoing review based on market conditions. As of September 30, 2004, debt decreased from year-end 2003 by $65.2 million, while cash and cash equivalents increased by $75.9 million. The debt reduction includes $61.0 million in principal payments, $1.0 million reduction in the value of our interest rate swaps and $3.2 million in foreign exchange translation adjustments. The Company paid dividends of $7.0 million and $4.9 million in the third quarter of 2004 and 2003, respectively. As of September 30, 2004 and December 31, 2003, the Company had sold $50.0 million of receivables under a Receivables Transfer Agreement for face value without recourse. From a credit quality perspective, we have an investment grade credit rating of A- from Standard & Poor's and Baa2 from Moody's. On August 30, 2004 Moody's placed its rating for the Company under review for potential upgrade. See Recent Developments section of Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of recent actions taken by each credit rating agency. Effective July 22, 2004 the Company established a new credit facility that provides for borrowings up to $600 million through July 2009. The new credit facility replaced the Company's existing $350 million facility. The Company believes that the combination of cash balances, cash flow from operations, available credit facilities and universal shelf registration will be sufficient to satisfy its cash needs for the current level of operations and planned operations for the remainder of 2004. The Company expects net cash flow to exceed $150 million in 2004. OTHER MATTERS LITIGATION The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency (EPA) and certain state environmental agencies and private parties as potentially responsible parties (PRPs) at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund) and equivalent state laws and, as such, may presently be liable for the cost of clean-up and other remedial activities at 41 such sites. Responsibility for clean-up and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation formula. Based on the information available to the Company, which in most cases, includes: an estimate of allocation of liability among PRPs; the probability that other -23- PRPs, many of whom are large solvent public companies, will fully pay the cost apportioned to them; currently available information from PRPs and/or federal or state environmental agencies concerning the scope of contamination and estimated remediation costs; remediation alternatives; estimated legal fees; and other factors, the Company has established a reserve for indicated environmental liabilities with a balance at September 30, 2004 of approximately $21.3 million. The Company expects this amount to be expended over the next three to five years. The Company believes that none of these matters, individually or in the aggregate, will have a material adverse effect on its financial condition or future operating results, generally either because estimates of the maximum potential liability at a site are not large or because liability will be shared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any such matter. In connection with the sale of Kuhlman Electric Corporation, the Company agreed to indemnify the buyer and Kuhlman Electric for certain environmental liabilities relating to the past operations of Kuhlman Electric. During 2000, Kuhlman Electric notified the Company that it discovered potential environmental contamination at its Crystal Springs, Mississippi plant while undertaking an expansion of the plant. The Company has been working with the Mississippi Department of Environmental Quality, the EPA and Kuhlman Electric to investigate the extent of and remediate the contamination. The investigation revealed the presence of Polychlorinated Biphenyls (PCBs) in portions of the soil at the plant and neighboring areas. Clean up began in 2000 and is continuing. Kuhlman Electric and others, including the Company, have been sued in numerous related lawsuits, in which multiple claimants allege personal injury and property damage. The first trial in these lawsuits is scheduled to begin in March 2005. The Company believes that the reserve for environmental liabilities and any insurance recoveries are adequate to cover any potential liability associated with environmental matters. However, due to the nature of environmental remediation, there can be no assurance that the actual amount of environmental liabilities will not exceed the amount reserved. NEW ACCOUNTING PRONOUNCEMENTS In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation (FIN) No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51", which was revised in December 2003. FIN No. 46R requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the entity that has the controlling financial interest. FIN No. 46R also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. For the Company, this Interpretation, as revised, was effective January 1, 2004. The Company has no variable interest entities required to be consolidated as a result of adopting FIN No. 46R, therefore, there was no impact on our Consolidated Financial Statements. In December 2003, the FASB issued a revised Statement of Financial Accounting Standards, (SFAS) No. 132, "Employer's Disclosures About Pensions and Other -24- Postretirement Benefits." SFAS No. 132 changes employers' disclosures about pension plans and other postretirement benefits and requires additional disclosures about assets, obligations, cash flows and net periodic benefit cost. The Statement is effective for annual and interim periods ended after December 15, 2003. The Company adopted SFAS No. 132 as of December 31, 2003, resulting in additional disclosures in the Company's annual and interim Consolidated Financial Statements. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") was enacted in the United States. The Act provides, among other things, expanded existing Medicare healthcare benefits to include an outpatient prescription drug benefit to Medicare eligible residents of the U.S. (Medicare Part D) beginning in 2006. Prescription drug coverage will be available to eligible individuals who enroll under the Part D plan. As an alternative, employers may provide drug coverage at least "actuarially equivalent to standard coverage" and receive-free federal subsidy equal to 28% of a portion of a Medicare beneficiary's drug costs for covered retirees who do not enroll in a Part D plan. In May 2004, the FASB issued Staff Position FAS No. 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," to provide guidance on accounting for effects of the Act. The Staff Position requires treating the effect of the employer subsidy on the accumulated post retirement benefit obligation (APBO) as an actuarial gain. The effect of the subsidy is to be reflected in the estimate of service cost in measuring the cost of benefits attributable to current service. The effects of plan amendments adopted subsequent to the Act to qualify plans as actuarially equivalent are to be treated as actuarial gains if the effect of the amendments reduces the APBO. The net effect on the APBO of any plan amendments that (a) reduce benefits under the plan and thus disqualify the benefits as actuarially equivalent and (b) eliminate the subsidy are to be accounted for as prior service cost. The effect of the adoption was a $6.8 million reduction of the Company's 2004 post-retirement benefits expense. RECENT DEVELOPMENTS A. PROPOSED ACQUISITION OF MAJORITY STAKE IN BERU AG On November 1, 2004, the Company announced that its wholly-owned German subsidiary, BorgWarner Germany GmbH ("BorgWarner Germany"), entered into a Sale and Purchase Agreement, dated October 30, 2004 (the "Sale and Purchase Agreement"), with CEP BE 00 Beteiligungs GmbH, Frau Ingelore Ruprecht, Wolfram Birkel, Elsa Birkel, Annegret Birkel, Christoph Birkel, Catharina Birkel, Klosterfeld Beteiligungen GmbH + Co. KG, and Meier-Birkel GmbH & Co. KG to purchase an aggregate of 6,221,170 shares or 62.21% of the outstanding shares of Beru AG, a German publicly-traded company ("Beru"), for Euro 59 per share. BorgWarner Germany also entered into an option agreement (the "Option Agreement") to acquire an additional 81,500 shares of Beru for Euro 59 per share from Annegret Birkel at any time after January 3, 2005 and prior to March 31, 2005. The completion of the transactions contemplated by the agreements is conditioned on obtaining regulatory approval and other customary conditions. Assuming regulatory approval, the closing is anticipated to occur around year- -25- end. On November 1, 2004, the Company also announced that BorgWarner Germany intends, as required by German law, to commence a tender offer in Germany (the "Tender Offer") to acquire the remaining shares of approximately 37% (or approximately 3.7 million shares) of the outstanding stock of Beru at a price of Euro 67.50 per share. The total transaction, assuming purchase of all the remaining outstanding shares of Beru in the Tender Offer, is valued at Euro 621 million (or approximately $764 million). The Company intends to initially fund the transaction with cash and funds available under its existing revolving credit facility. The Company intends to ultimately fund the transaction in a manner consistent with maintaining the Company's current investment grade capital structure. Beru is a leading global automotive supplier and manufacturer of diesel cold starting technology (glow plugs and instant starting systems); gasoline ignition technology (spark plugs and ignition coils); and electronic and sensor technology (tire pressure sensors, diesel cabin heaters and selected sensors.) The company's major customers include, among others, BMW, DCX, GM/Fiat, VW/ Audi, Ford, Porsche, PSA, Renault, Isuzu, Siemens VDO, Valeo, Deutz, and MAN. The company employs approximately 2,700 employees and reported 2004 fiscal year (ended March 31) revenues of (euro)354.5 million. B. ACTIONS OF CREDIT RATING AGENCIES Based on the proposed acquisition of a majority stake in Beru AG and the related tender offer for their remaining shares, on November 1, 2004 Standard & Poor's placed their long-term credit rating of A- for the Company on credit watch with negative implications. Standard & Poor's has committed to meet with Company management to review the Beru financing and integration plans and the near-term outlook for the Company before making a ratings decision. Standard & Poor's indicated that the impact on the ratings could be modest, depending on how the deal is financed. On November 2, 2004 Moody's reiterated their long-term credit rating of Baa2 on the Company and will continue to review the Company for potential upgrade. C. DIVIDENDS On October 20, 2004, the Company declared a $0.125 per share dividend to be paid on November 15, 2004 to stockholders of record as of November 1, 2004. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS Statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management's current expectations, estimates and projections. Words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," -26- variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond the control of the Company, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. Such risks and uncertainties include: fluctuations in domestic or foreign vehicle production, the continued use of outside suppliers, fluctuations in demand for vehicles containing the Company's products, general economic conditions, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission, including the Cautionary Statements filed as Exhibit 99.1 to the Form 10-K for the fiscal year ended December 31, 2003. The Company does not undertake any obligation to update any forward-looking statements. Item 3. Quantitative and Qualitative Disclosure About Market Risks There have been no material changes to our exposures to market risk since December 31, 2003. Item 4. Controls and Procedures The Company's management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There have been no changes in internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are likely to materially affect our internal controls over financial reporting. -27- PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is party to various judicial and administrative proceedings, which are considered to be routine and incidental to its business including those described in the MD&A under Other Matters Litigation. Management does not believe that the results of any of these proceedings are reasonably likely to have a material adverse effect on the Company's liquidity, financial condition or results of operations. Like many other industrial companies, the Company continues to be named as one of the defendants in asbestos-related personal injury actions. Management believes that the Company's involvement is limited to claims that relate to a few types of automotive friction products, manufactured many years ago, that contained encapsulated asbestos. The Company aggressively defends against these lawsuits and has been successful in obtaining dismissal of many cases without any payment whatsoever, or in many cases, for nominal or minimal settlement payments. The Company has significant insurance coverage with solvent carriers. During the quarter, the Company and its first layer of excess insurers negotiated a cost sharing agreement among themselves pursuant to which asbestos related litigation continues to be funded. A declaratory judgment action was filed in January 2004 in the Circuit Court of Cook County, Illinois by Continental Casualty Company and related companies ("CNA") against the Company and certain of its other historical general liability insurers. CNA provided the Company with primary and excess insurance, and, in conjunction with another primary insurer, is currently defending and indemnifying the Company in all of its pending asbestos-related claims. The lawsuit seeks to determine the extent of insurance coverage available to the Company including whether the available limits exhaust on a "per occurrence" or an aggregate basis, and to determine how the applicable coverage responsibilities should be apportioned. In addition to the primary insurance available for these claims, the Company has substantial historical excess and umbrella insurance available for any anticipated asbestos-related liabilities. Although it is impossible to predict the outcome of pending or future claims, in light of the nature of the products, our experience in defending and resolving claims in the past, our insurance coverage and existing reserves, management does not believe that asbestos-related claims will have a material adverse effect on the Company's liquidity, financial condition or results of operations. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 10.1 Credit Agreement dated as of July 22, 2004 among BorgWarner Inc., as Borrower, the Lenders Party Hereto, JPMorgan Chase Bank, Administrative Agent, Bank of America, N.A. as Syndication Agent and Calyon New York Branch -28- Citibank, N.A. Deutsche Bank Securities Inc., as Documentation Agents. Exhibit 10.2 BorgWarner Inc. 2004 Deferred Compensation Plan Exhibit 10.3 Form of BorgWarner Inc. 2004 Stock Incentive Plan, Non-Qualified Stock Option Award Agreement Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer Exhibit 32 Section 1350 Certifications (b) Reports on Form 8-K On July 23, 2004, the Company filed a report on Form 8-K, attaching a copy of a press release announcing the appointment of Cynthia Niekamp as President and General Manager of BorgWarner TorqTransfer Systems, Drivetrain Group and Vice President of BorgWarner Inc. On July 29, 2004 the Company filed a report on Form 8-K, furnishing a copy of a news release relating to earnings expectations for the second quarter of 2004 and full year 2004. -29- 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, hereunto duly authorized. BORGWARNER INC. (Registrant) By (Signature) William C. Cline Vice President and Controller (Principal Accounting Officer) Date: November 9, 2004 -30- EX-10.1 2 creda.txt EXECUTION COPY CREDIT AGREEMENT dated as of July 22, 2004 among BORGWARNER INC., as Borrower The Lenders Party Hereto JPMORGAN CHASE BANK, Administrative Agent BANK OF AMERICA, N.A., as Syndication Agent and CALYON NEW YORK BRANCH CITIBANK, N.A. DEUTSCHE BANK SECURITIES INC., as Documentation Agents $600,000,000 REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY J.P. MORGAN SECURITIES INC. and BANC OF AMERICA SECURITIES LLC, as Joint Lead Arrangers and Joint Book Managers TABLE OF CONTENTS Page ARTICLE I Definitions 1 SECTION 1.1. Defined Terms 1 SECTION 1.2. Classification of Loans and Borrowings 20 SECTION 1.3. Terms Generally 20 SECTION 1.4. Accounting Terms; GAAP 20 SECTION 1.5. Change of Currency. 20 ARTICLE II The Credits 21 SECTION 2.1. Commitments 21 SECTION 2.2. Loans and Borrowings 22 SECTION 2.3. Requests for Revolving Borrowings 23 SECTION 2.4. Competitive Bid Procedure 24 SECTION 2.5. Swingline Loans 26 SECTION 2.6. Letters of Credit 28 SECTION 2.7. Extension of Maturity Date 32 SECTION 2.8. Funding of Borrowings 34 SECTION 2.9. Interest Elections 34 SECTION 2.10. Termination and Reduction of Commitments 36 SECTION 2.11. Repayment of Loans; Evidence of Debt 37 SECTION 2.12. Prepayment of Loans 38 SECTION 2.13. Fees 39 SECTION 2.14. Interest 40 SECTION 2.15. Alternate Rate of Interest 41 SECTION 2.16. Increased Costs 42 SECTION 2.17. Break Funding Payments 43 SECTION 2.18. Taxes 44 SECTION 2.19. Payments Generally; Pro Rata Treatment; Sharing of Set-offs 45 SECTION 2.20. Mitigation Obligations; Replacement of Lenders 47 ARTICLE III Representations and Warranties 47 SECTION 3.1. Organization; Powers 48 SECTION 3.2. Authorization; Enforceability 48 SECTION 3.3. Governmental Approvals; No Conflicts 48 SECTION 3.4. Financial Condition; No Material Adverse Effect 48 SECTION 3.5. Properties 49 SECTION 3.6. Litigation and Environmental Matters 49 SECTION 3.7. Compliance with Laws and Agreements 49 SECTION 3.8. Investment and Holding Company Status 49 SECTION 3.9. Taxes 50 SECTION 3.10. ERISA 50 SECTION 3.11. Federal Regulations 50 SECTION 3.12. Disclosure 50 ARTICLE IV Conditions 50 SECTION 4.1. Effective Date 51 SECTION 4.2. Each Credit Event 52 ARTICLE V Affirmative Covenants 52 SECTION 5.1. Financial Statements and Other Information 52 SECTION 5.2. Notices of Material Events 53 SECTION 5.3. Existence; Conduct of Business 54 SECTION 5.4. Payment of Obligations 54 SECTION 5.5. Maintenance of Properties; Insurance 54 SECTION 5.6. Books and Records; Inspection Rights 54 SECTION 5.7. Compliance with Laws 55 SECTION 5.8. Use of Proceeds and Letters of Credit 55 ARTICLE VI Negative Covenants 55 SECTION 6.1. Financial Covenants 55 SECTION 6.2. Liens 55 SECTION 6.3. Fundamental Changes 56 SECTION 6.4. Third Party Guarantees 57 ARTICLE VII Events of Default 57 ARTICLE VIII The Administrative Agent 59 ARTICLE IX Miscellaneous 61 SECTION 9.1. Notices 61 SECTION 9.2. Waivers; Amendments 62 SECTION 9.3. Expenses; Indemnity; Damage Waiver 63 SECTION 9.4. Successors and Assigns 64 SECTION 9.5. Survival 66 SECTION 9.6. Counterparts; Integration; Effectiveness 66 SECTION 9.7. Severability 67 SECTION 9.8. Right of Setoff 67 SECTION 9.9. Governing Law; Jurisdiction; Consent to Service of Process 67 SECTION 9.10. WAIVER OF JURY TRIAL 68 SECTION 9.11. Headings SECTION 9.12. Confidentiality 68 SECTION 9.13. Judgment Currency 69 SECTION 9.14. Loan Conversion/Participation 69 SECTION 9.15. USA PATRIOT Act 71 SCHEDULES: Schedule 2.1 Commitments Schedule 3.6 Disclosed Matters Schedule 6.2 Existing Liens EXHIBITS: Exhibit A Form of Assignment and Acceptance Exhibit B Form of Opinion of Borrower's Counsel CREDIT AGREEMENT, dated as of July 22, 2004, among BORGWARNER INC., a Delaware corporation (the "Borrower "), the several banks and other financial institutions from time to time parties hereto (the "Lenders"), CALYON NEW YORK BRANCH, CITIBANK, N.A. and DEUTSCHE BANK SECURITIES INC., as documentation agents (in such capacity, the "Documentation Agents"), BANK OF AMERICA, N.A., as syndication agent (in such capacity, the "Syndication Agent") and JPMORGAN CHASE BANK, as administrative agent for the Lenders (in such capacity, the "Administrative Agent").. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.1.__ Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Adjusted Eurocurrency Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the Eurocurrency Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Adjusted Revolving Credit Exposure" shall mean, with respect to each Lender, the Revolving Credit Exposure of such Lender, plus the amount of any participating interests purchased by such Lender pursuant to Section 9.14, minus the amount of any participating interests sold by such Lender pursuant to Section 9.14. "Administrative Agent " has the meaning assigned to such term in the preamble. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate " means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agents " means the collective reference to the Administrative Agent, the Syndication Agent and the Documentation Agents. "Agreement " means this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Alternate Base Rate " means, for any day, a rate per annum equal to the higher of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Alternative Currency " means Sterling, Yen or Euros. "Alternative Currency Loan " means a Revolving Loan that is a Eurocurrency Rate Loan and that is made in an Alternative Currency pursuant to the applicable Borrowing Request. "Alternative Currency Sublimit " means, with respect to any Alternative Currency, the Dollar Amount of such Alternative Currency set forth below: Currency Alternative Currency Sublimit Sterling $ 90,000,000 Yen $ 300,000,000 Euros $ 570,000,000 "Applicable Percentage " means, with respect to any Lender under any Revolving Facility, the percentage of the total Commitments represented by such Lender's Commitment under such Facility. If the Commitments under such Facility have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments under such Facility most recently in effect, giving effect to any assignments. "Applicable Rate " means, for any day, with respect to any Eurocurrency Revolving Loan, or with respect to the facility fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "Eurocurrency Margin" or "Facility Fee Rate", as the case may be, based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt: Index Debt Ratings: Eurocurrency Margin Facility Fee Rate Category 1 0.170% 0.080% A/A2 or higher Category 2 0.260% 0.090% A-/A3 Category 3 0.390% 0.110% BBB+/Baa1 Category 4 0.610% 0.140% BBB/Baa2 Category 5 0.700% 0.175% BBB-/Baa3 or lower For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 5; (ii) the rating of Index Debt on any day shall be deemed to be the rating in effect at the close of business on such day; (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the higher of the two ratings (e.g., A-/Baa1 results in Category 2 status) unless one of the two ratings is two or more Categories lower than the other, in which case the Applicable Rate shall be determined by reference to the Category next below that of the higher of the two ratings (e.g., A-/Baa2 results in Category 3 status); and (iv) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Applicable Time " means, with respect to any Borrowings and payments in any Alternative Currency the local time in the place of settlement for such Alternative Currency, as may be reasonably determined by the Administrative Agent to be necessary for timely settlement on the relevant date in accordance with normal banking procedures in the place of payment. "Assignment and Acceptance " means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.4), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Available Dollar Commitment " means at any date of determination with respect to any Dollar Lender, an amount in Dollars equal to the excess, if any, of (a) the amount of such Dollar Lender's Dollar Commitment in effect on such date over (b) the Revolving Credit Exposure of such Dollar Lender on such date. "Availability Period " means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. "Board " means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower " has the meaning assigned to such term in the preamble. "Borrowing " means (a) Revolving Loans of the same Type and under the same Facility, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, (b) a Competitive Loan or group of Competitive Loans of the same Type made on the same date and as to which a single Interest Period is in effect or (c) a Swingline Loan. "Borrowing Request " means a request by the Borrower for a Revolving Borrowing in accordance with Section 2.3. "Business Day " means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided, however, that (i) when used in connection with a Eurocurrency Loan (other than a Eurocurrency Loan denominated in Euro), the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market (or other interbank market selected by the Administrative Agent where its eurocurrency operation for the applicable currency are being conducted) or in the city which is the principal financial center of the country of issuance of the applicable Alternative Currency and (ii) when used in connection with a Loan denominated in Euro "Business Day" shall also exclude any day which is not a TARGET Day. "Capital Lease Obligations " of any Person means the obligations of such Person to pay rent or 2other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock " means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Change in Control " means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group. "Change in Law " means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.16(b), by any lending office of such Lender or by such Lender's or the Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Class ", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Dollar Revolving Loans, Euro Revolving Loans, Sterling Revolving Loans, Yen Revolving Loans, Competitive Loans or Swingline Loans. "Code " means the Internal Revenue Code of 1986, as amended from time to time. "Committed Exposure Percentage " shall mean, on any date with respect to any Lender, the percentage which the Adjusted Revolving Credit Exposure of such Lender constitutes of the Adjusted Revolving Credit Exposures of all Lenders. "Commitments " means, the collective reference to the Dollar Commitments, the Euro Commitments, the Sterling Commitments and the Yen Commitments. The initial aggregate amount of the Commitments is $600,000,000. "Competitive Bid " means an offer by a Lender to make a Competitive Loan in accordance with Section 2.4. "Competitive Bid Rate " means, with respect to any Competitive Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid. "Competitive Bid Request " means a request by the Borrower for Competitive Bids in accordance with Section 2.4. "Competitive Loan " means a Loan made pursuant to Section 2.4. "Consolidated EBITDA " means, for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring non-cash expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the ordinary course of business), and (f) minority interest charges and any other non-cash charges, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income, (b) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (c) minority interest credits and any other non-cash income (except for all amounts that would, in conformity with GAAP, be set forth opposite the caption "equity in affiliate earnings and other income" (or any like caption) on a consolidated income statement of the Borrower and its Subsidiaries), all as determined on a consolidated basis. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a "Reference Period") pursuant to any determination of the Leverage Ratio, (i) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period and (ii) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. As used in this definition, "Material Acquisition" means any acquisition of property or series of related acquisitions of property that (a) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person and (b) involves the payment of consideration by the Borrower and its Subsidiaries in excess of $50,000,000; and "Material Disposition" means any disposition of property or series of related dispositions of property that yields gross proceeds to the Borrower or any of its Subsidiaries in excess of $50,000,000. "Consolidated Net Income " means, for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Consolidated Net Worth " means, at any date, all amounts that would, in conformity with GAAP, be set forth opposite the captions "minority interest" (or any like caption) and "total stockholders' equity" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date. "Consolidated Total Assets " means at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date. "Consolidated Total Debt " means, at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP. "Continuing Lenders" has the meaning assigned to such term in Section 2.7(a). "Control " means the possession, directly or indirectl8y, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Conversion Date" shall mean any date on which either (a) an Event of Default under paragraph (h) or (i) of Article VII has occurred with respect to the Borrower or (b) the Commitments shall have been terminated prior to the Maturity Date and/or the Loans shall have been declared immediately due and payable, in either case pursuant to Article VII. "Conversion Sharing Percentage" means on any date with respect to any Lender and any Revolving Loans of such Lender outstanding in any currency other than Dollars, the percentage of such Revolving Loans such that, after giving effect to the conversion of such Revolving Loans to Dollars and the purchase and sale by such Lender of participating interests as contemplated by Section 9.14, the Committed Exposure Percentage of such Lender will equal such Lender's Applicable Percentage under the Dollar Facility on such date (calculated immediately prior to giving effect to any termination or expiration of the Commitments on the Conversion Date). "Converted Loans" shall have the meaning set forth in Section 9.14. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Disclosed Matters" means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.6. "Documentation Agents" has the meaning assigned to such term in the preamble. "Dollar Amount" means, at any time: (a) with respect to any Loan denominated in Dollars (including, with respect to any Swingline Loan, any funded participation therein), the principal amount thereof then outstanding (or in which such participation is held); (b) with respect to any Alternative Currency Loan, the principal amount thereof then outstanding in the relevant Alternative Currency, converted to Dollars at the Exchange Rate determined by the Administrative Agent on the date of determination of a Dollar Amount; and (c) with respect to any LC Exposure (or any risk participation therein), the amount thereof. "Dollar Commitment " means, with respect to each Lender, the commitment of such Lender to make Dollar Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.10, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.4 or (c) increased from time to time pursuant to Section 2.1(e). The initial amount of each Lender's Dollar Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Dollar Commitment, as applicable. "Dollar Facility" shall have the meaning set forth in the definition of "Facility ". "Dollar Lender" means each Lender holding a Dollar Commitment. "Dollar Revolving Loan" mean a Revolving Loan made pursuant to Section 2.1(a). "Dollars" or "$" refers to lawful money of the United States of America. "Domestic Subsidiary" means any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States. "Effective Date" means the date on which the conditions specified in Section 4.1 are satisfied (or waived in accordance with Section 9.2). "EMU" means the economic and monetary union in accordance with the Treaty of Rome 1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998. "EMU Legislation" means the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency. "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event ", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Euro " and "EUR" means the lawful currency of the Participating Member States introduced in accordance with EMU Legislation. "Euro Commitment" means, with respect to each Lender, the commitment of such Lender to make Euro Revolving Loans, as such commitment may be (a) reduced from time to time pursuant to Section 2.10, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.4 or (c) increased from time to time pursuant to Section 2.1(e). The initial amount of each Lender's Euro Commitment is set forth on Schedule 2.1, or in th Assignment and Acceptance pursuant to which such Lender shall have assumed its Euro Commitment, as applicable. "Euro Facility" shall have the meaning set forth in the definition of "Facility". The Euro Facility shall be a subfacility of the Dollar Facility. "Euro Lender" means each Lender holding a Euro Commitment. "Euro Revolving Loan" mean a Revolving Loan made pursuant to Section 2.1(b). "Eurocurrency" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted Eurocurrency Rate (or, in the case of a Competitive Loan, the Eurocurrency Rate). "Eurocurrency Rate" means, for any Interest Period with respect to any Eurocurrency Rate Loan: (a) except with respect to Eurocurrency Rate Loans denominated in Sterling, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that is quoted on the Reuters Telerate screen for deposits in Dollars or the relevant Alternative Currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m., London time, two (2) Business Days (or, in the case of Euros, TARGET Days) prior to the first day of such Interest Period, or (b) except with respect to Eurocurrency Rate Loans denominated in Sterling, in the event that such rate does not appear on the Reuters Telerate screen (or otherwise on such screen), the "Eurocurrency Rate" shall be determined by reference to such other comparable publicly available service for displaying eurocurrency rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered deposits in the applicable currency at or about 11:00 a.m., London time, two Business Days (or, in the case of Euros, two TARGET Days) prior to the beginning of such Interest Period in the interbank eurocurrency market where its eurocurrency and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein; or (c) with respect to any Eurocurrency Rate Loan denominated in Sterling, the rate at which the Administrative Agent is offered deposits in Sterling at or about 11:00 a.m., London time, two Business Days prior to the beginning of such Interest Period in the interbank eurocurrency market where its eurocurrency and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. "Eurocurrency Rate Loan" means a Loan, whether denominated in Dollars or in an Alternative Currency, that bears interest at a rate based on the Eurocurrency Rate. "Event of Default" has the meaning assigned to such term in Article VII. "Exchange Rate" shall mean, with respect to any Alternative Currency on a particular date, the rate at which such Alternative Currency may be exchanged into Dollars, as set forth on such date on the applicable Reuters currency page with respect to such Alternative Currency. In the event that such rate does not appear on the applicable Reuters currency page, the Exchange Rate with respect to such Alternative Currency shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, such Exchange Rate shall instead be JPMorgan Chase Bank's spot rate of exchange in the London interbank or other market where its foreign currency exchange operations in respect of such Alternative Currency are then being conducted, at or about 10:00 a.m., local time, at such date for the purchase of Dollars with such Alternative Currency for delivery two Business Days later; provided, however, that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.20(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender's failure to comply with Section 2.18(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section ""2.18(a). "Existing Credit Agreement" means the Credit Agreement, dated as of July 21, 2000 (as the same may be amended, supplemented or otherwise modified from time to time), among the Borrower, the banks and other financial institutions from time to time parties thereto, JPMorgan Chase Bank (formerly, The Chase Manhattan Bank), as administrative agent, Bank of America, N.A., as syndication agent, and Bank One, N.A., as documentation agent. "Extended Maturity Date" has the meaning assigned to such term in Section 2.7(a). "Extension Acceptance Notice" has the meaning assigned to such term in Section 2.7(a). "Extension Date" has the meaning assigned to such term in Section 2.7(a). "Extension Notice" has the meaning assigned to such term in Section 2.7(a). "Facility " means any of (a) the credit facility constituted by the Dollar Commitments and the extensions of credit thereunder (the "Dollar Facility"), (b) the credit facility constituted by the Euro Commitments and the extensions of credit thereunder (the "Euro Facility"), (c) the credit facility constituted by the Sterling Commitments and the extensions of credit thereunder (the "Sterling Facility "), (d) the credit facility constituted by the Yen Commitments and the extensions of credit thereunder (the "Yen Facility") and (e) the credit facility constituted by the Competitive Bids and the extensions of credit thereunder (the "Competitive Bid Facility"). "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding 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 (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or assistant treasurer of the Borrower. "Fixed Rate" means, with respect to any Competitive Loan (other than a Eurocurrency Competitive Loan), the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid. "Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed Rate. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Foreign Subsidiary" means any Subsidiary of the Borrower that is not a Domestic Subsidiary. "GAAP" means generally accepted accounting principles in the United States of America. "Governmental Authority " means any government or nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor ") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor ") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Indebtedness"of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Index Debt" means (i) senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person or subject to any other credit enhancement or (ii) if no indebtedness of the type described in clause (i) is outstanding, all senior, unsecured, long-term indebtedness of the Borrower (that is not guaranteed by any other Person or subject to any other credit enhancement) registered under an effective shelf registration under Rule 415 of the Securities Act of 1933, as amended. "Interest Election Request" means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.9. "Interest Payment Date" means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days' duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing and (d) with respect to any Swingline Loan, the day that such Loan is required to be repaid. "Interest Period" means (a) with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect, and (b) with respect to any Fixed Rate Borrowing, the period (which shall not be less than 15 days or more than 180 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurocurrency Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Issuing Bank" means JPMorgan Chase Bank or any of its Affiliates, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.6(i). "Joint Lead Arrangers" means J.P. Morgan Securities Inc. and Banc of America Securities LLC, as joint lead arrangers and joint book managers for this Agreement. "LC Disbursement" means a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time. "Lenders" means the Persons listed on Schedule 2.1 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. Unless the context otherwise requires, the term "Lenders" includes the Swingline Lender. "Letter of Credit" means any letter of credit issued pursuant to this Agreement. Letters of Credit shall be a subfacility of the Dollar Facility. "Leverage Ratio" means, as at the last day of any period, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Loans to be Converted" shall have the meaning set forth in Section 9.14(a). "Margin" means, with respect to any Competitive Loan bearing interest at a rate based on the Eurocurrency Rate, the marginal rate of interest, if any, to be added to or subtracted from the Eurocurrency Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or (c) the rights of or benefits available to the Lenders under this Agreement. "Material Indebtedness" means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $50,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Maturity Date" means July 22, 2009, as such date may be extended with respect to any particular Lender pursuant to Section 2.7. "Moodys" means Moody's Investors Service, Inc. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means in connection with any issuance or sale of any common equity, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. "Non-Extending Lenders" has the meaning assigned to such term in Section 2.7(a). "Notice Date" has the meaning assigned to such term in Section 2.7(a). "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Overnight Rate" means, for any day, (a) with respect to any amount denominated in Dollars, the Federal Funds Effective Rate, and (b) with respect to any amount denominated in an Alternative Currency, the rate of interest per annum at which overnight deposits in the applicable Alternative Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by a branch or Affiliate of JPMorgan Chase Bank in the applicable offshore interbank market for such currency to major banks in such interbank market. "Participating Member State" means any member state of the EMU which has the Euro as its lawful currency. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Encumbrances" means: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of Foreign Subsidiaries, generally accepted accounting principles in effect from time to time in their respective jurisdictions of incorporation; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 60 days or are being contested in compliance with Section 5.4; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; and (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Receivables Facility" means receivables financings of the Borrower and its Subsidiaries in an aggregate principal amount not to exceed $200,000,000 at any one time outstanding for the Borrower and the Domestic Subsidiaries, $200,000,000 at any one time outstanding for the Foreign Subsidiaries, or $300,000,000 at any one time outstanding for the Borrower and its Subsidiaries, which receivables financings shall be upon terms and subject to conditions reasonably satisfactory to the Required Lenders, but in any event no less restrictive to the Borrower and its Subsidiaries than those for any such receivables financings in effect on the date hereof. "Register" has the meaning set forth in Section 9.4. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. With respect to each Lender (other than the Administrative Agent) and for the purpose of Section 9.3, it is hereby understood that such Lender's "agents" (as such term is used in the preceding sentence) shall not include the Administrative Agent or agents of the Administrative Agent. "Required Lenders" means, at any time, Lenders having Dollar Commitments representing more than 50% of the total Dollar Commitments at such time; provided that, for purposes of declaring the Loans to be due and payable pursuant to Article VII, and for all purposes after the Loans become due and payable pursuant to Article VII or the Dollar Commitments expire or terminate, "Required Lenders" shall mean Lenders having Revolving Credit Exposures representing more than 50% of the total Revolving Credit Exposures and the outstanding Competitive Loans of the Lenders shall be included in their respective Revolving Credit Exposures in determining the Required Lenders; provided that for purposes of this definition the Revolving Credit Exposure of each Lender shall be adjusted up or down so as to give effect to any participations purchased or sold pursuant to Section 9.14. "Revolving Credit Exposure" means, with respect to any Lender at any time, the Dollar Amount of the sum of the outstanding principal amount of such Lender's Revolving Loans and its LC Exposure and Swingline Exposure at such time. "Revolving Facility" means any of the Dollar Facility, the Euro Facility, the Sterling Facility or the Yen Facility. "Revolving Loan" means a Loan made pursuant to Section 2.3. "Same Day Funds" means (a) with respect to disbursements and payments in Dollars, immediately available funds, and (b) with respect to disbursements and payments in an Alternative Currency, same day or other funds as may be determined by the Administrative Agent, to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Alternative Currency. "S&P" means Standard & Poor's Ratings Services, a division of the McGraw Hill Companies, Inc. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Sterling " and "Pound" means the lawful currency of the United Kingdom. "Sterling Commitment" means, with respect to each Lender, the commitment of such Lender to make Sterling Revolving Loans, as such commitment may be (a) reduced from time to time pursuant to Section 2.10, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.4 or (c) increased from time to time pursuant to Section 2.1(e). The initial amount of each Lender's Sterling Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Sterling Commitment, as applicable. "Sterling Facility" shall have the meaning set forth in the definition of "Facility". The Sterling Facility shall be a subfacility of the Dollar Facility. "Sterling Lender" means each Lender holding a Sterling Commitment. "Sterling Revolving Loan" mean a Revolving Loan made pursuant to Section 2.1(c). "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any subsidiary of the Borrower. "Swingline Exposure" means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time. "Swingline Lender" means JPMorgan Chase Bank, in its capacity as lender of Swingline Loans hereunder. "Swingline Loan" means a Loan made pursuant to Section 2.5. Swingline Loans shall be a subfacility of the Dollar Facility. "Swingline Rate" means, for any day, with respect to any Swingline Rate Loan, the rate per annum quoted by the Swingline Lender to the Borrower in accordance with Section 2.5(b) as the rate at which the Swingline Lender is willing to make such Loan. "Swingline Rate Loans" means the Loans the rate of interest applicable to which is based upon the Swingline Rate. "Syndication Agent" has the meaning assigned to such term in the preamble. "TARGET Day" means any day on which the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) payment system (or if such payment system ceases to be operative, such other payment system (if any) determined by the Administrative Agent to be a suitable replacement) is open for the settlement of payments in Euro. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted Eurocurrency Rate, the Alternate Base Rate or, in the case of a Competitive Loan or Borrowing, the Eurocurrency Rate or a Fixed Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. "Yen" and "Y " means the lawful currency of Japan. "Yen Commitment" means, with respect to each Lender, the commitment of such Lender to make Yen Revolving Loans, as such commitment may be (a) reduced from time to time pursuant to Section 2.10, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.4 or (c) increased from time to time pursuant to Section 2.1(e). The initial amount of each Lender's Yen Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Yen Commitment, as applicable. "Yen Facility" shall have the meaning set forth in the definition of "Facility". The Yen Facility shall be a subfacility of the Dollar Facility. "Yen Lender" means each Lender holding a Yen Commitment. "Yen Revolving Loan" means a Revolving Loan made pursuant to Section 2.1(d). SECTION 1.2.__ Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Dollar Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and6 Type (e.g., a "Dollar Eurocurrency Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Dollar Revolving Borrowing") or by Type (e.g., a "Eurocurrency Borrowing") or by Class and Type (e.g., a "Dollar Eurocurrency Revolving Borrowing "). SECTION 1.3.__ Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.4.__ Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.5.__ Change of Currency. (a) In the event that the United Kingdom adopts the Euro as its lawful currency after the date hereof, immediately prior to the effective time of such adoption the Sterling Commitments shall terminate and all Sterling Revolving Loans and accrued interest thereon shall be paid in full. (b) Each provision of this Agreement also shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify after consultation with the Borrower to be appropriate to reflect a change in currency of any other country and any relevant market conventions or practices relating to such change in currency. ARTICLE II The Credits SECTION 2.1._Commitments (a) Subject to the terms and conditions set forth herein, each Dollar Lender agrees to make Revolving Loans to the Borrower denominated in Dollars (each such Loan, a "Dollar Revolving Loan") from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender's Revolving Credit Exposure under the Dollar Commitments exceeding such Lender's Dollar Commitment or (ii) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Dollar Revolving Loans. (b) Subject to the terms and conditions set forth herein, each Euro Lender agrees to make Revolving Loans to the Borrower denominated in Euros (each such Loan, a "Euro Revolving Loan") from time to time during the Availability Period in an aggregate principal amount that will not result in (i) the Dollar Amount of such Lender's Euro Revolving Loans exceeding such Lender's Euro Commitment, (ii) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Dollar Commitments or (iii) the Dollar Amount of Euro Revolving Loans exceeding the applicable Alternative Currency Sublimit. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Euro Revolving Loans. (c) Subject to the terms and conditions set forth herein, each Sterling Lender agrees to make Revolving Loans to the Borrower denominated in Sterling (each such Loan, a "Sterling Revolving Loan") from time to time during the Availability Period in an aggregate principal amount that will not result in (i) the Dollar Amount of such Lender's Sterling Revolving Loans exceeding such Lender's Sterling Commitment, (ii) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Dollar Commitments or (iii) the Dollar Amount of Sterling Revolving Loans exceeding the applicable Alternative Currency Sublimit. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Sterling Revolving Loans. (d) Subject to the terms and conditions set forth herein, each Yen Lender agrees to make Revolving Loans to the Borrower denominated in Yen (each such loan, a "Yen Revolving Loan") from time to time during the Availability Period in an aggregate principal amount that will not result in (i) the Dollar Amount of such Lender's Yen Revolving Loans exceeding such Lender's Yen Commitment, (ii) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Dollar Commitments or (iii) the Dollar Amount of Yen Revolving Loans exceeding the applicable Alternative Currency Sublimit. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Yen Revolving Loans. (e) The Borrower may, from time to time, elect to increase the Dollar Commitments hereunder on a non-pro rata basis in an aggregate amount up to $200,000,000; provided that (i) no Default or Event of Default has occurred and is continuing, (ii) each Lender which provides any portion of such increase (an "Increasing Lender") must be reasonably satisfactory to the Administrative Agent, (iii) no Lender shall have Commitments in excess of 20% of the total Commitments, unless approved by the Borrower and the Administrative Agent, and (iv) no Lender shall be obligated to increase its Commitment pursuant to such election. Each Increasing Lender may specify that its increase in Commitments pursuant to this paragraph shall also apply to the Euro Facility, the Sterling Facility and/or the Yen Facility, and such respective Facilities shall be increased by the amount(s) so specified. (f) Notwithstanding any other provision of this Agreement to the contrary: (i) The Lenders shall not be required to make any Revolving Loans or Swingline Loans hereunder or issue any Letter of Credit if, after giving effect thereto, the Revolving Credit Exposure of any Dollar Lender would exceed such Dollar Lender's Dollar Commitment (unless such Dollar Lender consents thereto); and (ii) At the election of the Borrower and the Administrative Agent, Dollar Revolving Loans shall be made on the ratable basis of Available Dollar Commitments (rather than on the basis of Dollar Commitments) of the Dollar Lenders in the event that the Dollar Lenders have disproportionate commitments to the Euro Facility, the Sterling Facility or the Yen Facility. SECTION 2.2.__ Loans and Borrowings. (a) Each Revolving Loan under a Facility shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments under such Facility, subject to Section 2.1(f). Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.4. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.15, (i) each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith, (ii) each Competitive Loan shall be comprised entirely of Eurocurrency Loans or Fixed Rate Loans as the Borrower may request in accordance herewith and (iii) each Swingline Loan shall be an ABR Loan or a Swingline Rate Loan. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (or comparable amounts determined by the Administrative Agent in the case of Alternative Currency). At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000; provided that an ABR Revolving Dollar Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Dollar Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.6(e). Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $500,000. Notwithstanding anything herein to the contrary, any borrowing of Revolving Loans to be used solely to pay the aggregate amount of Swingline Loans then outstanding may be in the aggregate principal amount of such Swingline Loans. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 15 Eurocurrency Revolving Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.3.__ Requests for Revolving Borrowings. To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 12:00 noon New York City time (or 3:00 p.m. London, England time in the case of any Borrowing denominated in an Alternative Currency), three Business Days before the date of the proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, on the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.6(e) may be given not later than 1:00 p.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy (or transmitted by electronic communication, if arrangements for doing so have been approved by the Administrative Agent) to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; (iv) the currency in which such Borrowing is to be denominated and the Facility under which such Borrowing is to be made; (v) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.8. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. If no currency or Facility is specified, the requested Borrowing shall be in Dollars under the Dollar Facility. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. In making any determination of the Dollar Amount for purposes of calculating the amount of Loans to be borrowed from the respective Lenders on any date, the Administrative Agent shall use the relevant Exchange Rate in effect on the date on which the Borrower delivers a borrowing notice for such Loans pursuant to the provisions of this Agreement. SECTION 2.4.__ Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period the Borrower may request Competitive Bids (with specified maturities of not less than 15 or more than 180 days) and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans at any time shall not exceed the total Dollar Commitments. To request Competitive Bids, the Borrower shall notify the Administrative Agent of such request by telephone, in the case of a Eurocurrency Borrowing, not later than 12:00 noon, New York City time, four Business Days before the date of the proposed Borrowing, and in the case of a Fixed Rate Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of the proposed Borrowing; provided that the Borrower may submit up to (but not more than) three Competitive Bid Requests on the same day, but a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy (or transmitted by electronic communication, if arrangements for doing so have been approved by the Administrative Agent) to the Administrative Agent of a written Competitive Bid Request in a form approved by the Administrative Agent and signed by the Borrower. Competitive Loans shall be denominated in Dollars. Each such telephonic and written Competitive Bid Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be a Eurocurrency Borrowing or a Fixed Rate Borrowing; (iv) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term Interest Period; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.8. Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Administrative Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the Administrative Agent and must be received by the Administrative Agent by telecopy, in the case of a Eurocurrency Competitive Borrowing, not later than 9:30 a.m., New York City time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the form approved by the Administrative Agent may be rejected by the Administrative Agent, and the Administrative Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000, and which may equal the entire principal amount of the Competitive Borrowing requested by the Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The Administrative Agent shall promptly notify the Borrower by telecopy of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph, the Borrower may accept or reject any Competitive Bid. The Borrower shall notify the Administrative Agent by telephone, confirmed by telecopy in a form approved by the Administrative Agent, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurocurrency Competitive Borrowing, not later than 10:30 a.m., New York City time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 10:30 a.m., New York City time, on the proposed date of the Competitive Borrowing; provided that (i) the failure of the Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) the Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if the Borrower rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, the Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner determined by the Borrower. A notice given by the Borrower pursuant to this paragraph shall be irrevocable. (e) The Administrative Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) If the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Administrative Agent pursuant to paragraph (b) of this Section. SECTION 2.5.__Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $50,000,000 or (ii) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Dollar Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans. (b) All Swingline Loans shall be made and maintained as (i) ABR Loans or (ii) Swingline Rate Loans and shall not be entitled to be converted into Eurocurrency Loans. The Borrower may, on any date of borrowing for Swingline Loans and prior to the time that an irrevocable notice requesting such Swingline Loans must be made pursuant to this Section 2.5(b), request from the Swingline Lender a quote of the Swingline Rate which would be applicable for such Swingline Loans, specifying the amount of the proposed Swingline Rate Loans and the maturity date thereof (which shall be no less than one and no more than five Business Days following such date of borrowing). Upon receipt of such quote, the Borrower shall promptly (but not later than the time that an irrevocable notice requesting such Swingline Loans must be made pursuant to this Section 2.5(b)) notify the Swingline Lender and the Administrative Agent whether it requests the Swingline Lender to make Swingline Rate Loans at such Swingline Rate. To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy or by electronic communication (if arrangements for doing so have been approved by the Administrative Agent)), not later than 12:00 noon, New York, New York time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day), the amount of the requested Swingline Loan and whether such Swingline Loan shall be an ABR Loan or a Swingline Rate Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower designated by the Borrower (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.6(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan. (c) The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day require the Lenders to acquire irrevocable and unconditional pro rata participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Lenders will participate. In addition, upon the occurrence of any of the events described in paragraph (h), (i) or (j) of Article VII, each Lender shall automatically acquire a participation in all of the Swingline Loans then outstanding. Promptly upon receipt of such notice or the occurrence of any event described in paragraph (h), (i) or (j) of Article VII, the Administrative Agent will give notice thereof to each Lender, specifying in such notice such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent for the account of the Swingline Lender, such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.8 with respect to Loans made by such Lender (and Section 2.8 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof. SECTION 2.6.__ Letters of Credit (a) . (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Availability Period. Letters of Credit shall be denominated in Dollars. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application reasonably acceptable to the Issuing Bank in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $50,000,000 and (ii) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans shall not exceed the total Dollar Commitments. Notwithstanding the foregoing, the Issuing Bank will not issue any Letter of Credit after it has received a written notice from the Administrative Agent stating that the conditions precedent set forth in Section 4.2(b) for the issuance of Letters of Credit will not be satisfied. The Administrative Agent agrees to withdraw any such notice promptly following its determination that such conditions precedent will be satisfied. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date. (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.3 or 2.5 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender's Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.8 with respect to Loans made by such Lender (and Section 2.8 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement. (f) Obligations Absolute. The Borrower's obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or this Agreement; (iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and (vi) any other act or omission to act or delay of any kind of the Issuing Bank, the Lenders, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower's obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder, including any of the circumstances specified in clauses (i) through (vi) above, as well as any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any damages suffered by the Borrower that are caused by the Issuing Bank's failure to exercise the agreed standard of care (as set forth below) in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that the Issuing Bank shall have exercised the agreed standard of care in the absence of gross negligence or willful misconduct on the part of the Issuing Bank. Without limiting the generality of the foregoing, it is understood that the Issuing Bank may accept documents that appear on their face to be in compliance with the terms of a Letter of Credit, without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in compliance with the terms of such Letter of Credit; provided that the Issuing Bank shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy or by electronic communication (if arrangements for doing so have been approved by the Administrative Agent and the Borrower)) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such LC Disbursement. (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.14(e) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.13(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h), (i) or (j) of Article VII. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to the payment of drafts drawn under all Letters of Credit with respect to which presentment for honor shall not have occurred by the time the Borrower received such notice demanding the deposit of cash collateral, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay principal of and interest on each Loan and all other fees payable hereunder. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower (i) within three Business Days after all Events of Default have been cured or waived or (ii) after (A) the Commitments have expired or terminated, (B) the principal of and interest on each Loan and all fees payable hereunder have been paid in full, (C) all Letters of Credit have expired or terminated and (D) all LC Disbursements shall have been reimbursed. SECTION 2.7.__Extension of Maturity Date. (a) The Borrower may, by written notice to the Administrative Agent (such notice being an "Extension Notice") given at any time, from time to time but in any event, no later than 45 days prior to the Maturity Date then in effect (the date of such notice, the "Notice Date"), request the Lenders to extend the then applicable Maturity Date to a date specified in the Extension Notice (the "Extended Maturity Date "). The Administrative Agent shall promptly transmit any Extension Notice to each Lender. Each Lender shall notify the Administrative Agent whether it wishes to extend the then applicable Maturity Date no later than twenty days after the Notice Date, and any such notice given by a Lender to the Administrative Agent, once given, shall be irrevocable as to such Lender. The Administrative Agent shall promptly notify the Borrower of each Lender's notice that it wishes to extend (each, an "Extension Acceptance Notice"). Any Lender which does not expressly notify the Administrative Agent during such twenty day period that it wishes to so extend the then applicable Maturity Date shall be deemed to have rejected the Borrower's request for extension of such Maturity Date. Lenders consenting to extend the then applicable Maturity Date are hereinafter referred to as "Continuing Lenders ", and Lenders declining to consent to extend such Maturity Date (or Lenders deemed to have so declined) are hereinafter referred to as "Non-Extending Lenders ". If the Required Lenders have elected (in their sole and absolute discretion) to so extend the Maturity Date, the Administrative Agent shall notify the Borrower of such election by such Required Lenders no later than five days after the date when Extension Acceptance Notices are due, and effective on the date of such notice by the Administrative Agent to the Borrower (the "Extension Date"), the Maturity Date shall be automatically and immediately so extended to the Extended Maturity Date. No extension will be permitted hereunder without the consent of the Required Lenders and in no event shall the period from the Extension Date to the Extended Maturity Date exceed five years. Upon the delivery of an Extension Notice and upon the extension of the Maturity Date pursuant to this Section 2.7, the Borrower shall be deemed to have represented and warranted on and as of the Notice Date and the Extension Date, as the case may be, that no Default or Event of Default has occurred and is continuing. Notwithstanding anything contained in this Agreement to the contrary, no Lender shall have any obligation to extend the Maturity Date, and each Lender may at its option, unconditionally and without cause, decline to extend the Maturity Date. (b) If the Maturity Date shall have been extended in accordance with Section 2.7(a), all references herein to the "Maturity Date" shall refer to the Extended Maturity Date. (c) If any Lender shall determine not to extend the Maturity Date as requested by any Extension Notice given by the Borrower pursuant to Section 2.7(a), the Commitments of such Lender and its participation obligations under Sections 2.5(c) and 2.6(d) (except in respect of unreimbursed drawings under Letters of Credit having an expiry date prior to the Maturity Date) shall terminate on the Maturity Date without giving any effect to such proposed extension, and the Borrower shall on such date pay to the Administrative Agent, for the account of such Lender, the principal amount of, and accrued interest on, such Lender's Loans, together with any fees or other amounts owing to such Lender under this Agreement; provided that if the Borrower has replaced such Non-Extending Lender pursuant to Section 2.7(d) below, then the provisions of Section 2.7(d) shall apply. The total Commitments under each Revolving Facility shall be reduced by the amount of the Commitment of such Non-Extending Lender under such Revolving Facility to the extent the Commitment of such Non-Extending Lender under such Revolving Facility has not been transferred to one or more Continuing Lenders pursuant to Section 2.7(d) below. (d) A Non-Extending Lender shall be obligated, at the request of the Borrower and subject to payment by the Borrower to the Administrative Agent for the account of such Non-Extending Lender of the principal amount of, and accrued interest on, such Lender's Loans, together with any fees or other amounts owing to such Lender under this Agreement, to transfer without recourse, representation or warranty (other than good title to its Loans), at any time prior to the Maturity Date applicable to such Non-Extending Lender, all of its rights and obligations hereunder to another financial institution or group of financial institutions nominated by the Borrower and willing to participate in the Commitments in the place of such Non-Extending Lender; provided that, if such transferee is not a Lender, such transferee(s) satisfies all the requirements of this Agreement and the Administrative Agent shall have consented to such transfer, which consent shall not be unreasonably withheld. Each such transferee shall become a Continuing Lender hereunder in replacement of the Non-Extending Lender, with the Maturity Date applicable to such Continuing Lender's Commitments being the Extended Maturity Date, and shall enjoy all rights and assume all obligations on the part of the Lenders set forth in this Agreement. Simultaneously with such transfer, each such transferee shall execute and deliver to the Administrative Agent a written agreement assuming all obligations of the Lenders set forth in this Agreement, which agreement shall be reasonably satisfactory in form and substance to the Administrative Agent. (e) If the Maturity Date shall have been extended in respect of the Continuing Lenders in accordance with Section 2.7(a) any notice of borrowing pursuant to Section 2.3, 2.4 or 2.5 specifying a borrowing date occurring after the Maturity Date applicable to a Non-Extending Lender or requesting an Interest Period extending beyond such date (a) shall have no effect in respect of such Non-Extending Lender and (b) shall not specify a requested aggregate principal amount exceeding the total applicable Commitments. SECTION 2.8.__ Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of Same Day Funds by 2:00 p.m., New York City time, in the case of any Loan denominated in Dollars, and by the Applicable Time specified by the Administrative Agent, in the case of any Loan denominated in an Alternative Currency, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.5. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower designated by the Borrower in the applicable Borrowing Request or Competitive Bid Request; provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.6(e) shall be remitted by the Administrative Agent to the Issuing Bank. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent in Same Day Funds, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, in Same Day Funds at (i) in the case of such Lender, the applicable Overnight Rate from time to time in effect and (ii) in the case of the Borrower, the interest rate on the applicable Borrowing. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.9.__ Interest Elections (a) Each Revolving Borrowing denominated in Dollars initially shall be of the Type and under the Facility specified in the applicable Borrowing Request and, in the case of a Eurocurrency Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings or Swingline Borrowings, which may not be converted or continued. (b) Each Revolving Borrowing denominated in an Alternative Currency shall have an initial Interest Period as specified in the applicable Borrowing Request. Thereafter, the Borrower may elect to continue such Borrowing and may elect Interest Periods thereafter, all as provided in this Section. The Borrower may elect different Interest Periods with respect to different portions of the affected Borrowing, in which case such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (c) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone or by electronic communication (if arrangements for doing so have been approved by the Administrative Agent) by the time that a Borrowing Request would be required under Section 2.3 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy or by electronic communication (if arrangements for doing so have been approved by the Administrative Agent) to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (d) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.2: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) in the case of Borrowings denominated in Dollars, whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and (iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (e) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (f) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period (i) such Borrowing shall be converted to an ABR Borrowing if it is denominated in Dollars or (ii) such Borrowing shall be continued as such for an Interest Period of one month if it is denominated in an Alternative Currency. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing denominated in Dollars may be converted to or continued as a Eurocurrency Borrowing, (ii) unless repaid, each Eurocurrency Revolving Borrowing denominated in Dollars shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto and (iii) each Eurocurrency Revolving Borrowing denominated in an Alternative Currency may be continued as such for an Interest Period of one month. SECTION 2.10.__ Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) The Borrower may at any time terminate, or from time to time reduce, the Dollar Commitments; provided that (i) each reduction of the Dollar Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce the Dollar Commitments if, (A) after giving effect to any concurrent prepayment of the Loans, the sum of the Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans would exceed the total Commitments or (B) the Dollar Commitments as so reduced would be less than the aggregate Euro Commitments, Sterling Commitments or Yen Commitments. (c) The Borrower may at any time terminate, or from time to time reduce, the Euro Commitments; provided that (i) each reduction of the Euro Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce the Euro Commitments if, after giving effect to any concurrent prepayment of the Loans, the Dollar Amount of the aggregate principal amount of outstanding Euro Revolving Loans would exceed the total Euro Commitments. (d) The Borrower may at any time terminate, or from time to time reduce, the Sterling Commitments; provided that (i) each reduction of the Sterling Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce the Sterling Commitments if, after giving effect to any concurrent prepayment of the Loans, the Dollar Amount of the aggregate principal amount of outstanding Sterling Revolving Loans would exceed the total Sterling Commitments. (e) The Borrower may at any time terminate, or from time to time reduce, the Yen Commitments; provided that (i) each reduction of the Yen Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce the Yen Commitments if, after giving effect to any concurrent prepayment of the Loans, the Dollar Amount of the aggregate principal amount of outstanding Yen Revolving Loans would exceed the total Yen Commitments. (f) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b), (c), (d) or (e) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the applicable Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of any Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of any Commitments shall be made ratably among the applicable Lenders in accordance with their respective applicable Commitments. SECTION 2.11.__ Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan and (iii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the Maturity Date. (b) 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 Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class, Type and Facility thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.4) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.12. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section; provided that the Borrower shall not have the right to prepay any Competitive Loan without the prior consent of the Lender thereof. (b) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy or by electronic communication (if arrangements for doing so have been approved by the Administrative Agent, and in the case of a prepayment of a Swingline Loan, the Swingline Lender)) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m., New York City time (or 2:00 p.m. London, England time in the case of Loans denominated in an Alternative Currency), three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of any Commitments as contemplated by Section 2.10, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.10. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the applicable Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.2. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.14. (c) If on the last day of any fiscal quarter of the Borrower for any reason the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeds the total Dollar Commitments then in effect by more than 5%, the Borrower shall upon learning thereof, or upon the request of the Administrative Agent, immediately prepay Revolving Loans and cancel or reduce Letters of Credit, in an aggregate principal amount at least equal to the amount of such excess. (d) If on the last day of any fiscal quarter of the Borrower for any reason the Dollar Amount of the aggregate principal amount of outstanding Euro Revolving Loans exceeds the total Euro Commitments then in effect by more than 5%, the Borrower shall upon learning thereof, or upon request of the Administrative Agent, immediately prepay Euro Revolving Loans in an aggregate principal amount at least equal to the amount of such excess. (e) If on the last day of any fiscal quarter of the Borrower for any reason the Dollar Amount of the aggregate principal amount of outstanding Sterling Revolving Loans exceeds the total Sterling Commitments then in effect by more than 5%, the Borrower shall upon learning thereof, or upon request of the Administrative Agent, immediately prepay Sterling Revolving Loans in an aggregate principal amount at least equal to the amount of such excess. (f) If on the last day of any fiscal quarter of the Borrower for any reason the Dollar Amount of the aggregate principal amount of outstanding Yen Revolving Loans exceeds the total Yen Commitments then in effect by more than 5%, the Borrower shall upon learning thereof, or upon request of the Administrative Agent, immediately prepay Yen Revolving Loans in an aggregate principal amount at least equal to the amount of such excess. (g) The Borrower will implement and maintain internal controls to monitor the Borrowings and repayments, with the object of preventing any request for a Borrowing that would cause conditions specified in the first sentences of Sections 2.1(a), (b) (c) and (d), 2.4(a) and 2.5(a) and the last sentence of Section 2.6(b) not to be satisfied. (h) The Administrative Agent shall calculate the Dollar Amount of any Alternative Currency on the date of each Borrowing of Revolving Loans and on the last Business Day of each calendar quarter and may do so more frequently from time to time in its sole discretion. SECTION 2.13.__ Fees (a) The Borrower agrees to pay to the Administrative Agent for the account of each Dollar Lender a facility fee, which shall accrue at the Applicable Rate on the daily amount of the Dollar Commitment of such Lender (whether used or unused) during the period from and including the Effective Date to but excluding the date on which such Dollar Commitment terminates; provided that, if such Lender continues to have any Revolving Credit Exposure after its Dollar Commitment terminates, then such facility fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the date on which its Dollar Commitment terminates to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Dollar Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the date on which the Dollar Commitments terminate shall be payable on demand. All facility fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at a rate per annum equal to the Applicable Rate applicable to interest on Eurocurrency Revolving Loans on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.10% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (c) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a utilization fee in the amount of 0.125% per annum of the Dollar Amount of outstanding principal amount of the Loans and Letters of Credit for each day that the Dollar Amount of outstanding principal amount of the Loans and the Letters of Credit exceeds 50% of the aggregate amount of the Dollar Commitments then in effect (or, after the Dollar Commitments have terminated, 50% of the aggregate amount of the Dollar Commitments immediately prior to such termination). Accrued utilization fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Dollar Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any utilization fees accruing after the date on which the Dollar Commitments terminate shall be payable on demand. All utilization fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (d) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (e) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of facility fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.14.__ Interest. (a) The Loans comprising each ABR Borrowing (including each Swingline Loan maintained as an ABR Loan) shall bear interest at a rate per annum equal to the Alternate Base Rate. (b) The Loans comprising each Eurocurrency Borrowing shall bear interest at a rate per annum equal to (i) in the case of a Eurocurrency Revolving Loan, the Adjusted Eurocurrency Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate, or (ii) in the case of a Eurocurrency Competitive Loan, the Eurocurrency Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the Margin applicable to such Loan. (c) Each Fixed Rate Loan shall bear interest at a rate per annum equal to the Fixed Rate applicable to such Loan. (d) Each Swingline Rate Loan not maintained as an ABR Loan shall bear interest at a rate per annum equal to the Swingline Rate applicable to such Loan. (e) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided above. (f) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Eurocurrency Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion and (iv) all accrued interest shall be payable upon termination of the Commitments. (g) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate and Overnight Rates (except the Federal Funds Effective Rate, which shall be computed on the basis of a year of 360 days) shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted Eurocurrency Rate, Eurocurrency Rate and Overnight Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.15.__ Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted Eurocurrency Rate or the Eurocurrency Rate, as applicable, for the relevant currency for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders or by the holders of at least a majority of the Commitments under a Facility (or, in the case of a Eurocurrency Competitive Loan, the Lender that is required to make such Loan) that the Adjusted Eurocurrency Rate or the Eurocurrency Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurocurrency Borrowing shall be ineffective, (ii) if any Borrowing Request requests a Eurocurrency Revolving Borrowing, such Borrowing, if denominated in Dollars, shall be made as an ABR Borrowing and, if denominated in an Alternative Currency, shall be made as a Borrowing bearing interest at an interest rate reasonably determined by the Administrative Agent, after consultation with the Borrower and the applicable Lenders, to compensate the applicable Lenders for such Borrowing in such currency for the applicable period and (iii) any request by the Borrower for a Eurocurrency Competitive Borrowing shall be ineffective; provided that (A) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by the Borrower for Eurocurrency Competitive Borrowings may be made to Lenders that are not affected thereby and (B) if the circumstances giving rise to such notice affect only one Type of Borrowings, then any other available Type of Borrowings for the applicable currency shall be permitted. SECTION 2.16.__ Increased Costs (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted Eurocurrency Rate) or the Issuing Bank; or (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans or Fixed Rate Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan or Fixed Rate Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof. (e) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made. SECTION 2.17. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan or Fixed Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.12(b) and is revoked in accordance herewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan, or (e) the assignment of any Eurocurrency Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.20, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted Eurocurrency Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for dollar deposits from other banks in the Eurocurrency market at the commencement of such period. A certificate of any Lender setting forth (i) any amount or amounts that such Lender is entitled to receive pursuant to this Section and (ii) the calculations used to arrive at such amount shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.18.__Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (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 Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.19.__ Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Except as otherwise expressly provided herein, the Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or under Section 2.16, 2.17 or 2.18, or otherwise) prior to 12:00 noon, New York, New York time (or as specified in the next sentence in the case of Loans denominated in an Alternative Currency), on the date when due, in Same Day Funds, without set-off or counterclaim. Except as otherwise expressly provided herein, all payments by the Borrower hereunder with respect to principal and interest on Loans denominated in an Alternative Currency shall be made on the dates specified herein for the account of the respective Lenders to whicsuch payment is owed, in such Alternative Currency and in Same Day Funds not later than the Applicable Time specified by the Administrative Agent to the Borrower by the same time at least one Business Day prior to the date when due. If, for any reason, the Borrower is prohibited by law from making any required payment hereunder in an Alternative Currency, such Borrower shall make such payment in Dollars in the Dollar Amount of the Alterative Currency payment amount. All payments received by the Administrative Agent (i) after 12:00 p.m., in the case of payments in Dollars, or (ii) after the Applicable Time specified by the Administrative Agent in the case of payments in an Alternative Currency, may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.16, 2.17, 2.18 and 9.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments made by the Borrower hereunder shall be made in the applicable currency, except as otherwise provided in this paragraph. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) Except to the extent that this Agreement provides for payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the applicable Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the applicable Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the applicable Overnight Rate from time to time in effect. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.5(c), 2.6(d) or (e), 2.8(b) or 2.19(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.20._Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.16, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.18, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.16 or 2.18, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.16, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.18, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.4), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Dollar Commitment is being assigned, the Issuing Bank and Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Competitive Loans) and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.16 or payments required to be made pursuant to Section 2.18, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III Representations and Warranties The Borrower represents and warrants to the Lenders that: SECTION 3.1.__ Organization; Powers. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 36.2.__ Authorization; Enforceability. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.3.__ Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 3.4.__ Financial Condition; No Material Adverse Effect. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the year ended December 31, 2003, reported on by Deloitte & Touche LLP, independent public accountants, and (ii) as of and for the quarter ended March 31, 2004, certified by its principal accounting officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) Since March 31, 2004, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect except as disclosed on or prior to the Effective Date (i) in writing to the Lenders, or (ii) in any public filing with the Securities and Exchange Commission. SECTION 3.5.__ Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.6.__ Litigation and Environmental Matters. (a) There are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or the Transactions. (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.7.__ Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.8.__ Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.9.__ Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10.__ ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statements of Financial Accounting Standards No. 87 and No. 132) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $90,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statements of Financial Accounting Standards No. 87 and No. 132) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $90,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11.__Federal Regulations. No part of the proceeds of any Loans hereunder will be used, directly or indirectly, for "buying" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board as now and from time to time hereafter in effect which violates, or which would be inconsistent with, the provisions of the Regulations of such Board. SECTION 3.12.__ Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. ARTICLE IV Conditions SECTION 4.1.__ Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.2): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Existing Credit Agreement (including the commitments thereunder) shall have been terminated and all amounts owed thereunder shall have been paid. (c) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of the general counsel for the Borrower, substantially in the form of Exhibit B, and covering such other matters relating to the Borrower, this Agreement or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion. (d) The Administrative Agent shall have received all government and third party approvals necessary or, in the discretion of the Administrative Agent, advisable in connection with the financing contemplated hereby. (e) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (f) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.2. (g) The Lenders, the Administrative Agent and the Joint Lead Arrangers shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (h) The Borrower shall have made available to the Lenders and the Administrative Agent, including through electronic transmission (i) audited consolidated financial statements of the Borrower for the two most recent fiscal years ended prior to the Effective Date as to which such financial statements are available and (ii) unaudited interim consolidated financial statements of the Borrower for each quarterly period ended subsequent to the date of the latest financial statements made available pursuant to clause (i) of this paragraph as to which such financial statements are available. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.2) at or prior to 3:00 p.m., New York City time, on August 2, 2004 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.2.__ Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions: (a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable. (b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing. Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that: SECTION 5.1.__ Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Deloitte & Touche LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 6.1 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.4 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other financial reports, proxy statements and other financial materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request. The requirements of Sections 5.1(a), (b) and (e) shall be deemed to be satisfied if the Borrower shall have made such materials available to the Lenders and the Administrative Agent, including by electronic transmission, within the time periods specified therefor, in which case "delivery" of such statements for purposes of Section 5.1(c) and (d) shall mean making such statements available in such fashion. SECTION 5.2.__Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.3.__Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.4. SECTION 5.4.__ Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.5.__Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 5.6.__Books and Records; Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.7.__ Compliance with Laws. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.8.__ Use of Proceeds and Letters of Credit. The proceeds of the Loans will be used for general corporate purposes of the Borrower and its Subsidiaries, including, without limitation, to repurchase the Borrowers Capital Stock and debentures, to finance investments and acquisitions and to provide working capital to the Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that: SECTION 6.1.__ Financial Covenants (a) Leverage Ratio. The Borrower will not permit the Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower to exceed 3.25 to 1.00. (b) Consolidated Net Worth. The Borrower will not permit Consolidated Net Worth at any time to be less than the sum of (i) $800,000,000, (ii) 25% of cumulative Consolidated Net Income for each fiscal quarter of the Borrower (beginning with the fiscal quarter ending September 30, 2004) for which Consolidated Net Income is positive and (iii) 100% of the Net Cash Proceeds of any common equity issued by the Borrower after the Effective Date. SECTION 6.2.__Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.2; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness having an aggregate principal amount not exceeding $50,000,000 at any time outstanding, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary; (e) Liens (not otherwise permitted hereunder) which secure Indebtedness of the Borrower; provided that the aggregate outstanding principal amount of Indebtedness secured by such Liens shall not exceed 10% of Consolidated Total Assets as reflected in the most recent annual audited or quarterly consolidated financial statements of the Borrower delivered pursuant to Section 5.1 at the time of the creation of such Liens; (f) Liens on assets of Foreign Subsidiaries (not otherwise permitted hereunder) which secure Indebtedness of Foreign Subsidiaries which is not guaranteed by the Borrower; and (g) Liens which may arise in connection with the Receivables Facility. SECTION 6.3.__ Fundamental Changes. The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (a) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (b) any Subsidiary may merge into any wholly-owned Subsidiary in a transaction in which the surviving entity is a Subsidiary, (c) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another wholly-owned Subsidiary and (d) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders. SECTION 6.4.__ Third Party Guarantees. The Borrower will not, and will not permit any of its Subsidiaries to, deliver or provide Guarantees in respect of obligations of unconsolidated joint ventures and other Persons not constituting Subsidiaries in an aggregate amount exceeding $50,000,000 at any time. ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days; (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any amendment or modification hereof, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any amendment or modification hereof, shall prove to have been incorrect when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.2, 5.3 (with respect to the Borrower's existence) or 5.8 or in Article VI; (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent (given at the request of any Lender) to the Borrower; (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) the Borrower or any Subsidiary shall become unable, admit in writing or fail generally to pay its debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $50,000,000 shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (m) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE VIII The Administrative Agent Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.3 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such 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 Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. None of the Syndication Agent or any Documentation Agent or the Joint Lead Arrangers and Joint Bank Managers named on the cover hereof shall have any rights or obligations in its capacity as such. ARTICLE IX Miscellaneous SECTION 9.1.__ Notices. Except in the case of notices and other communications expressly permitted to be given by telephone or electronic communication, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at BorgWarner Inc., 200 South Michigan Avenue, Chicago, Illinois, 60604, Attention of Vice President and Treasurer (Telecopy No. 312-322-8712) (Treasurycash@bwauto.com); (b) if to the Administrative Agent, to it at JPMorgan Chase Bank, 1111 Fannin 10th Floor, Houston, TX 77002, Attention of Michael V. Chau (Telecopy No. 713-750-2938) (michael.v.chau@chase.com), with a copy to (i) JPMorgan Chase Bank, 270 Park Avenue, New York 10017, Attention of Richard Duker (Telecopy No. 212-270-5127) Richard.Duker@jpmorgan.com) and (ii) with respect to matters relating to Loans denominated in Alternative Currencies, J.P. Morgan Europe Limited, 125 London Wall, London EC2Y 5AJ, England, Attention of Nichola Hall (Telecopy No. +44-207-777-2542) (Nichola.Hall@jpmorgan.com); (c) if to the Issuing Bank, to it at JPMorgan Chase Bank, 10420 Highland Manor Drive BL2, 4th Floor, Tampa, FL 33610, Attention of James Alonzo (Telecopy No. 813-432-5161) (james.Alonzo@chase.com); (d) if to the Swingline Lender, to it at JPMorgan Chase Bank, 1111 Fannin 10th Floor, Houston, TX 77002, Attention of Michael V. Chau (Telecopy No. 713-750-2938) (michael.v.chau@chase.com), with a copy to JPMorgan Chase Bank, 270 Park Avenue, New York 10017, Attention of Richard Duker (Telecopy No. 212-270-5127) (Richard.Duker@ jpmorgan.com); and (e) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto (or, in the case of any Lender, by notice to the Administrative Agent and the Borrower). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.2.__ Waivers; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.19(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, or (v) change any of the provisions of this Section or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender hereunder without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be. Notwithstanding the foregoing, any amendment of this Agreement entered into to effect an increase in the Commitments pursuant to Section 2.1(e) need not be approved by the Lenders and shall be effective when approved by the Administrative Agent and the Borrower. SECTION 9.3.__ Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Joint Lead Arrangers and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and the Joint Lead Arrangers, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of one counsel for the Administrative Agent, the Issuing Bank and the Lenders (unless using such counsel would present a conflict of interest, in which case, the Borrower shall pay the reasonable fees, charges and disbursements of one additional counsel), in connection with the enforcement or protection of their rights in connection with this Agreement, including their rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including in connection with any workout, restructuring or negotiations in respect thereof. (b) The Borrower shall indemnify the Administrative Agent, the Joint Lead Arrangers, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee (notwithstanding any limitation in Section 9.3(a)(ii)), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee or its Related Parties, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or its Related Parties. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, a Joint Lead Arranger, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Dollar Lender severally agrees to pay to the Administrative Agent, such Joint Lead Arranger, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's Applicable Percentage under the Dollar Facility (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, such Joint Book Arranger, the Issuing Bank or the Swingline Lender in its capacity as such. (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. SECTION 9.4.__ Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it); provided that (i) each of the Borrower (except in the case of an assignment to a Lender or an Affiliate of a Lender) and the Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 and after giving effect thereto the assigning Lender and its Affiliates shall hold Commitments of not less than $5,000,000 (except in the case of an assignment to the entire remaining amount of the assigning Lender's Commitment), in each case unless each of the Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under the assigned Commitment, except that this clause (iii) shall not apply to rights in respect of outstanding Competitive Loans, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, (v) any assignment by a Lender of its Commitments under the Dollar Facility, the Euro Facility, the Sterling Facility or the Yen Facility shall be accompanied by a ratable assignment (to the extent practical) of its Commitments under such other Facilities, unless otherwise agreed by the Borrower and the Administrative Agent, and (vi) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default has occurred and is continuing. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.16, 2.17, 2.18 and 9.3). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Issuing Bank 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. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.2(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.16, 2.17 and 2.18 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. (f) A Participant shall not be entitled to receive any greater payment under Section 2.16 or 2.18 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.18 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.18(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. SECTION 9.5.__ Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.16, 2.17, 2.18 and 9.3 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.6.__ Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.7.__ Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.8.__ Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender 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 to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. In the event that amounts set off in one currency are applied to obligations in a different currency, the rate of exchange shall be the Exchange Rate as in effect at the time of application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.9.__ Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, 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 such New York State or, to the extent permitted by law, in such Federal court. 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 the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which 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 in any court referred to in paragraph (b) of this Section. 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. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.1. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10.__ WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11.__ Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12.__ Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) 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, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower, provided that, if Information is disclosed pursuant to clause (b) or (c) above, the Administrative Agent, the Issuing Bank or such Lender, as the case may be, shall use its best efforts to promptly notify the Borrower prior to such disclosure unless it is legally prohibited from doing so or unless such disclosure is in connection with customary reviews by bank examiners. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13.__ Judgment Currency. If, for the purposes of obtaining judgment or filing a claim in any court, it is necessary to convert a sum due hereunder or claim in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of the Borrower in respect of any such sum due from it to the Administrative Agent or the Lenders hereunder shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent from the Borrower in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or the Person to whom such obligation was owing against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent in such currency, the Administrative Agent agrees to return the amount of any excess to the Borrower (or to any other Person who may be entitled thereto under applicable law). SECTION 9.14.__ Loan Conversion/Participation. (a) (i) On any Conversion Date, to the extent not otherwise prohibited by law or otherwise, all Revolving Loans outstanding in any currency other than Dollars ("Loans to be Converted") shall be converted into Dollars (calculated on the basis of the relevant Exchange Rates as of the Business Day immediately preceding the Conversion Date) ("Converted Loans"), and (ii) on the Conversion Date (A) each Dollar Lender severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Converted Loans in an amount equal to its Conversion Sharing Percentage (calculated immediately prior to the termination or expiration of the Commitments) of the outstanding principal amount of Converted Loans and (B) to the extent necessary to cause the Committed Exposure Percentage of each Lender, after giving effect to the purchase and sale of participating interests under the foregoing clause (A), to equal its Applicable Percentage under the Dollar Facility (calculated immediately prior to the termination or expiration of the Commitments), each Dollar Lender severally, unconditionally and irrevocably agrees that it shall purchase or sell a participating interest in its Dollar Revolving Loans then outstanding. Each Dollar Lender will immediately transfer to the Administrative Agent, in immediately available funds, the amounts of its participation(s), and the proceeds of such participation(s) shall be distributed by Administrative Agent to each Lender from which a participating interest is being purchased in the amount(s) provided for in the preceding sentence. All Converted Loans shall be ABR Loans. The Borrower agrees to indemnify each Lender for any loss or reasonable cost or expense arising out of the conversion of Loans from one currency to another pursuant to this Section. (b) If, for any reason, the Loans to be Converted may not be converted into Dollars in the manner contemplated by paragraph (a) of this Section 9.14, (i) the Administrative Agent shall determine the Dollar Amount of the Loans to be Converted (calculated on the basis of the Exchange Rate as of the Business Day immediately preceding the date on which such conversion would otherwise occur pursuant to paragraph (a) of this Section 9.14), (ii) effective on such Conversion Date, each Lender severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Loans to be Converted in an amount equal to its Conversion Sharing Percentage of such Loans to be Converted and (iii) each Dollar Lender shall purchase or sell participating interests as provided in paragraph (a)(ii) of this Section 9.14. Each Dollar Lender will immediately transfer to the Administrative Agent, in immediately available funds, the amount(s) of its participation(s), and the proceeds of such participation(s) shall be distributed by the Administrative Agent to each relevant Lender in the amount(s) provided for in the preceding sentence. (c) To the extent any Taxes are required to be withheld from any amounts payable by a Lender (the "First Lender") to another Lender (the "Other Lender") in connection with its participating interest in any Converted Loan, the Borrower, with respect to the relevant Loans made to it, shall be required to pay increased amounts to the Other Lender receiving such payments from the First Lender to the same extent they would be required under Section 2.18 if the Borrower were making payments with respect to the participating interest directly to the Other Lender. SECTION 9.15.__ USA PATRIOT Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act2"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BORGWARNER INC., By _________________________ Name: Title: JPMORGAN CHASE BANK, individually and as Administrative Agent, By _________________________ Name: Title: BANK OF AMERICA, N.A., individually and as Syndication Agent, By _________________________ Name: Title: CALYON NEW YORK BRANCH, individually and as Documentation Agent By _________________________ Name: Title: CITIBANK, N.A., individually and as Documentation Agent By _________________________ Name: Title: DEUTSCHE BANK SECURITIES INC., as Documentation Agent By _________________________ Name: Title: DEUTSCHE BANK AG NEW YORK BRANCH, as Lender By _________________________ Name: Title By _________________________ Name: Title: EX-10.2 3 defcomp.txt BorgWarner Inc. 2004 Deferred Compensation Plan July 1, 2004 ARTICLE 1 purpose, status and effective date Section 1.1 Purpose of Plan. BorgWarner Inc., a Delaware corporation, has adopted the BorgWarner Inc. 2004 Deferred Compensation Plan (the "Plan"), as set forth herein, as a means of rewarding and retaining selected employees and to provide such individuals the opportunity for capital accumulation through elective deferrals of compensation. The Plan is also the successor to, amends and restates, assumes the obligations of, and replaces the BorgWarner Inc. Executive Deferred Compensation Plan (formerly named the Borg-Warner Automotive Inc. Deferred Compensation Plan) (the "Prior Plan"). Effective as of July 1, 2004, or as soon as practical thereafter, the account balances under the Prior Plan of Prior Plan participants shall be transferred to the Plan, which shall comprise the sole source of liability of the Company and of Employers for the obligations under the Prior Plan. With respect to any participant in a Prior Plan whose Account balance has been transferred into this Plan, the distribution of a Participant's Account under the Plan shall be in complete satisfaction of the Participant's right to a distribution under the Prior Plan. Section 1.2 Status of Plan. The Company has established the Plan as an unfunded deferred compensation plan for a select group of management and highly compensated employees within the meaning of sections 201(2), 301(3), and 401(1) of the Employee Retirement Income Security Act of 1974, as amended. The Plan shall at all times be administered and interpreted in a manner that is consistent with such status. Section 1.3 Effective Date. The effective date of the Plan is July 1, 2004. ARTICLE 2 definitions Under the Plan, when capitalized, the following definitions shall apply: Section 2.1 Account shall mean the bookkeeping account for a Participant that is established and maintained to record the Participant's interest under the Plan. The balance posted to the record of the Account of a Participant shall consist of the sum of the Participant's balance transferred from the Prior Plan (if any) and Deferrals, adjusted for earnings, losses, appreciation, depreciation, distributions, expenses, and other charges made against the Account pursuant to Article 6. Section 2.2 Administrative Committee shall mean the administrative committee of the Company appointed by the Board of Directors to administer the Plan, with the powers set forth in Article 9 and as elsewhere provided in the Plan, other than those powers that the Board of Directors has reserved for itself. Section 2.3 Beneficiary shall mean the person or persons or entity designated by the Participant to receive the balance of the Participant's Account in the event of the Participant's death. The designation may be in favor of one or more Beneficiaries, may include contingent as well as primary designations and named or unnamed trustees under any will or trust agreement, may apportion the benefits payable in any manner among the Beneficiaries; provided, however, that a married Participant's primary Beneficiary shall be at all times, while the Participant is married, the Participant's current spouse unless the spouse consents in writing, properly notarized or witnessed by a member of the Administrative Committee or its delegatee, to the naming by the Participant of someone other than the spouse as a primary Beneficiary, and the consent acknowledges the financial effect of the waiver and further acknowledges the nonspouse beneficiary(ies), class of beneficiaries or contingent beneficiary(ies) and the specific form of payment, if any, chosen by the Participant. A Participant's designation of one or more Beneficiaries shall be made in writing in a manner designated by the Administrative Committee and shall not be effective until received by the Administrative Committee. If a Participant who is unmarried at the time of his or her death fails to properly designate a Beneficiary or if the designated beneficiaries of such unmarried Participant shall have predeceased the Participant, the Participant's estate shall be the Beneficiary. If a married Participant's spouse has validly consented to the designation of a Beneficiary(ies) other than such spouse and such designated beneficiaries shall have predeceased the Participant, the Participant's spouse shall be the Beneficiary. Subject to the provisions of the preceding paragraph requiring spousal consent to a married Participant's designation of a Beneficiary other than such Participant's spouse, a Participant may change his or her Beneficiary without the consent of any Beneficiary by similar instrument in accordance with rules and procedures established by the Administrative Committee. The beneficiary designation form received and acknowledged most recently by the Administrative Committee shall control as of any date. If concurrent Beneficiaries are named without specifying the proportion of benefits due each, distribution shall be made in equal shares to those Beneficiaries. Section 2.4 Board of Directors shall mean the Board of Directors, as constituted from time to time, of BorgWarner Inc. If the Board of Directors has delegated any of its authority under the Plan to a committee or to an individual, the term "Board of Directors" shall also include such committee or individual. Section 2.5 BW Stock Unit shall mean a measure of participation under the Plan which has a value based on Common Stock. Each BW Stock Unit credited to a Participant's Account represents an obligation of the Company or relevant Employer to make a payment of cash equal to the fair market value of a share of Common Stock to such Participant at such time as the Participant's Account shall become distributable to him or her under the terms of the Plan. In the event of any Company stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a regular cash dividend, the number of BW Stock Units credited to Participants' Accounts under the Plan shall be appropriately adjusted by the Board of Directors. The decision of the Board of Directors regarding any adjustment shall be final, binding, and conclusive. Section 2.6 Business Day shall mean a day on which the New York Stock Exchange is open for trading. Section 2.7 Change in Control shall mean the happening of any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act )(a "Person ") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this Section 2.7, the following acquisitions shall not constitute a Change in Control: (W) any acquisition directly from the Company, (X) any acquisition by the Company, (Y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (Z) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2.7; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (each of the foregoing, a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, twenty percent (20%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. Section 2.8 Claimant shall mean the Participant or Beneficiary or his or her representative submitting a claim for benefits under the Plan. Section 2.9 Code shall mean the Internal Revenue Code of 1986, as amended, or as it may be amended from time to time. Section 2.10 Common Stock shall mean common stock, $0.01 par value, of BorgWarner Inc. Section 2.11 Company shall mean BorgWarner Inc., a Delaware corporation, and any successor thereto which continues the Plan. Section 2.12 Compensation shall mean the definition of compensation for the Plan Year announced in writing by the Administrative Committee on or before the due date for the Administrative Committee's receipt of Participants' Deferral Elections for such Plan Year. Unless and until superceded, the definition of compensation announced by the Administrative Committee for a Plan Year shall remain in effect for subsequent Plan Years. Section 2.13 Deferral Election shall mean the election or elections filed by the Participant with the Company to defer Compensation under the Plan. Section 2.14 Deferrals shall mean the amounts credited to a Participant's Deferrals Account as Deferrals pursuant to the Participant's Deferral Elections. Section 2.15 Disability shall mean "Permanent Disability" as defined in and as determined by, the plan administrator of the RSP under the RSP's procedures for disability claims. In addition, where the context so requires, "Disability" shall mean a termination of employment by reason of Disability. Section 2.16 Effective Date shall mean the date set forth in Section 1.3. Section 2.17 Eligible Employee shall mean an Employee who satisfies the requirements for eligibility under Article 3 of the Plan. Section 2.18 Employee shall mean any common law employee of the Company or a subsidiary who is expressly designated as an employee. Any person who is not expressly designated as an employee by the Company (or by the subsidiary of the Company for whom the person performs services) shall not be an Employee for purposes of the Plan, notwithstanding that such person may be later determined by the Internal Revenue Service or by a court of competent jurisdiction to be a common law employee. Section 2.19 Employer shall mean, with respect to any Participant, the Company or, if applicable, a subsidiary of the Company (that is participating in the Plan with the consent of the Board of Directors) that employs such Participant. Section 2.20 6ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Section 2.21 Hardship shall mean a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant, or of a dependent of the Participant (as dependent is defined in Code section 152(a)), loss of the Participant's property due to casualty or other similar circumstances, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that shall constitute a Hardship shall depend upon the particular facts of each case. A financial need shall not constitute a severe financial hardship to the extent that it can be or is relieved (i) through reimbursement or compensation by insurance or another party, (ii) by liquidation of the Participant's assets, unless such liquidation would itself cause severe financial hardship, or (iii) by cessation of Deferrals under the Plan. The purchase of a home or the payment of college tuition for a child or spouse shall not constitute a Hardship under the Plan. Section 2.22 Hardship Withdrawal shall mean a distribution of all or a portion of a Participant's Account by reason of Hardship. Section 2.23 Investment Option shall mean a security, mutual fund, common or collective trust, insurance company pooled separate account, or other benchmark for measuring the income, gain or loss recorded for a Participant's Account. Section 2.24 Participant shall mean an Employee who satisfies the eligibility and participation criteria in Article 3 and shall include an Employee whose account balance under the Prior Plan has been transferred to this Plan. Section 2.25 Plan shall mean this BorgWarner Inc. 2004 Deferred Compensation Plan, as herein set out or as duly amended, which is the successor to and which amends and restates, the BorgWarner Inc. Executive Deferred Compensation Plan (formerly known as the Borg-Warner Automotive, Inc. Executive Deferred Compensation Plan). Section 2.26 Plan Year shall mean the calendar year, except that the initial Plan Year shall commence on July 1, 2004. Section 2.27 Retirement shall mean the Participant's termination of employment with the Company and all Employers (i) on or after the last day of the calendar month coincident with or immediately following the day on which the Participant attains age 65, or age 60 if the Participant has been credited with at least 15 years of service as determined under the RSP, or (ii) with the written consent of the Participant's Employer that such termination of employment shall constitute retirement. Section 2.28 RSP shall mean the BorgWarner, Inc. Retirement Savings Plan. Section 2.29 Scheduled Withdrawal shall mean a distribution of all or a portion of the Deferrals credited to a Participant's Account in the year elected by the Participant for such distribution. In addition, other capitalized terms set forth in the Plan shall have the meanings first ascribed to them. ARTICLE 3 ELIGIBILITY AND PARTICIPATION Section 3.1 Eligibility. A. Participation in the Plan is limited to Employees who are expressly selected for Plan participation by the Board of Directors. B. In lieu of expressly selecting Employees for Plan participation, the Board of Directors may establish eligibility criteria providing for the participation of all Employees who satisfy such criteria. C. The Board of Directors may adopt, amend or abolish a Participant's selection for eligibility or eligibility criteria under Sections A and B hereof at any time, and for any reason, by resolution, which resolutions shall be attached to the copy of the Plan maintained by the Company and shall be effective as of the date specified therein, or if later, the date submitted to the Company. Section 3.2 Participation. A Participant shall continue to participate in the Plan with respect to amounts credited to his or her Account until: (i) the Participant ceases to satisfy any of the eligibility criteria for participation under Section 3.1, and (ii) there has been a complete distribution of the Participant's Account. ARTICLE 4 CONTRIBUTIONS AND CREDITS Section 4.1Deferrals. A. Generally. 1. A Participant may elect to make Deferrals to his or her Account for a Plan Year by timely making a Deferral Election, in such manner as the Administrative Committee shall prescribe, on or before the due date established by the Administrative Committee for the Plan Year for which the Deferral Election is being made. Except as provided in paragraph 3 of this subsection A, such due date shall be prior to January 1 of the Plan Year for which the Compensation would otherwise be payable. 2. The Administrative Committee may provide for separate Deferral Elections and due dates for the various elements of Compensation, such as base salary and bonuses. Except as provided in paragraph 3 of this subsection A, any Deferral Election must be made prior to the period for which the element of Compensation being deferred will be earned, as determined by the Administrative Committee in its sole discretion, and the Participant's Deferral Election shall only apply to Compensation earned after the date on which it is received by the Administrative Committee. 3. A Participant who first becomes eligible for participation in the Plan after January 1 of a Plan Year (including all Participants for the initial Plan Year), who wishes to make Deferrals to his or her Account for such Plan Year shall execute and file with the Administrative Committee a Deferral Election within 30 days after the date on which such Participant first becomes eligible to participate in the Plan. 4. Only one Deferral Election for each element of Compensation may be made with respect to the Compensation to be earned in a single Plan Year. Any Participant who fails to timely execute and file a Deferral Election with the Administrative Committee for a Plan Year shall not be permitted to make Deferrals for such Plan Year. 5. The Administrative Committee may establish separate minimum deferral amounts (expressed as a whole percentage of Compensation) for the deferral of each element of Compensation. Unless otherwise provided by the Board of Directors, for any Plan Year, the maximum amount of a Participant's Deferral Election for base salary shall be 20% of the Participant's base salary and the maximum amount of a Participant's Deferral Election for his or her annual bonus shall be 100% of the annual bonus (if any bonus is paid). A Deferral Election shall direct the Company or the Employer to reduce the Participant's Compensation (or the element thereof) by the whole percentage specified by the Participant in the Deferral Election. 6. The amount specified by the Participant in the Deferral Election cannot reduce the Participant's current Compensation for such Plan Year below the amount necessary to satisfy any applicable taxes and withholdings required by law, as determined by the Administrative Committee. 7. The Deferral Election of a Participant for base salary shall continue in effect for each Plan Year following the effective date of the Deferral Election until the first to occur of the following: (i) a new Deferral Election for base salary becomes effective, (ii) the Participant revokes the Deferral Election, (iii) the Participant ceases to be eligible to make Deferrals, or (iv) the Participant terminates employment with the Company and all Employers. The Participant may make a new Deferral Election for base salary for subsequent Plan Years by timely making a new Deferral Election, in such manner as the Administrative Committee shall prescribe, on or before the due date established by the Administrative Committee for the Plan Year for which the Deferral Election is being made. The Participant may revoke a Deferral Election for base salary during a Plan Year by filing a revocation of such Deferral Election with the Administrative Committee, which revocation shall be effective as provided by the Administrative Committee. Once filed with the Administrative Committee, a revocation of a Deferral Election for base salary shall be irrevocable for that Plan Year, and no further deferrals of the Participant's base salary shall be permitted for the remaining portion of such Plan Year. 8. A Deferral Election for Compensation other than base salary shall be effective only for the Plan Year for which it is made. Once filed with the Administrative Committee, a Deferral Election for Compensation other than base salary shall be irrevocable. 9. If the Participant does not make Deferrals for a Plan Year, he or she may actively participate as of the next following January 1, or any subsequent January 1, by making a Deferral Election, in such manner as the Administrative Committee shall prescribe, on or before the due date established by the Administrative Committee for the Plan Year for which the Deferral Election is being made, provided that the Participant satisfies or will satisfy the eligibility criteria of Section 3.1 as of first day of such Plan Year. 10. In making a Deferral Election, a Participant consents to the Employer's withholding from his or her currently payable Compensation the amount or amounts elected and the crediting of such withheld amounts to the Participant's Account, as provided in the Plan. B. Hardship Suspensions of Deferrals. Notwithstanding anything in the foregoing of this Article to the contrary: (i) a Participant who receives a hardship distribution from a Code section 401(k) plan maintained by the Participant's Employer shall be prohibited from making Deferrals to this Plan for the longer of: (a) the period specified by the Code or its regulations for the suspension of a participant's election to make elective deferrals following a hardship distribution; or (b) the period specified in such Code section 401(k) plan for such suspensions; and (ii) a Participant who receives a Hardship Withdrawal during a Plan Year from the Plan shall be prohibited from making Deferrals to this Plan for the remainder of such Plan Year and the following Plan Year. C. Automatic Cancellation of Deferral Elections. Notwithstanding anything in the Plan to the contrary, in the event the Participant ceases to satisfy the eligibility requirements to make Deferrals set forth in Section 3.1, all of such Participant's outstanding Deferral Elections shall immediately be cancelled, and the Participant's right to make future Deferral Elections shall be suspended until the Participant again satisfies such eligibility criteria. Section 4.2 Maximum Salary Reduction Contributions Required. Notwithstanding anything in the Plan to the contrary, for any Plan Year, no Participant who is a participant in a 401(k) plan maintained by his or her Employer shall have his or her Compensation reduced pursuant to a Deferral Election until such Participant has made the maximum elective deferrals to the 401(k) Plan allowable for such year or the maximum elective contributions permitted under the terms of such 401(k) plan for such year. ARTICLE 5 VESTING Section 5.1 Deferrals. A Participant shall at all times be 100% vested in amounts credited to the Participant's Account. ARTICLE 6 PARTICIPANT ACCOUNTs; INVESTMENT OPTIONS Section 6.1 Accounts. The Administrative Committee shall establish an Account for each Participant to record the Deferrals, distributions, adjustments for income, gain or loss, forfeitures, and other charges and credits to the Account under the Plan. The initial Account balance of a Participant who was a Prior Plan participant and whose Prior Plan account balance was transferred to the Plan pursuant to Article 1 shall include such transferred balances. In the case of an Employee who is subject to Section 16 of the Securities Exchange Act of 1934 ("Exchange Act"), ("Section 16 Participant") amounts credited to such Participant's Account from the Prior Plan as BWA Stock Units shall continue to be credited under the Plan as stock units (renamed herein as BW Stock Units) until distributed to the Participant pursuant to the terms of the Plan. Section 6.2 Investment Options. The Company shall offer one or more Investment Options for measuring the income, gain or loss recorded for a Participant's Account and may change Investment Options at any time. Until the Board of Directors otherwise provides, the Investment Options under the Plan shall consist of (i) those investment options available to participants under the RSP, excepting The BorgWarner Inc. Stock Fund, and (ii) for Section 16 Participants whose Accounts include BWA Stock Units transferred from the Prior Plan, BW Stock Units. Section 6.3 Participant Allocations. A. A Participant shall elect on his or her Deferral Election form or on such other form or by such other means as may be specified by the Administrative Committee, one or more Investment Options to which Deferrals to be credited to the Participant's Account shall be allocated. A Participant may change the allocation of future Deferrals among the Investment Options and may change the allocation of his or her Account balance among the Investment Options as frequently as permitted by the Administrative Committee under rules and procedures applicable to all Participants. The Administrative Committee shall establish and may prospectively change its rules regarding the timing and frequency of Investment Option elections and may establish minimum amounts or percentages for allocating Deferrals and transferring Account balances among the Investment Options. B. In the event a Participant fails or refuses to make an election allocating Deferrals credited to his or her Account among the then available Investment Options, the Administrative Committee shall, in its discretion, either: (i) reject the Participant's Deferral Election as incomplete; or (ii) specify the Investment Option or Investment Options to which the Participant's Account shall be allocated and notify the Participant of its selection, which notification may be the Account statements provided to the Participant. C. Whenever the Company pays a dividend on its Common Stock, in cash or property, at a time when a Participant has BW Stock Units credited to his or her Account, the Participant shall be credited with a number of additional BW Stock Units equal to the result of multiplying the number of BW Stock Units in the Participant's Account on the dividend record date by the dividend paid on each share of Common Stock, and then dividing this amount by the price per share of the Common Stock on the dividend payment date. For this purpose, the price per share of Common Stock shall be the average of the daily high and low sales prices quoted on the New York Stock Exchange composite tape for that date. In the event no trading is reported for the dividend payment date, the price per share of Common Stock shall be the average of the high and low sales prices of Common Stock for the Business Day first occurring after the dividend payment date for which trading for Common Stock is reported on the New York Stock Exchange composite tape. In the case of any dividend distributable in property other than Common Stock, the per share value of the dividend shall be the value determined by the Company for federal income tax reporting purposes. D. Notwithstanding anything in this Section to the contrary, no Participant shall be permitted to (i) allocate any Deferrals under the Plan to BW Stock Units, or (ii) transfer amounts credited to his Account from any other Investment Option into BW Stock Units. No Section 16 Participant that has BW Stock Units credited to his or her Account shall be permitted to transfer such amounts from BW Stock Units to any other Investment Option. Section 6.4 Adjustment of Accounts. A Participant's Account balance shall be adjusted daily, based on the performance of the Investment Options selected or deemed selected by the Participant, as if the portion of the Participant's Account allocated to an Investment Option were actually invested in such Investment Option and adjusted for other amounts as if such other amounts were actually charged or credited to an actual Account balance of the Participant. The Administrative Committee may also charge as an expense against a Participant's Account: (i) amounts customarily charged by the sponsor of one or more Investment Funds that are charged on a per Participant or per transaction basis and not otherwise charged as an expense of an Investment Option; and (ii) the Administrative Committee's and the Company's own expenses and out-of-pocket fees in administering the Plan. The Administrative Committee's allocation of charges and expenses among Participant Accounts shall be final and conclusive against the Participants and all other parties. Section 6.5 Status of Investment Options. The Investment Options offered under the Plan are for the sole purpose of providing a performance measurement for adjusting Participants' Accounts for income, gain or loss. Notwithstanding anything in this Plan to the contrary, the Company shall not be required to actually invest monies in any fund designated as an Investment Option, any decision to so invest shall remain within the complete discretion of the Company, and any amounts so invested shall remain the property of the Company. A Participant whose Account consists in whole or in part of BW Stock Units shall have no rights of a shareholder of Common Stock. Neither the Participant nor his or her Beneficiary shall have any right, other than the right of an unsecured general creditor, against the Company or the Participant's Employer in respect to the benefits payable, or which may be payable, to the Participant or Beneficiary under the Plan. ARTICLE 7 DISTRIBUTION OF BENEFITS Section 7.1 Distribution Election. A Participant may elect to receive a distribution of his or her Account upon the occurrence of either of the following: A. A distribution upon the first to occur of the Participant's Retirement, or Disability ("Retirement/Disability Distribution"); or B. A date selected by the Participant to receive a distribution of his or her Account ("Scheduled Withdrawal"). In addition, a Participant may elect to receive an Unscheduled Distribution, as provided in Section 7.4, or a Hardship Distribution, as provided in Section 7.5. In the event of a Change in Control, a Participant shall receive a distribution of his or her Account as provided in Section 7.6. Section 7.2 Retirement/Disabil4ity Distribution. A Participant may elect to receive a distribution of his or her Account upon the first to occur of the Participant's Retirement or Disability. A Participant's election of a Retirement/Disability Distribution shall be irrevocable. Section 7.3 Scheduled Withdrawals. A Participant may elect to receive up to four (4) Scheduled Withdrawals of up to 100% in the aggregate of the amount credited to his or her Account (in increments of 1% or a specified dollar amount, as permitted by the Administrative Committee), in one or more years specified by the Participant, provided however, that any Scheduled Withdrawal shall not commence any earlier than five (5) years after the end of the Plan Year in which the Participant first commenced participation in the Plan, and provided further, that a Participant shall not receive a Scheduled Withdrawal of any amounts credited to his or her Account as BW Stock Units. The Administrative Committee may specify or limit to one or more dates during a year (e.g., the first day of every month) for which a Participant may elect a Scheduled Withdrawal. Section 7.64 Unscheduled Distributions. A Participant shall be permitted to receive one Unscheduled Distribution per Plan Year of up to 100% of his or her Account, provided however, that a Participant shall not be permitted to receive an Unscheduled Distribution of any amounts credited to his or her Account as BW Stock Units. An Unscheduled Distribution must be for a minimum amount of $2,000, and an application for an Unscheduled Distribution shall be made on such forms or by such means as the Administrative Committee shall require. An amount equal to 10% of the gross amount of any Unscheduled Distribution allowed shall be permanently forfeited by the Participant, with the Participant only receiving a distribution of the net amount thereof. A Participant who has received an Unscheduled Distribution during a Plan Year is prohibited from making Deferrals for the remainder of such Plan Year. Section 7.5 Hardship Withdrawals. Upon application to and approval by the Administrative Committee, a Participant shall be permitted a Hardship Withdrawal of up to 100% of his or her Account, provided however, that a Participant shall not be permitted to receive a Hardship Withdrawal of any amounts credited to his or her Account as BW Stock Units. The amount of any Hardship Withdrawal shall not exceed the amount determined by the Administrative Committee to be necessary to alleviate such Hardship, including any taxes payable by the Participant as a result of receiving such Hardship Withdrawal. Prior to approving a Hardship Withdrawal, the Administrative Committee shall require that the Participant submit documentation and proof satisfactory to the Administrative Committee that a Hardship has in fact occurred and that it cannot be relieved by other means. No Participant may receive more than one Hardship Withdrawal in any Plan Year. A Participant who has received a Hardship Withdrawal during a Plan Year is prohibited from making Deferrals for the remainder of such Plan Year and the following Plan Year. An application for a Hardship Withdrawal shall be made on such forms or by such means as the Administrative Committee shall require. Section 7.6 Change in Control Distribution. Upon the occurrence of a Change in Control, a Participant shall receive a complete distribution of his or her Account. Section 7.7 Postponement of Scheduled Withdrawal Date by Participant. A Participant may postpone to a later year the date of a Scheduled Withdrawal if such change is made in writing (or by such means as the Administrative Committee shall require) at least one (1) year prior to the date of distribution specified in the original Scheduled Withdrawal election. No Scheduled Withdrawal may be postponed more than once. Section 7.8 Form of Distributions. Amounts distributed to a Participant from his or her Account shall be paid in cash as follows: A. In the case of a Retirement/Disability Distribution in either (i) a single sum, or (ii) a distribution in approximately equal annual installments payable over a period of 5, 10, or 15 years, as elected by the Participant, with one-fourth (1/4) of each annual installment paid quarterly, such distribution to be paid (in the case of a single sum) or commence to be paid (in the case of annual installments) in the calendar quarter that begins after the calendar quarter in which the Participant's Retirement or Disability occurs, with the Participant's Account being valued as of the first Business Day of the calendar quarter in which a distribution is paid. The Account balance of a Participant who fails or refuses to elect a method of distribution shall be a single sum; B. In the case of a Scheduled Withdrawal, an Unscheduled Distribution, or a Change in Control Distribution, in a single sum in the calendar quarter that begins after the calendar quarter in which the event giving rise to the distribution occurs, with the Participant's Account being valued as of the first Business Day of the calendar quarter in which the single sum is paid; and C. In the case of a Hardship Withdrawal, in a single sum as soon as administratively possible following its approval by the Administrative Committee, with the Participant's Account being valued as of the date on which the Hardship Withdrawal is approved, or if such date is not a Business Day, on the Business Day first occurring after the date of approval. Section 7.9 Change in Form of Retirement/Disability Distributions. A Participant may change his or her form of distribution election for a Retirement/Disability Distribution if such change is made in writing at least six (6) months prior to the Participant's Retirement or Disability. In the event that the Participant's most recent Retirement/Disability Distribution election was made within six months of the Participant's Retirement or Disability, the next most recent election made by the Participant at least six (6) months prior to the Participant's Retirement or Disability (or if none, the Participant's initial election) shall be used. Section 7.10 Death Before Commencement of Distributions. If a Participant dies while an Employee or after Retirement or Disability, but before a distribution of his or her Account has commenced, the Participant's entire Account balance shall be paid to his or her Beneficiary in cash in either (i) a single sum, or (ii) a distribution in approximately equal annual installments payable over a period of 5, 10, or 15 years, as elected by the Participant, with one-fourth (1/4) of each annual installment paid quarterly, such distribution to be paid (in the case of a single sum) or commence to be paid (in the case of annual installments) in the calendar quarter that begins after the calendar quarter in which the Participant's death occurs, with the Participant's Account being valued as of the first Business Day of the calendar quarter in which a distribution is paid. Section 7.11 Death After Commencement of Distributions. If a Participant dies while an Employee and after a distribution of his or her Account under the Plan has commenced, the Participant's entire Account balance, including those amounts not yet distributable, shall continue to be distributed to his or her Beneficiary in cash under the distribution method elected by the Participant. Section 7.12 Termination of Employment Prior to Retirement, Death or Disability. If a Participant terminates employment with the Company and all Employers prior to his or her Retirement, death or Disability for any reason, notwithstanding any distribution election made by the Participant, the Participant's entire Account balance shall be paid to the Participant in cash in a single sum in the calendar quarter that begins six (6) months after the end of the calendar quarter in which such termination of employment occurs, with the Participant's Account being valued as of the first Business Day of the calendar quarter in which the single sum is paid. Section 7.13 Postponement of Distributions by the Company. A. Notwithstanding any other provision of this Plan or a Participant's election to the contrary, in no event shall any amount credited to a Participant's Account as BW Stock Units be distributed from the Plan any earlier than six (6) months and one (1) day following the date on which such stock units were first credited to the Participant's Account as BW (or BWA) Stock Units. B. The Administrative Committee shall postpone the conversion to cash of BW Stock Units or the distribution of all or part of an amount otherwise payable to a Participant to the extent that the conversion or distribution would subject the Participant to liability under Section 16(b) of the Exchange Act. C. The Administrative Committee may postpone the conversion to cash of BW Stock Units or the distribution of all or part of an amount otherwise payable to a Participant to the extent that the conversion or distribution would subject the Participant to a reporting obligation under Section 16(a) of the Exchange Act. D. The Administrative Committee may postpone the distribution of all or part of an amount otherwise payable to a Participant to the extent that the distribution would not be deductible by the Employer under Section 162(m) of the Code. A conversion or distribution that is so postponed pursuant to this Section 7.13 shall be converted and/or paid as soon as it is possible to do so without the Participant incurring a reporting obligation or liability under Section 16 of the Exchange Act or within the deduction limitations of Section 162(m) of the Code, whichever applies. ARTICLE 8 CLAIMS PROCEDURES Section 8.1 Generally. A distribution request (also referred to herein as a claim) shall be made by filing a written request with the Administrative Committee on a form provided by the Administrative Committee, which shall be delivered to the Administrative Committee and, in the case of a request for a Hardship Withdrawal, be accompanied by such substantiation of the claim as the Administrative Committee considers necessary and reasonable. If the claims procedure form made available by the Administrative Committee does not contain information on where to file the claim, the claim may be submitted to the human resources office at the site where the Claimant is employed. Section 8.2 Denied Claims. If a claim is denied in whole or in part, the Claimant shall receive a written or electronic notice explaining the denial of the claim within ninety (90) days after the Administrative Committee's receipt of the claim. If the Administrative Committee determines that for reasons beyond its control, a ninety (90) day extension of time is necessary to process the claim, the Claimant shall be notified in writing of the extension and reason for the extension within ninety (90) days after the Administrative Committee's receipt of the claim. The written extension notification shall also indicate the date by which the Administrative Committee expects to render a final decision. A notice of denial of claim shall contain the following: the specific reason or reasons for the denial; reference to the specific Plan provisions on which the denial is based; a description of any additional materials or information necessary for such Claimant to perfect the claim and an explanation of why such material or information is necessary; and a description of the Plan's review procedures and the time limits applicable to such procedures, including a statement of the Claimant's right to bring a civil action under Section 502(c) of ERISA following an adverse determination on review. Sec4tion 8.3 Review of Denied Claims. To request a review of a denied claim, a Claimant must file a written request for review within sixty (60) days after receiving written notice of the denial. The Claimant may submit written comments, documents, records and other relevant information in support of the claim. A Claimant shall be provided, upon request and without charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant's claim. A document, record, or other information shall be considered relevant if it: (i) was relied upon in denying the claim; (ii) was submitted, considered or generated in the course of processing the claim, regardless of whether it was relied upon; (iii) demonstrates compliance with the claims procedures process; or (iv) constitutes a statement of Plan policy or guidance concerning the denied claim. Section 8.4 Decisions on Reviewed Claims. The Administrative Committee will notify the Claimant in writing of its decision on the appeal. Such notification will be in a form designed to be understood by the Claimant. If the claim is denied in whole or in part on appeal, the notification will also contain: the specific reason or reasons for the denial; reference to the specific Plan provisions on which the determination is based; a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant's claim for benefits; and a statement that the Claimant has a right to bring an action under section 502(a) of ERISA. A document, record, or other information shall be considered relevant if it: (i) was relied upon in denying the claim; (ii) was submitted, considered or generated in the course of processing the claim, regardless of whether it was relied upon; (iii) demonstrates compliance with the claims procedures process; or (iv) constitutes a statement of Plan policy or guidance concerning the denied claim. Such notification will be given by the Administrative Committee within sixty (60) days after the complete appeal is received by the Administrative Committee (or within one hundred twenty (120) days if the Administrative Committee determines special circumstances require an extension of time for considering the appeal, and if written notice of such extension and circumstances is given to the Claimant within the initial sixty (60) day period). Such written extension notice shall also indicate the date by which the Administrative Committee expects to render a decision. Section 8.5 Review Procedures. In reviewing a denied claim, the reviewer shall take into consideration all comments, documents, records, and other information submitted by the Claimant in support of the claim, without regard to whether such information was submitted or considered in the initial determination. ARTICLE 9 PLAN ADMINISTRATION Section 9.1 Establishment of the Administrative Committee. The Administrative Committee shall have the sole responsibility for the administration of the Plan. The Administrative Committee shall consist of at least three (3) members who shall be appointed by the Board of Directors and who may also be officers, directors, or employees of the Company or an Employer. An Administrative Committee member may resign by written notice to, or may be removed by, the Board of Directors, which shall appoint a successor to fill any vacancy on the Administrative Committee, howsoever caused. An Employee's membership on the Administrative Committee shall automatically terminate upon such Employee's termination of employment with the Company and all Employers. Section 9.2 Appointment and Duties of the Administrative Committee. A. The Administrative Committee may delegate its responsibilities hereunder to one or more persons to serve at the Administrative Committee's discretion. The Administrative Committee or its delegatee(s) shall have such powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the following: 1. To administer and enforce the Plan, including the discretionary and exclusive authority to interpret the Plan, to make all factual determinations under the Plan and to resolve questions as between the Company and Participants or Beneficiaries, including questions which relate to eligibility and distributions from the Plan, to remedy possible ambiguities, inconsistencies or omissions, and decisions on claims which shall, subject to the claims procedures under the Plan, be conclusive and binding upon all persons hereunder, including, without limitation, Participants, other employees of the Company, Beneficiaries, and former Participants, and their executors, administrators, conservators, or heirs; 2. To prescribe procedures to be followed by Participants or Beneficiaries filing applications for benefits; 3. To prepare and distribute, in such manner as the Administrative Committee determines to be appropriate, information explaining the Plan; 4. To receive from the Company and from Participants such information as shall be necessary for the proper administration of the Plan and Trust; 5. To furnish the Company, upon request, such reports with respect to the administration of the Plan as are reasonable and appropriate; 6. To receive, review and keep on file (as it deems convenient or proper) reports of the receipts and disbursements under the Plan; 7. To appoint or employ individuals to assist in the administration of the Plan and any other agents it deems advisable, including legal counsel, third party administrators ("TPAs"), and such clerical, medical, accounting, auditing, actuarial and other services as it may require in carrying out the provisions of the Plan or in connection with any legal claim or proceeding involving the Plan, to settle, compromise, contest, prosecute or abandon claims in favor of or against the Plan; and 8. To discharge all other duties set forth herein. B. The Administrative Committee shall have no power to add to, subtract from or modify any of the terms of the Plan, or to change or add to any benefits provided by the Plan, or to waive or fail to apply any requirements of eligibility under the Plan. No member of the Administrative Committee shall participate in any action on any matters involving solely his or her own rights or benefits as a Participant under the Plan, and any such matters shall be determined by the other members of the Administrative Committee. Section 9.3 Direction on Payments. The Administrative Committee, or the person or persons designated by the Administrative Committee, shall review and approve all distributions from the Plan, including Hardship Withdrawal requests. Section 9.4 Actions by the Administrative Committee. The Administrative Committee may act at a meeting or by writing without a meeting, by the vote or assent of a majority of its members. The Administrative Committee may adopt such by-laws and regulations as it deems desirable for the conduct of its affairs and the administration of the Plan. A dissenting Administrative Committee member who, within a reasonable time after he or she has knowledge of any action or failure to act by the majority, registers his or her dissent in writing delivered to the other Administrative Committee members shall not be responsible for any such action or failure to act. Section 9.5 Expenses of the Administrative Committee. Members of the Administrative Committee shall not receive compensation from the Plan for those services they perform as the Administrative Committee members while employed by the Company. Any and all necessary expenses related to Plan administration shall be paid by the Company but may be charged against Plan Accounts. Section 9.6 Records of the Administrative Committee. The Administrative Committee shall keep a record of all of its meetings and shall keep all such books of account, records and other data as may be necessary or desirable in its judgment for the administration of the Plan. The Administrative Committee may retain a TPA to perform some or all of its Plan record-keeping functions. Section 9.7 Information from Participant. The Administrative Committee may require a Participant to complete and file with the Administrative Committee written or electronic forms approved by the Administrative Committee, and to furnish all pertinent information requested by such Administrative Committee. The Administrative Committee may rely upon all such information so furnished, including the Participant's current mailing address. Section 9.8 Notification of Participant's Address. Each Participant, retired Participant and Beneficiary entitled to benefits under the Plan must file with the Administrative Committee or such other person designated by the Administrative Committee, in writing, his or her post office address and each change of post office address. Any communication, statement or notice addressed to such a person at this latest post office address as filed with the Administrative Committee will, on deposit in the United States mail with postage prepaid, be binding upon such person for all purposes of the Plan, and the Administrative Committee shall not be obliged to search for, or ascertain the whereabouts of, any such person. Section 9.9 Indemnification. Members of the Administrative Committee shall be indemnified by the Company against any and all liabilities arising by reason of any act or failure to act made in good faith pursuant to the provisions of the Plan, including expenses reasonably incurred in the defense of any claim relating thereto. If the Company takes any action to liquidate under circumstances which require that the Administrative Committee remain in existence, the Company shall purchase insurance for each member of the Administrative Committee to cover liability or losses occurring by reason of an act or omission of any such member, unless the same is determined to be due to acts of gross negligence or willful misconduct. The expense incurred for such insurance or indemnification shall be paid by the Company. ARTICLE 10 AMENDMENT AND TERMINATION Section 10.1Amendment and Termination. A. The Company hereby reserves the right, by written resolution of its Board of Directors to amend or terminate the Plan at any time, and for any reason, without the consent of any Participant. No amendment shall impair or curtail the Employer's contractual obligations to a Participant for the amount of benefits accrued prior to the date of any such amendment or termination of the Plan. B. The Company further reserves the right, whether upon amendment or termination of the Plan or otherwise, to accelerate the distribution of all or a portion of a Participant's Account balance before such distribution would otherwise be payable, without the consent of the Participant, if (1) the Board of Directors determines by written resolution that such acceleration of payments would be in the best interest of the Company, or (2) the Administrative Committee determines that a change in the federal tax laws will cause the Participant to recognize income for federal tax purposes with respect to all or a portion of his or her Account balance prior to the date on which such portion of the Participant's Account would otherwise be distributable. ARTICLE 11 ADDITIONAL PROVISIONS Section 11.1 No Contract. Nothing in the Plan shall be deemed to give a Participant any right to be retained in the employ of the Employer or to interfere with the Employer's right to discharge the Participant at any time, with or without cause. Section 11.2 Withholdings. The Employer shall withhold from any amount distributable to a Participant under the Plan any applicable federal, state or local income or employment taxes or any other amounts required to be withheld by law. In addition, the Employer may withhold from a Participant's currently payable salary, bonus or other compensation any applicable federal, state or local income or employment taxes that may be due upon the crediting of an amount to the Participant's Account. Section 11.3 Interests Not Transferable. Any amounts to which a Participant or his or her Beneficiary may become entitled under this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, garnishment by creditors or encumbrance, and any attempt to do so is void. Amounts credited to a Participant's Account are not subject to attachment or legal process for the debts, contracts, liabilities, engagements or torts of the Participant or his or her Beneficiary. Section 11.4 Offset. If, at the time payments or installments of payments are to be made hereunder, the Participant or Beneficiary or both are indebted or obligated to the Company, then the remaining payments under the Plan to be made to the Participant or the Beneficiary or both may, at the discretion of the Company, be reduced by the amount of the indebtedness or obligation, provided, however, that an election by the Company not to reduce any such payment or payments shall not constitute a waiver of its claim for such indebtedness or obligation or a waiver of its right to make an offset against payments in the future. Section 11.5 No Funding. A. The Plan constitutes a mere promise of the Employer to make payments in accordance with the terms of the Plan. This Plan does not give any Participant or his or her Beneficiary any interest, lien, or claim in or against any specific assets of the Employer. The Participant and his or her Beneficiary shall have only the rights of general, unsecured creditors of the Employer with respect to their interests under the Plan. B. The Company may, but shall not be required to, establish a grantor trust as a funding source for its obligations under the Plan. If such a trust is so established, it shall be the intention of the Company that the trust shall constitute an unfunded arrangement for purposes of the Plan, such that the Plan will continue to be an unfunded plan maintained for the purpose of providing deferred compensation to a select group of management or highly compensated employees under ERISA. With respect to any Participant, the assets of the trust so established shall remain subject to the claims of the creditors of the Participant's Employer in the event of the Employer's bankruptcy or insolvency. Section 11.6 Construction. The headings in this Plan have been inserted for convenience of reference only and are to be ignored in any construction of the provision. Section 11.7 Gender and Number. Except when otherwise clearly indicated by the context, when used in the Plan words in any gender shall include any other gender, and words in the singular shall include the plural, and words in the plural shall include the singular. Section 11.8 Severability. In the event any provision of the Plan shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted, and the Company shall have the right to correct and remedy such questions of illegality or invalidity by amendment as provided by the Plan. Section 11.9 Governing Law. The Plan shall be regulated, construed and administered in all respects under and by the laws of the State of Michigan, without regard to its conflict of laws provisions, except when preempted by federal law. EX-10.3 4 sipa.txt BORGWARNER INC. 2004 STOCK INCENTIVE PLAN NON-QUALIFIED STOCK OPTION AWARD AGREEMENT Stock Option Grant Awarded to _____________________ Column (1) Column (2) Column (3) Column (4) Column (5) Column (6) Date of Number of Exercise Type of Stock Expiration Cumulative Shares Subject Price Per: Option: Date of Percentage Stock Exercise Schedule Option Option of Stock Option: M/D/Yr # Shares $-- Non-Qualified M/D/Yr _% on M/D/Yr Stock Option % on M/D/Yr 1. Grant of Stock Option. Pursuant to Section 6 of the Borg Warner, Inc. 2004 Stock Incentive Plan, (the "Plan"), BorgWarner Inc., a Delaware corporation, hereby grants to the individual named above, an employee of the Company or an Affiliate (the "Optionee"), an option to purchase from the Company the number of its shares of common stock, $.01 par value shown above in Column 2 of this Award Agreement, upon and subject to the terms and conditions set forth in the Plan and this Award Agreement (the "Shares"). Capitalized terms not defined herein shall have the meanings specified in the Plan. 2. Date of Grant. The date of grant of this Stock Option is the date set forth above in Column 1. 3. Type of Stock Option. This Stock Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Internal Revenue Code, and this Award Agreement shall be interpreted and treated consistently with the characterization of the Stock Option as a Non-Qualified Stock Option. 4. Stock Option Price. The option price per share of Stock covered by the Stock Option shall be the price set forth above in Column 3 of this Award Agreement. 5. Expiration Date. Unless the Stock Option is previously terminated pursuant to the terms of this Award Agreement and the Plan, the Stock Option granted by this Award Agreement shall terminate on the date shown above in Column 5 of this Award Agreement. 6. Exercise of Stock Option. A. The Stock Option shall become exercisable as of the date set forth above in Column 6 according to the percentage shown for such date ("Exercisable Date"); provided that at all times during the period between Date of Grant and the Exercisable Date the Optionee has been employed by the Company or an Affiliate. The Committee (as such term is defined in the Plan) has, in its sole discretion, the authority to, in whole or in part, accelerate the exercisability of the Stock Option. The Stock Option may be exercised only to purchase whole Shares and in no case may a fraction of a Share be purchased. The right of the Optionee to purchase Shares may be exercised in whole at any time or in part from time to time after (and to the extent) the Stock Option has become exercisable and prior to the tenth anniversary of the Date of Grant; provided, however, that no portion of the Stock Option shall be exercisable unless (except as hereinafter provided in this Section 6) the Optionee at the time of exercise is, and at all times from the Date of Grant has been employed by the Company or an Affiliate. A Termination of Employment (as such term is defined in the Plan) shall not be deemed to have occurred if the transfer, promotion, reassignment or similar personnel move of the Optionee, at the request of the Company or an Affiliate, from any one entity within the Company or Affiliate to another entity within the Company or Affiliate results in the Optionee being immediately employed with such other entity. B. If the Optionee dies while employed by the Company or an Affiliate, the Optionee's estate shall be permitted to exercise the Stock Option to the extent exercisable on the date of the Optionee's death or to the extent that the exercisability of the Stock Option may be accelerated by the Committee. The Stock Option may be exercised for a period of one year from the date of such death or until the expiration of the Stock Option, whichever period is shorter. C. If the Optionee incurs a Termination of Employment by reason of Disability or Retirement (as such terms are defined in the Plan), the Optionee shall be permitted to exercise the Stock Option to the extent exercisable at the time of the termination or to the extent that the exercisability of the Stock Option may be accelerated by the Committee. The Stock Option may be exercised for a period of three years from the date of such termination or until the expiration of the Stock Option, whichever period is the shorter; provided, however, that if the three year period is the applicable period and the Optionee dies within such three year period, any unexercised Stock Option held by such Optionee shall, notwithstanding the expiration of such three year period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of twelve (12) months from the date of such death or until the expiration of the Stock Option, whichever period is the shorter. D. If the Optionee incurs a Termination of Employment and such Termination of Employment is involuntary and without Cause (as such term is defined in the Plan), the Optionee shall be permitted to exercise the Stock Option to the extent exercisable at the time of the termination or to the extent that the exercisability of the Stock Option may be accelerated by the Committee. The Stock Option may be exercised for a period of one year from the date of such termination or until the expiration of the Stock Option, whichever period is shorter; provided, however, that if the one year period is the applicable period and the Optionee dies within such one year period, any unexercised Stock Option held by such Optionee shall, notwithstanding the expiration of such one year period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of twelve (12) months from the date of such death or until the expiration of the Stock Option, whichever period is the shorter. E. If the Optionee incurs a Termination of Employment for any reason other than as set forth in Sections 6(B), (C) and (D) above and such Termination of Employment is without Cause, the Optionee shall be permitted to exercise the Stock Option to the extent exercisable at the time of the Termination of Employment. The Stock Option may be exercised for a period of five (5) business days from the date of such termination or until the expiration of the Stock Option, whichever period is the shorter. F. If the Optionee incurs a Termination of Employment which is for Cause, the Stock Option held by the Optionee shall terminate at the time of the Optionee's Termination of Employment. 7. Transferability of Stock Option. The Stock Option and this Stock Option Award Agreement shall be transferable by the Optionee: (i) by will or by the laws of descent and distribution, (ii) pursuant to a qualified domestic relations order (as such term is described in the Plan), or (iii) pursuant to a gift to the Optionee's "immediate family" members (as such term is described in the Plan) directly or indirectly by means of a trust, partnership, or limited liability company, subject in the case of all transfers pursuant to clause (iii), above, to the review of the Committee or its designee. A Stock Option shall be exercised, only by the Optionee, by the guardian or legal representative of the Optionee, or permitted transferee, it being understood that the terms "holder" and "Optionee" include any such guardian, legal representative or beneficiary or permitted transferee. A permitted transferee may transfer a Stock Option only by will or by the laws of descent and distribution. 8. Exercise of Stock Option; Payment. A. If the Optionee is then employed by the Company or an Affiliate and elects to exercise all or part of the Stock Option which is exercisable, he or she shall deliver to the Company a written notice, in a form acceptable to the Committee, specifying the number of Shares to be purchased under the Stock Option and an exercise date, not more than thirty days after the date of such notice, upon which such Shares shall be purchased and payment therefor shall be made. B. If the Optionee's employment with the Company or an Affiliate is terminated for any of the reasons set forth in Section 6(B) through (E) above, then any election to exercise all or part of the Stock Option which is exercisable shall be done in the following manner: the Optionee or his or her estate shall deliver to the Company a written notice, in a form acceptable to the Committee, specifying the number of Shares to be purchased under the Stock Option and an exercise date, within the exercise period set forth for such reason in Section 6(B) through (E) above and with respect to Section 6(B) through (D), not more than thirty days after the date of such notice, upon which such Stock Option Shares shall be purchased and payment therefor shall be made. C. On the exercise date the Optionee has specified in the notice described in Section 8(A) or 8(B) above, the Optionee or his or her estate shall deliver to the Company (i) cash, certified or bank check or such other instrument as the Company may accept, made payable to the order of the Company in an amount equal to the product of the number of Shares specified to be purchased in such notice and the Option Price (the "Option Exercise Amount") and within five days thereafter payment, by cash, certified or bank check or such other instrument as the Company may accept, made payable to the order of the Company, in such amount as the Company in its sole discretion deems necessary to satisfy its liability to withhold federal, state or local income or other taxes incurred by reason of the exercise of the Stock Option or the transfer of Shares thereupon (collectively the "Applicable Tax"), or (ii) unrestricted Shares owned by the Optionee for more than six months prior to the exercise date, the value of which in whole Shares shall not exceed the Option Exercise Amount, and within 5 days thereafter unrestricted Shares owned by the Optionee, the value of which in whole Shares shall not exceed the Applicable Tax, the value of such Shares for the purpose of paying the Option Exercise Amount and the Applicable Tax (collectively the "Option Payment Amount") being the Fair Market Value (as such term is defined in the Plan) of the Shares on the exercise date, or (iii) a written request to the Company to withhold, from the number of Shares otherwise issuable upon the exercise of the Stock Option, that whole number of Shares having an aggregate Fair Market Value which does not exceed the Applicable Tax, or (iv) a combination of the above described forms of payment that equals the Option Payment Amount; provided that if the Optionee is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), then (y) such Optionee shall have the right to make payment of the Option Payment Amount only at the time and in the manner specified in Section 16 of the Exchange Act and the rules and regulations thereunder and (z) the Company shall have the right to retain or sell without notice, or to demand surrender of, Shares or Shares issuable upon the exercise of the Stock Option which have a Fair Market Value on the exercise date equal to the amount determined by the Company as necessary to satisfy any Applicable Tax. Upon receipt in full of the Option Payment Amount (including in the case of payment by check, the receipt by the Company of collected funds), the Optionee or his or her estate shall be deemed to be the owner of Shares so purchased and certificates representing such Shares shall thereupon be delivered to the Optionee or his or her estate. If the Company has entered into agreement(s) with one or more brokerage firms to enable the Optionee to facilitate payment for the Shares through such brokerage firm(s), the Optionee or his or her estate may make use of such coordinated procedure if he or she elects and if allowed by law. 9. Specific Restrictions Upon Shares. The Optionee hereby agrees with the Company as follows: A. The Optionee shall acquire the Shares issuable upon the exercise of the Stock Option (the "Stock Option Shares") for investment purposes only and not with a view to resale or other distribution thereof to the public in violation of the Securities Act of 1933, as amended (the "1933 Act"), and shall not dispose of any Stock Option Shares in transactions which, in the opinion of counsel to the Company, violate the 1933 Act, or the rules and regulations thereunder, or any applicable state securities or "blue sky" laws; B. If any Stock Option Shares shall be registered under the 1933 Act, no public offering (otherwise than on a national securities exchange, as defined in the Exchange Act) of any such Stock Option Shares shall be made by the Optionee (or any other person) under such circumstances that he or she (or such other person) may be deemed an underwriter, as defined in the 1933 Act; and C. The Company shall have the authority to endorse upon the certificate or certificates representing the Stock Option Shares such legends referring to the foregoing restrictions. 10. Change in Control Cash Out. During the sixty (60) day period from and after a Change in Control (as such term is defined in the Plan), the Optionee shall have the right, whether or not the Stock Option is fully exercisable and in lieu of the payment of the exercise price for the Shares being purchased under this Stock Option, to elect to surrender, by giving notice to the Company, all or part of this Stock Option to the Company and to receive cash, payable by the Company, within thirty (30) days of such notice, in an amount equal to the amount by which the Change in Control Price (as such term is defined in the Plan) per Share on the date of such election shall exceed the Option Price multiplied by the number of Shares surrendered under this Stock Option; less such amount as the Company deems necessary to satisfy its liability to withhold federal, state or local income or other taxes incurred by reason of the number of Shares surrendered; provided, however, that if the Change in Control is within six (6) months of the Date of Grant to an Optionee who is an officer or director of the Company and subject to Section 16(b) of the Exchange Act, then no such election shall be made by such Optionee with respect to this Stock Option prior to six (6) months from the Date of Grant. 11. Adjustments to Shares. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the Stock or other change in corporate structure affecting the Stock, the Committee or Board of Directors of the Company may make such substitution or adjustments in the aggregate number, kind and option price of shares subject to this Stock Option Award Agreement and/or such other substitutions or adjustments in the consideration receivable upon exercise as it may determine to be appropriate in its sole discretion. 12. Notices. Any written notice required or permitted under this Stock Option Award Agreement shall be deemed given when delivered personally, as appropriate, either to the Optionee or to the Executive Compensation Department of the Company, or when deposited in a United States Post Office as registered mail, postage prepaid, addressed, as appropriate, either to the Optionee at his or her address set forth above or such other address as he or she may designate in writing to the Company, or to the Attention: Executive Compensation, BorgWarner Inc., at its headquarters office or such other address as the Company may designate in writing to the Optionee. 13. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Stock Option Award Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof. 14. Governing Law. All questions concerning the construction, validity and interpretation of this Stock Option Award Agreement shall be governed by and construed according to the internal law, and not the law of conflicts, of the State of Delaware, except that questions concerning the relative rights of the Company and the Optionee with respect to the Shares, shall be governed by the corporate law of the State of Delaware. 15. Provisions of Plan. The Stock Option provided for herein is granted pursuant to the Plan, and said Stock Option and this Stock Option Award Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Stock Option Award Agreement solely by reference or are expressly cited herein. In the case of any conflict between the Plan and this Stock Option Award Agreement, the terms of the Plan shall control. IN WITNESS WHEREOF, the Company has executed this Stock Option Award Agreement in duplicate on the day and year first above written. BORGWARNER INC. By: Timothy M. Manganello Chairman & Chief Executive Officer I acknowledge receipt of a copy of the Plan (either as an attachment hereto or that has been previously received by me) and that I have carefully read this Stock Option Award Agreement and the Plan. I agree to be bound by all of the provisions set forth in this Stock Option Award Agreement and the Plan. Date Employee's Signature SS# (U.S. Employees Only) Print Name Home Street Address City, State, Zip, Country EX-31.1 5 exh311.txt CERTIFICATION Exhibit 31.1 I, Timothy M. Manganello, certify that: 1. I have reviewed this quarterly report on Form 10-Q of BorgWarner Inc.; 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 officer(s) 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; 5. The registrant's other certifying officer(s) 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 controls 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 controls over financial reporting. Date: November 9, 2004 /s/ Timothy M. Manganello Timothy M. Manganello Chairman and Chief Executive Officer EX-31.2 6 exh312.txt CERTIFICATION Exhibit 31.2 I, Robin J. Adams, certify that: 1. I have reviewed this quarterly report on Form 10-Q of BorgWarner Inc.; 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 officer(s) 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; 5. The registrant's other certifying officer(s) 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 controls 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 controls over financial reporting. Date: November 9, 2004 /s/ Robin J. Adams Robin J. Adams Executive Vice President, Chief Financial Officer & Chief Administrative Officer EX-32.1 7 exh32.txt EXHIBIT 32 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Quarterly Report of BorgWarner Inc. (the "Company") on Form 10-Q for the period ended September 30, 2004 (the "Report"), each of the undersigned officers of the Company certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of such officer's knowledge: (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: November 9, 2004 /s/ Timothy M. Manganello Timothy M. Manganello Chairman & Chief Executive Officer /s/ Robin J. Adams Robin J. Adams Executive Vice President, Chief Financial Officer & Chief Administrative Officer A signed original of this written statement required by Section 906 has been provided to BorgWarner Inc. and will be retained by BorgWarner Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----